Friday, March 26, 2010

Cycle time and cashflow

Cycle time*, by which I mean the time to market for a feature, is not merely an academic concern. In times like these it may involve your job security, your project's viability and your company's future.

Clarke Ching amusingly points this out in his latest biztech parable "Rocks into Gold" with a tale of a back-from-the-brink project that found a simple way to justify its existence and solve the cashflow problem. It a quick read that's well worth the effort.

Graph's like the one above also bring home the message that even a small reduction in cycle time - specifically the time to external release of new features of a product - can result in major improvements in economic performance measured by return on investment (ROI), time to pay back, and profitability.

Agile processes - influenced for example by Goldratt's Theory of Constraints (TOC) - stress the need for rapid turn around and frequent releases, and the key drivers for this are the financial benefits from early release. The inhibitors to frequent and early release of new features are usually lack of automated testing and incomplete continuous integration. Using the financial arguments, particularly improving ROI, is the best way to justify and assess investment in this area. Automating acceptance tests in particular involves considerable effort and expense, but if it results in reduced cycle times and improved quality the financial justification is clear.

*Note: Unfortunately cycle time is an overloaded term that means different things to different people. I now trying to use a different term whenever I can. See "In search of unambiguous terminology for Flow systems" for further discussion of this issue.
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