.

Return on Investment profit / investment

improving ROI profit ++ / investment –

[example: retail] more value (profit ++)

  • sell more to the same customer
  • get more customers
  • increase prices (without losing sales)

less waste (investment –)

  • cheaper space / furniture / tills / …
  • fewer people
  • less inventory (things on the shelves and in the back)

improving ROI improving profit / investment

[example: software] more value (profit ++)

  • do things that are more valuable (effective)
  • do things faster (efficient)
  • work more

less waste (investment –)

  • cheaper space / furniture / laptops / …
  • fewer people
  • less inventory (Work In Progress)

Inventory

items invested in that take up space

[example: retail] ideal: every customer walking in finds everything they are willing to buy

inventory - physical limitations:

  • more inventory -> more investment
  • more inventory -> more space
  • more inventory -> more staff

Inventory

items invested in that take up space

[example: software] work in progress features (no value, low value, high value)

work-in-progress - limitations:

  • more work-in-progress -> more investment
  • more work-in-progress -> more context-switching
  • more work-in-progress -> more cognitive-load

features - limitations:

  • more features -> more investment
  • more features -> higher cost to add new things
  • more features -> higher chance of things breaking
  • more features -> more cognitive-load

ROI 80-20

ROI = profit / investment ROI = 10 / 100 = 10%

80-20 ROI = 8 / 20 = 40%

Inventory 80-20

ROI = profit / (space + … + wage + inventory) ROI = 10 / ( ? + … + ? + 100) = <10%

80-20 ROI = 8 / ( ? + … + ? + 20) = <40%

Work in Progress == Inventory

unfinished tasks are like an unsold products on the shelves

investments are paid, but no profits made

useful metrics

Work-In-Progress-limits how much inventory

Lead-Time how long between investment and profit how long between money out and money in

Definition-of-Done generated value, sold & paid

Book: Isn’t It Obvious? - Eliyahu M. Goldratt

maybe a good metaphor = museum

  • “features build up”
  • “features take up space”
  • “inventory is not sold”