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Limits to prioritization

Joe, after several days of writing, came to me with a written proposal for a project, IVORY SNOW. Joe has carefully filled the proposal template: the proposal describes a problem, and the proposed solution; it considers alternative solutions and shows why they’re inferior; it lists work required and an effort estimate; it has a RACI, et cetera. I thanked Joe’s for his proposal, and read it carefully. I looked for negative side-effects of IVORY SNOW, but Joe has addressed those. I did an impact/effort analysis, and the impact of IVORY SNOW ($1M revenue) seems much greater than the effort required ($10K in costs). The proposal passed all our analysis tools with flying colors, so I accepted the proposal, and Joe began work on project IVORY SNOW.

What’s wrong with this common picture? I didn’t consider all the other projects Joe could have worked on instead! The cost of IVORY SNOW is not just Joe’s salary; it’s also the foregone revenue I could have got from Joe working on FLYING STALLION! This cost is called “opportunity cost”, and it can seriously outweigh the explicit costs.

To show opportunity cost, the only tool I know of is a prioritized backlog. Here’s an example:

Priority Project Revenue estimate Explicit cost estimate
1 FLYING STALLION$100,000,000 $10,000
2 DESERT MEMORY $10,000,000 $20,000
3 ROWDY TRUMPET $50,000 $1,000
... ... ... ...

When Joe presented IVORY SNOW, what I should have done is insert it into this backlog. This would have made it clear that FLYING STALLION is the right thing for Joe to work on. The prioritized backlog seems like the miracle cure to invisible opportunity cost. So why didn’t I use the backlog? There are, unfortunately, many reasons!

One common we forget the backlog is focus. We’re taught that focus is a virtue. But focus can also lead to myopia! By considering IVORY SNOW in such detail, I became unaware of other things we could be doing.

Another limit to prioritization is incomparability. These

One fundamental limit is centralization. To prioritize everything, you need a single backlog. This backlog is a bottleneck. Its owner, such as a Product Manager, is a bottleneck.

Another fundamental limit is multiple skills. Joe is competent to work on IVORY SNOW or FLYING STALLION. Jane is competent to work on IVORY SNOW or ROWDY TRUMPET.

A common work-around is multiple backlogs: the PM has one, the team has another, and each contributor has their own. The trade-off is that items from different backlogs are incomparable.

Another fundamental limit to prioritization is incompleteness. I do not have the imagination to list everything I could be doing!

Signs you’re not considering opportunity cost, and not doing enough prioritization:

Limits to prioritization. Centralization. Everything has to go through one backlog.

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