Understanding COF and WSJF: Maximizing Value in Agile Development

Cost of Delay/Failure (CoD/CoF)

CoF stands for Cost of Delay or Cost of Failure. In the context of Agile development and prioritization, Cost of Delay (CoF) refers to the financial impact or penalty associated with delaying a task, feature, or project.

Cost of Delay (CoF) considers the following:

1. Opportunity Cost: Revenue or value lost by not delivering a feature or project on time.

2. Delayed Revenue: Revenue that could have been generated if the feature or project were delivered earlier.

3. Increased Costs: Additional costs incurred due to the delay, such as extended timelines, overhead, and resources.

CoF is usually measured in units of currency per unit of time (e.g., $ per day, € per week, etc.).

Calculating Cost of Delay:

CoD = (Value of Project or Feature) / (Duration of Delay)

Example:

- Project value: $100,000

- Delay duration: 6 months

- CoD: $100,000 / 6 months = $16,667 per month

This means that every month the project is delayed, the company forfeits $16,667 in potential value.

By quantifying the Cost of Delay, teams and organizations can:

1. Prioritize tasks and projects based on their financial impact.

2. Make informed decisions about resource allocation and trade-offs.

3. Identify opportunities to reduce delay and increase value delivery.

In summary, CoF helps teams understand the financial consequences of delaying work items, enabling them to prioritize and deliver value more efficiently.

Weighted Shortest Job First(WSJF)

WSJF is a prioritization technique used in Agile and Lean frameworks to prioritize tasks or features based on their economic value. It's calculated by dividing the Cost of Delay (COF) by the duration of the task or feature.

The formula:

WSJF = COF / Duration

This approach helps teams prioritize tasks that have a high value and a short duration, maximizing the economic benefit and minimizing delays.

By using WSJF, teams can:

- Prioritize tasks based on economic value

- Optimize the sequence of tasks for maximum benefit

- Visualize the economic impact of delays

- Make informed decisions about resource allocation

Let's consider a simple example to illustrate how WSJF (Weighted Shortest Job First) prioritization works:

Suppose we have three features to develop in a software project, each with a different Cost of Delay (COF) and duration:

Feature A:

- COF: $100 per day

- Duration: 5 days

Feature B:

- COF: $50 per day

- Duration: 3 days

Feature C:

- COF: $200 per day

- Duration: 10 days

To calculate the WSJF priority, we divide the COF by the duration for each feature:

Feature A:

- WSJF = $100 per day ÷ 5 days = $20 per day per day

Feature B:

- WSJF = $50 per day ÷ 3 days = $16.67 per day per day

Feature C:

- WSJF = $200 per day ÷ 10 days = $20 per day per day

Now, we prioritize the features based on their WSJF values:

1. Feature B (WSJF = $16.67)

2. Feature A (WSJF = $20)

3. Feature C (WSJF = $20)

In this example, Feature B has the highest priority due to its relatively low duration and moderate COF. Feature A and C have the same WSJF value, but since Feature A has a shorter duration, it's prioritized second.

By using WSJF, the team prioritizes Feature B first, followed by Feature A and then Feature C, maximizing the economic value and minimizing delays.

This example illustrates how WSJF helps teams make informed decisions about prioritization, ensuring they deliver the most valuable features first.