The Singularity of Donald Reinertsen’s Cost of Delay:
Why 85% of Companies Miss the Mark In The Principles of Product Development Flow: Second Generation Lean Product Development, Donald Reinertsen
In The Principles of Product Development Flow: Second Generation Lean Product Development, Donald Reinertsen delivers a groundbreaking critique of traditional product development paradigms, arguing that they are fundamentally flawed. At the heart of his thesis lies a critical observation: 85% of companies do not understand their cost of delay (COD), instead relying on proxy variables like schedules, efficiency, or quality metrics to guide decisions. This reliance, Reinertsen contends, disconnects organizations from the true economic value of new features and their contribution to total lifecycle profit. By focusing on COD and economic frameworks, Reinertsen offers a singular lens to optimize product development flow, a concept he has elaborated on in numerous publicly available videos and explanations. This blog explores the significance of this theme, its implications for businesses, and how Reinertsen’s insights, drawn from his book and multimedia content, challenge conventional practices.
The Cost of Delay: A Blind Spot for 85% of Companies
Reinertsen’s assertion that 85% of companies fail to quantify their cost of delay is a wake-up call for product developers. COD represents the economic impact of delaying a product’s release, whether due to extended cycle times, unmanaged queues, or inefficient prioritization. In his book, Reinertsen emphasizes that without understanding COD, companies cannot make informed trade-offs between speed, quality, and features. He writes, “To understand the economic cost of queues, product developers must be able to answer two questions. First, how big are our queues? Today, only 2 percent of product developers measure queues. Second, what is the cost of these queues? To answer this second question, we must determine how queue size translates into delay cost, which requires knowing the cost of delay. Today, only 15 percent of product developers know the cost of delay”.
This statistic underscores a pervasive blind spot. Instead of focusing on COD, companies lean on proxy variables—metrics like on-time delivery, resource utilization, or defect rates—that often fail to reflect the true economic stakes. For example, a team might prioritize hitting a schedule milestone over delivering a high-value feature, only to discover later that the delay in that feature cost millions in lost revenue. Reinertsen’s point is clear: proxy variables are not just suboptimal; they can lead to catastrophic misallocations of resources.
In a 2017 talk at the Lean Product & Process Development Exchange (LPPDE), Reinertsen illustrates this with a vivid example: “Ask 10 people in your organization to estimate what it would cost, in pretax profit, if your project were 60 days late to market. You’ll get answers with a 50-to-1 range” (YouTube: “Don Reinertsen - The Principles of Product Development Flow”). This variability reveals a lack of shared economic understanding, forcing teams to fall back on proxies like “sticking to the plan” rather than optimizing for lifecycle profit.
Proxy Variables vs. Economic Value
Reinertsen’s critique of proxy variables is rooted in their disconnect from economic outcomes. Proxy variables, such as cycle time or percent value-added time, are often easier to measure but rarely capture the full picture. As he notes in his book, “Cycle time and percent value-added time are only proxy variables! The unit of measure should be life-cycle profit impact, which is the ultimate measure of product development success”. By fixating on these metrics, companies risk optimizing for local efficiencies (e.g., keeping developers fully utilized) at the expense of global profitability.
In contrast, Reinertsen advocates for an economic framework centered on lifecycle profit, where decisions are evaluated based on their impact on the total profit generated over a product’s life. New features, for instance, should be prioritized based on their contribution to this profit, not arbitrary deadlines or subjective notions of “importance.” In a 2015 webinar hosted by Planview (“Applying Lean Principles to Product Development”), Reinertsen explains, “The value added by an activity is the difference in the price an economically rational buyer would pay before and after that activity is performed.” This perspective forces teams to quantify the economic value of features, aligning development efforts with market realities.
For example, consider a software company deciding between two features: one that enhances user experience (potentially increasing retention and revenue) and another that meets a regulatory requirement (avoiding fines but adding no direct customer value). Without COD, the team might prioritize the regulatory feature to “check a box,” delaying the user-facing feature and sacrificing significant profit. Reinertsen’s framework demands that both features be evaluated in economic terms, with COD guiding prioritization.
The Role of Queues and Flow in COD
A key contributor to delay—and thus COD—is the presence of unmanaged queues in product development. Reinertsen argues that “stagnant piles of idle work lengthen cycle time, delay vital feedback, and destroy process efficiency”. Yet, most organizations fail to measure or manage these queues, exacerbating delays. In his book, he cites queuing theory to show that queue size multiplies delay costs: “When we have 20 jobs in a queue, a 5-minute delay generates 100 minutes of delay time. When there are only two jobs in line, a 5-minute delay generates 10 minutes of delay time”.
In a 2016 presentation at Mind the Product (“Don Reinertsen: Flow, Profit, and the Science of Product Development”), Reinertsen uses a traffic analogy to explain this: “Think of a highway. When it’s 90% full, a small accident causes massive congestion. The same happens in product development when queues are overloaded.” By reducing batch sizes, applying work-in-progress (WIP) constraints, and prioritizing high-COD tasks, companies can minimize queues and accelerate flow, directly impacting lifecycle profit.
Reinertsen’s Videos and Explanations: Bringing COD to Life
Reinertsen’s publicly available videos and talks provide rich context for his COD-centric philosophy, making his dense book more accessible. Here are key examples where he elaborates on these themes:
Lean Product & Process Development Exchange 2017 (YouTube): Reinertsen discusses the economic cost of queues and the importance of COD. He shares a practical method for calculating COD: “Estimate the revenue loss per week of delay, then add any penalty costs like missed trade shows or contractual fines.” This approach demystifies COD, showing how it can be quantified even in complex projects.
Mind the Product 2016 (YouTube): Reinertsen emphasizes the need to prioritize based on economic impact rather than proxy variables. He recounts a case study where a company reduced cycle time by 90% by focusing on COD-driven prioritization, illustrating the transformative potential of his principles.
Planview Webinar 2015 (Online): Here, Reinertsen dives into the economic value of features, urging teams to “stop chasing proxy metrics like utilization and start asking, ‘What’s the profit impact?’” He provides a framework for building project economic models that integrate COD and lifecycle profit.
Kanban India 2018 Workshop (Promotional Video): Reinertsen previews his workshop on applying COD and queuing theory, noting, “We use economics to decide which queues to shrink and which features to prioritize. Without this, you’re flying blind.” This aligns with his book’s call for science-based decision-making.
These resources reinforce Reinertsen’s singular focus: by understanding and quantifying COD, companies can align development with economic goals, avoiding the trap of proxy-driven decisions.
Why This Matters: The Singularity of Reinertsen’s Theme
Reinertsen’s emphasis on COD as a driver of lifecycle profit is singular because it reframes product development as an economic discipline, not a series of technical or procedural tasks. His critique of proxy variables challenges deeply ingrained practices, such as phase-gated project management or maximizing resource utilization, which he calls “wrong to its very core”. By highlighting that 85% of companies lack COD awareness, he exposes a systemic failure to prioritize what truly matters: delivering value to customers and profits to the business.
This theme has profound implications. For startups, where agility is critical, ignoring COD can mean missing market windows in highly competitive spaces. For established firms, it can lead to bloated processes and diminished returns on innovation. Reinertsen’s economic lens, supported by his rigorous use of mathematics and queuing theory, provides a universal framework for optimizing flow, regardless of industry.
Conclusion: A Call to Action
Donald Reinertsen’s The Principles of Product Development Flow is a clarion call to rethink how we manage product development. His central theme—that 85% of companies fail to understand their cost of delay and rely on proxy variables instead of focusing on the economic value of features and lifecycle profit—cuts through decades of flawed practices. Through his book and numerous videos, including talks at LPPDE, Mind the Product, and Planview webinars, Reinertsen offers both a critique and a roadmap for change. By embracing COD, managing queues, and prioritizing economic outcomes, companies can unlock 5x to 10x improvements in performance, as Reinertsen’s principles have demonstrated.
To product developers and leaders: stop chasing proxy metrics. Quantify your cost of delay, align decisions with lifecycle profit, and let economics guide your flow. As Reinertsen reminds us, “The dominant paradigm is wrong. It’s time for a new approach.”
References:
Reinertsen, Donald G. The Principles of Product Development Flow: Second Generation Lean Product Development. Celeritas Publishing, 2009.
YouTube: “Don Reinertsen - The Principles of Product Development Flow” (LPPDE 2017).
YouTube: “Don Reinertsen: Flow, Profit, and the Science of Product Development” (Mind the Product 2016).
Planview Webinar: “Applying Lean Principles to Product Development” (2015).
Kanban India 2018 Workshop Promotional Video. -,,,