## A project plan....

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• Last weekend whilst travelling the length of England I joined a twitter conversation (?). Here was one of my tweets... A plan is an ordered list (by expiry)
Message 1 of 14 , Mar 26, 2010
Last weekend whilst travelling the length of England I joined a twitter conversation (?). Here was one of my tweets...

"A plan is an ordered list (by expiry) of options. Context determines the appropriate options".

It felt like a nice summary of the rambling post I did in response to David a couple of weeks back.

Is it clear or does it need more explanation?
• Why would a plan be ordered by the expiry of the option? Isn t it more logical to order by a combination of value versus effort and priority? Only when looking
Message 2 of 14 , Mar 26, 2010

Why would a plan be ordered by the expiry of the option? Isn’t it more logical to order by a combination of value versus effort and priority? Only when looking at these 2 variables a relevant trade off can be made.

Cheers,

Olav

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Chris
Sent: vrijdag 26 maart 2010 15:19
To: real_options_discussion@yahoogroups.com
Subject: [real_options_discussion] A project plan....

Last weekend whilst travelling the length of England I joined a twitter conversation (?). Here was one of my tweets...

"A plan is an ordered list (by expiry) of options. Context determines the appropriate options".

It felt like a nice summary of the rambling post I did in response to David a couple of weeks back.

Is it clear or does it need more explanation?

• No, because the value depends on the context. You can t know for sure in advance what the value of the option will be. What you do need to know is *when *you
Message 3 of 14 , Mar 26, 2010
No, because the value depends on the context. You can't "know" for sure in advance what the value of the option will be. What you do need to know is when you have to decide whether to exercise it or not.

The problem I have with the "ordered by expiry" idea is that the expiry might be a condition rather than a point in time.

David

On 26 March 2010 18:57, Olav Maassen wrote:

Why would a plan be ordered by the expiry of the option? Isn’t it more logical to order by a combination of value versus effort and priority? Only when looking at these 2 variables a relevant trade off can be made.

Cheers,

Olav

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Chris
Sent: vrijdag 26 maart 2010 15:19
To: real_options_discussion@yahoogroups.com
Subject: [real_options_discussion] A project plan....

Last weekend whilst travelling the length of England I joined a twitter conversation (?). Here was one of my tweets...

"A plan is an ordered list (by expiry) of options. Context determines the appropriate options".

It felt like a nice summary of the rambling post I did in response to David a couple of weeks back.

Is it clear or does it need more explanation?

• Is an ordered list too simple a model? Options have interdependencies ‹ exercising one option may make other options possible, while killing yet other
Message 4 of 14 , Mar 27, 2010
Re: [real_options_discussion] A project plan.... Is an ordered list too simple a model?  Options have interdependencies — exercising one option may make other options possible, while killing yet other options.  Sounds to me like a network.

How would a PERT chart of options look different to a PERT chart of tasks?

Graham

On 26/03/2010 22:35, "David Peterson" <david@...> wrote:

No, because the value depends on the context. You can't "know" for sure in advance what the value of the option will be. What you do need to know is when you have to decide whether to exercise it or not.

The problem I have with the "ordered by expiry" idea is that the expiry might be a condition rather than a point in time.

David

On 26 March 2010 18:57, Olav Maassen <olav.maassen@...> wrote:

Why would a plan be ordered by the expiry of the option? Isn’t it more logical to order by a combination of value versus effort and priority? Only when looking at these 2 variables a relevant trade off can be made.

Cheers,
Olav

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Chris
Sent: vrijdag 26 maart 2010 15:19
To: real_options_discussion@yahoogroups.com
Subject: [real_options_discussion] A project plan....

Last weekend whilst travelling the length of England I joined a twitter conversation (?). Here was one of my tweets...

"A plan is an ordered list (by expiry) of options. Context determines the appropriate options".

It felt like a nice summary of the rambling post I did in response to David a couple of weeks back.

Is it clear or does it need more explanation?

Reply to sender <mailto:david@...?subject=Re: [real_options_discussion] A project plan....>  |   Reply to group <mailto:real_options_discussion@yahoogroups.com?subject=Re: [real_options_discussion] A project plan....>  |   Reply via web post <http://groups.yahoo.com/group/real_options_discussion/post;_ylc=X3oDMTJwYm9xb3J1BF9TAzk3MzU5NzE0BGdycElkAzIzMDgxNzkzBGdycHNwSWQDMTcwNTAwNDM3NQRtc2dJZAM3MTYEc2VjA2Z0cgRzbGsDcnBseQRzdGltZQMxMjY5NjQyOTYz?act=reply&messageNum=716>  | Start a New Topic <http://groups.yahoo.com/group/real_options_discussion/post;_ylc=X3oDMTJmM2JlMGd1BF9TAzk3MzU5NzE0BGdycElkAzIzMDgxNzkzBGdycHNwSWQDMTcwNTAwNDM3NQRzZWMDZnRyBHNsawNudHBjBHN0aW1lAzEyNjk2NDI5NjM->
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• Ø you do need to know is when you have to decide whether to exercise it or not. Agreed. What you want is the ordering which results in the greatest
Message 5 of 14 , Mar 29, 2010

Ø  you do need to know is when you have to decide whether to exercise it or not.

Agreed. What you want is the ordering which results in the greatest cumulative value being delivered by the project plan. With that goal in mind, the decision whether or not to exercise an option needs to be made at the point when deferring any further will impact the value being delivered: I call that the “optimal exercise point” rather than the expiry date, as it may still be possible to exercise later but with a reduced delivered value (for example, a late-exercised option resulting in loss of first mover advantage into a new market sector).

cheers

Julian

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of David Peterson
Sent: 26 March 2010 22:36
To: real_options_discussion@yahoogroups.com
Subject: Re: [real_options_discussion] A project plan....

No, because the value depends on the context. You can't "know" for sure in advance what the value of the option will be. What you do need to know is when you have to decide whether to exercise it or not.

The problem I have with the "ordered by expiry" idea is that the expiry might be a condition rather than a point in time.

David

On 26 March 2010 18:57, Olav Maassen <olav.maassen@...> wrote:

Why would a plan be ordered by the expiry of the option? Isn’t it more logical to order by a combination of value versus effort and priority? Only when looking at these 2 variables a relevant trade off can be made.

Cheers,

Olav

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Chris
Sent: vrijdag 26 maart 2010 15:19
To: real_options_discussion@yahoogroups.com
Subject: [real_options_discussion] A project plan....

Last weekend whilst travelling the length of England I joined a twitter conversation (?). Here was one of my tweets...

"A plan is an ordered list (by expiry) of options. Context determines the appropriate options".

It felt like a nice summary of the rambling post I did in response to David a couple of weeks back.

Is it clear or does it need more explanation?

This e-mail (and any attachments) is confidential and may contain personal views which are not the views of the BBC unless specifically stated. If you have received it in error, please delete it from your system. Do not use, copy or disclose the information in any way nor act in reliance on it and notify the sender immediately.

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• Hi Graham, It is both. It is a network, but one where you only care about the options attached to your current node (i.e. the options you need to decide
Message 6 of 14 , Mar 29, 2010
Re: [real_options_discussion] A project plan....

Hi Graham,

It is both. It is a network, but one where you only care about the options attached to your current node (i.e. the options you need to decide whether to exercise right now) – everything else should be deferred. The options attached to your current node can then be treated as an ordered list. That’s how the complexity of the network can be managed effectively. I basically view it as a three step process:

1.)    Deciding which options go on my list and which get deferred and thrown back into the big bag of network complexity

2.)    Manage my simple list

3.)    Goto 1.)

cheers

Julian

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Graham Oakes
Sent: 27 March 2010 10:31
To: real_options_discussion@yahoogroups.com
Subject: Re: [real_options_discussion] A project plan....

Is an ordered list too simple a model?  Options have interdependencies — exercising one option may make other options possible, while killing yet other options.  Sounds to me like a network.

How would a PERT chart of options look different to a PERT chart of tasks?

Graham

On 26/03/2010 22:35, "David Peterson" <david@...> wrote:

No, because the value depends on the context. You can't "know" for sure in advance what the value of the option will be. What you do need to know is when you have to decide whether to exercise it or not.

The problem I have with the "ordered by expiry" idea is that the expiry might be a condition rather than a point in time.

David

On 26 March 2010 18:57, Olav Maassen <olav.maassen@...> wrote:

Why would a plan be ordered by the expiry of the option? Isn’t it more logical to order by a combination of value versus effort and priority? Only when looking at these 2 variables a relevant trade off can be made.

Cheers,
Olav

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Chris
Sent: vrijdag 26 maart 2010 15:19
To: real_options_discussion@yahoogroups.com
Subject: [real_options_discussion] A project plan....

Last weekend whilst travelling the length of England I joined a twitter conversation (?). Here was one of my tweets...

"A plan is an ordered list (by expiry) of options. Context determines the appropriate options".

It felt like a nice summary of the rambling post I did in response to David a couple of weeks back.

Is it clear or does it need more explanation?

Reply to sender <mailto:david@...?subject=Re: [real_options_discussion] A project plan....>  |   Reply to group <mailto:real_options_discussion@yahoogroups.com?subject=Re: [real_options_discussion] A project plan....>  |   Reply via web post <http://groups.yahoo.com/group/real_options_discussion/post;_ylc=X3oDMTJwYm9xb3J1BF9TAzk3MzU5NzE0BGdycElkAzIzMDgxNzkzBGdycHNwSWQDMTcwNTAwNDM3NQRtc2dJZAM3MTYEc2VjA2Z0cgRzbGsDcnBseQRzdGltZQMxMjY5NjQyOTYz?act=reply&messageNum=716>  | Start a New Topic <http://groups.yahoo.com/group/real_options_discussion/post;_ylc=X3oDMTJmM2JlMGd1BF9TAzk3MzU5NzE0BGdycElkAzIzMDgxNzkzBGdycHNwSWQDMTcwNTAwNDM3NQRzZWMDZnRyBHNsawNudHBjBHN0aW1lAzEyNjk2NDI5NjM->
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• ... This all makes me think of Don Reinertsen s Cost of Delay concept. the optimal exercise point is just before you get hit by the Cost of Delay. So is Cost
Message 7 of 14 , Mar 29, 2010
On 29 March 2010 10:22, Julian Everett wrote:

Ø  you do need to know is when you have to decide whether to exercise it or not.

Agreed. What you want is the ordering which results in the greatest cumulative value being delivered by the project plan. With that goal in mind, the decision whether or not to exercise an option needs to be made at the point when deferring any further will impact the value being delivered: I call that the “optimal exercise point” rather than the expiry date, as it may still be possible to exercise later but with a reduced delivered value (for example, a late-exercised option resulting in loss of first mover advantage into a new market sector).

This all makes me think of Don Reinertsen's Cost of Delay concept. the "optimal exercise point" is just before you get hit by the Cost of Delay.

So is Cost of Delay just on example, and if so, what are others?

Karl

--
Karl Scotland
Lean & Agile Coach
http://www.availagility.co.uk/
• That makes sense. Thanks Julian. Thinking about my question on networks of tasks versus networks of options, is one difference that a network of tasks has
Message 8 of 14 , Mar 29, 2010
Re: [real_options_discussion] A project plan.... That makes sense.  Thanks Julian.

Thinking about my question on networks of tasks versus networks of options, is one difference that a network of tasks has just one route from the current state to the desired end state, while a network of options has multiple potential routes?  Each potential route could then have an expected value (or distribution of likely values) and risk level attached to it...?

What would integrating across all these potential routes tell us about things like option liquidity?  And once we exercise one of the currently-available options, that prunes some of the paths – what does the ratio of the new ensemble of paths compared to the old ensemble tell us?

Cheers
Graham
(just finishing up the project at Skype which has been keeping me maxed out for the last year, so finally have some time to speculate.  And, of course, am open for offers of new projects...)

On 29/03/2010 10:34, "Julian Everett" <julian.everett@...> wrote:

Hi Graham,

It is both. It is a network, but one where you only care about the options attached to your current node (i.e. the options you need to decide whether to exercise right now) – everything else should be deferred. The options attached to your current node can then be treated as an ordered list. That’s how the complexity of the network can be managed effectively. I basically view it as a three step process:

1.)   Deciding which options go on my list and which get deferred and thrown back into the big bag of network complexity

2.)   Manage my simple list

3.)   Goto 1.)

cheers

Julian

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Graham Oakes
Sent: 27 March 2010 10:31
To: real_options_discussion@yahoogroups.com
Subject: Re: [real_options_discussion] A project plan....

Is an ordered list too simple a model?  Options have interdependencies — exercising one option may make other options possible, while killing yet other options.  Sounds to me like a network.

How would a PERT chart of options look different to a PERT chart of tasks?

Graham

Graham Oakes Ltd
64 The Crescent, Northwich, Cheshire CW9 8AD
Phone: +44 (0)7971 546288
Email:
graham@... <mailto:graham@...>
Web:   http://www.grahamoakes.co.uk <http://www.grahamoakes.co.uk/>
Company registered in England number 4899088

Making sense of technology...

My book on Project Reviews, Assurance and Governance has now been published.  Details are at

• Hi Graham, I reckon: look backwards and you have a network of tasks (i.e. the path of work taken to get to the current position), look forwards and you have a
Message 9 of 14 , Mar 29, 2010
Re: [real_options_discussion] A project plan....

Hi Graham,

I reckon: look backwards and you have a network of tasks (i.e. the path of work taken to get to the current position), look forwards and you have a network of options. As you highlight, a PERT chart has just one route from the current state to the desired end state, and to my mind that is a key weakness. I believe PERT charts came from the “scientific management” school of thought championed by Taylor/Ford, that led to waterfall, etc. As far as I can tell they based on the flawed assumption that providing we do enough analysis upfront we can then determined the optimal path through the network – which violates one of the key principles of real options: never commit early unless you know why.

Ø  What would integrating across all these potential routes tell us about things like option liquidity?

I think of liquidity in terms of the “exercise time” of an option rather than the number of options: it is the time it takes to stop doing one thing and start doing something else. Examples are things like a.) re-deploying a dev team from lower value work to a higher value work-stream, or b.) adding more servers on-demand to scale out a production environment.

cheers

Julian

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Graham Oakes
Sent: 29 March 2010 11:53
To: real_options_discussion@yahoogroups.com
Subject: Re: [real_options_discussion] A project plan....

That makes sense.  Thanks Julian.
Thinking about my question on networks of tasks versus networks of options, is one difference that a network of tasks has just one route from the current state to the desired end state, while a network of options has multiple potential routes?  Each potential route could then have an expected value (or distribution of likely values) and risk level attached to it...?

What would integrating across all these potential routes tell us about things like option liquidity?  And once we exercise one of the currently-available options, that prunes some of the paths – what does the ratio of the new ensemble of paths compared to the old ensemble tell us?

Cheers
Graham
(just finishing up the project at Skype which has been keeping me maxed out for the last year, so finally have some time to speculate.  And, of course, am open for offers of new projects...)

On 29/03/2010 10:34, "Julian Everett" <julian.everett@...> wrote:

Hi Graham,

It is both. It is a network, but one where you only care about the options attached to your current node (i.e. the options you need to decide whether to exercise right now) – everything else should be deferred. The options attached to your current node can then be treated as an ordered list. That’s how the complexity of the network can be managed effectively. I basically view it as a three step process:

1.)   Deciding which options go on my list and which get deferred and thrown back into the big bag of network complexity

2.)   Manage my simple list

3.)   Goto 1.)

cheers

Julian

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Graham Oakes
Sent: 27 March 2010 10:31
To: real_options_discussion@yahoogroups.com
Subject: Re: [real_options_discussion] A project plan....

Is an ordered list too simple a model?  Options have interdependencies — exercising one option may make other options possible, while killing yet other options.  Sounds to me like a network.

How would a PERT chart of options look different to a PERT chart of tasks?

Graham

Graham Oakes Ltd
64 The Crescent, Northwich, Cheshire CW9 8AD
Phone: +44 (0)7971 546288
Email: graham@... <mailto:graham@...>
Web:   http://www.grahamoakes.co.uk <http://www.grahamoakes.co.uk/>
Company registered in England number 4899088

Making sense of technology...

My book on Project Reviews, Assurance and Governance has now been published.  Details are at http://www.gowerpublishing.com/isbn/9780566088070 <http://www.gowerpublishing.com/isbn/9780566088070>

This e-mail (and any attachments) is confidential and may contain personal views which are not the views of the BBC unless specifically stated. If you have received it in error, please delete it from your system. Do not use, copy or disclose the information in any way nor act in reliance on it and notify the sender immediately.

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• Hi Karl, Ø the optimal exercise point is just before you get hit by the Cost of Delay. Bearing in mind the old mantra never commit early unless you know
Message 10 of 14 , Mar 29, 2010

Hi Karl,

Ø  the "optimal exercise point" is just before you get hit by the Cost of Delay.

Bearing in mind the old mantra “never commit early unless you know why”, I would say it is actually the point when the Cost of Delay starts to outweigh the Benefit of Delay. I think the term “Cost of Delay” covers pretty much every example, as if the delay doesn’t cost you anything then why exercise the option now? You should instead be focussing on other options where a delay might actually be costing you…

cheers

Julian

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Karl Scotland
Sent: 29 March 2010 11:49
To: real_options_discussion@yahoogroups.com
Subject: Re: [real_options_discussion] A project plan....

On 29 March 2010 10:22, Julian Everett <julian.everett@...> wrote:

Ø  you do need to know is when you have to decide whether to exercise it or not.

Agreed. What you want is the ordering which results in the greatest cumulative value being delivered by the project plan. With that goal in mind, the decision whether or not to exercise an option needs to be made at the point when deferring any further will impact the value being delivered: I call that the “optimal exercise point” rather than the expiry date, as it may still be possible to exercise later but with a reduced delivered value (for example, a late-exercised option resulting in loss of first mover advantage into a new market sector).

This all makes me think of Don Reinertsen's Cost of Delay concept. the "optimal exercise point" is just before you get hit by the Cost of Delay.

So is Cost of Delay just on example, and if so, what are others?

Karl

--
Karl Scotland
Lean & Agile Coach
http://www.availagility.co.uk/

This e-mail (and any attachments) is confidential and may contain personal views which are not the views of the BBC unless specifically stated. If you have received it in error, please delete it from your system. Do not use, copy or disclose the information in any way nor act in reliance on it and notify the sender immediately.

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• .. where Benefit of Delay is essentially further mitigated risk. From: Julian Everett Sent: 29 March 2010 12:52 To: real_options_discussion@yahoogroups.com
Message 11 of 14 , Mar 29, 2010

.. where Benefit of Delay is essentially further mitigated risk.

From: Julian Everett
Sent: 29 March 2010 12:52
To: 'real_options_discussion@yahoogroups.com'
Subject: RE: [real_options_discussion] A project plan....

Hi Karl,

Ø  the "optimal exercise point" is just before you get hit by the Cost of Delay.

Bearing in mind the old mantra “never commit early unless you know why”, I would say it is actually the point when the Cost of Delay starts to outweigh the Benefit of Delay. I think the term “Cost of Delay” covers pretty much every example, as if the delay doesn’t cost you anything then why exercise the option now? You should instead be focussing on other options where a delay might actually be costing you…

cheers

Julian

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Karl Scotland
Sent: 29 March 2010 11:49
To: real_options_discussion@yahoogroups.com
Subject: Re: [real_options_discussion] A project plan....

On 29 March 2010 10:22, Julian Everett <julian.everett@...> wrote:

Ø  you do need to know is when you have to decide whether to exercise it or not.

Agreed. What you want is the ordering which results in the greatest cumulative value being delivered by the project plan. With that goal in mind, the decision whether or not to exercise an option needs to be made at the point when deferring any further will impact the value being delivered: I call that the “optimal exercise point” rather than the expiry date, as it may still be possible to exercise later but with a reduced delivered value (for example, a late-exercised option resulting in loss of first mover advantage into a new market sector).

This all makes me think of Don Reinertsen's Cost of Delay concept. the "optimal exercise point" is just before you get hit by the Cost of Delay.

So is Cost of Delay just on example, and if so, what are others?

Karl

--
Karl Scotland
Lean & Agile Coach
http://www.availagility.co.uk/

This e-mail (and any attachments) is confidential and may contain personal views which are not the views of the BBC unless specifically stated. If you have received it in error, please delete it from your system. Do not use, copy or disclose the information in any way nor act in reliance on it and notify the sender immediately.

Please note that the BBC monitors e-mails sent or received. Further communication will signify your consent to this

This e-mail has been sent by one of the following wholly-owned subsidiaries of the BBC:

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BBC World News Limited, Registration Number: 04514407 England, Registered Address: BBC Media Centre, 201 Wood Lane, London, W12 7TQ
BBC World Distribution Limited, Registration Number: 04514408, Registered Address: BBC Media Centre, 201 Wood Lane, London, W12 7TQ

• Ooh. Interesting. When I think of Cost of Delay, I see it as a graph of CoD over time. What would happen if you graphed BoD over time, and what would the
Message 12 of 14 , Mar 29, 2010
Ooh. Interesting.

When I think of Cost of Delay, I see it as a graph of CoD over time. What would happen if you graphed BoD over time, and what would the intersection tell you?

Karl

On 29 March 2010 12:54, Julian Everett wrote:

.. where Benefit of Delay is essentially further mitigated risk.

From: Julian Everett
Sent: 29 March 2010 12:52

Subject: RE: [real_options_discussion] A project plan....

Hi Karl,

Ø  the "optimal exercise point" is just before you get hit by the Cost of Delay.

Bearing in mind the old mantra “never commit early unless you know why”, I would say it is actually the point when the Cost of Delay starts to outweigh the Benefit of Delay. I think the term “Cost of Delay” covers pretty much every example, as if the delay doesn’t cost you anything then why exercise the option now? You should instead be focussing on other options where a delay might actually be costing you…

cheers

Julian

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Karl Scotland

Sent: 29 March 2010 11:49
To: real_options_discussion@yahoogroups.com
Subject: Re: [real_options_discussion] A project plan....

On 29 March 2010 10:22, Julian Everett <julian.everett@...> wrote:

Ø  you do need to know is when you have to decide whether to exercise it or not.

Agreed. What you want is the ordering which results in the greatest cumulative value being delivered by the project plan. With that goal in mind, the decision whether or not to exercise an option needs to be made at the point when deferring any further will impact the value being delivered: I call that the “optimal exercise point” rather than the expiry date, as it may still be possible to exercise later but with a reduced delivered value (for example, a late-exercised option resulting in loss of first mover advantage into a new market sector).

This all makes me think of Don Reinertsen's Cost of Delay concept. the "optimal exercise point" is just before you get hit by the Cost of Delay.

So is Cost of Delay just on example, and if so, what are others?

Karl

--
Karl Scotland
Lean & Agile Coach
http://www.availagility.co.uk/

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Lean & Agile Coach
http://www.availagility.co.uk/
• Agreed as regards the graph Karl. The intersection would tell you the optimal exercise point:
Message 13 of 14 , Mar 29, 2010

Agreed as regards the graph Karl. The intersection would tell you the optimal exercise point:

http://julianeverett.files.wordpress.com/2010/03/optimal-exercise-point.gif

providing you are mitigating risk effectively

http://julianeverett.files.wordpress.com/2010/03/risk-profiles.gif

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Karl Scotland
Sent: 29 March 2010 14:14
To: real_options_discussion@yahoogroups.com
Subject: Re: [real_options_discussion] A project plan....

Ooh. Interesting.

When I think of Cost of Delay, I see it as a graph of CoD over time. What would happen if you graphed BoD over time, and what would the intersection tell you?

Karl

On 29 March 2010 12:54, Julian Everett <julian.everett@...> wrote:

.. where Benefit of Delay is essentially further mitigated risk.

From: Julian Everett
Sent: 29 March 2010 12:52

Subject: RE: [real_options_discussion] A project plan....

Hi Karl,

Ø  the "optimal exercise point" is just before you get hit by the Cost of Delay.

Bearing in mind the old mantra “never commit early unless you know why”, I would say it is actually the point when the Cost of Delay starts to outweigh the Benefit of Delay. I think the term “Cost of Delay” covers pretty much every example, as if the delay doesn’t cost you anything then why exercise the option now? You should instead be focussing on other options where a delay might actually be costing you…

cheers

Julian

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Karl Scotland

Sent: 29 March 2010 11:49

To: real_options_discussion@yahoogroups.com
Subject: Re: [real_options_discussion] A project plan....

On 29 March 2010 10:22, Julian Everett <julian.everett@...> wrote:

Ø  you do need to know is when you have to decide whether to exercise it or not.

Agreed. What you want is the ordering which results in the greatest cumulative value being delivered by the project plan. With that goal in mind, the decision whether or not to exercise an option needs to be made at the point when deferring any further will impact the value being delivered: I call that the “optimal exercise point” rather than the expiry date, as it may still be possible to exercise later but with a reduced delivered value (for example, a late-exercised option resulting in loss of first mover advantage into a new market sector).

This all makes me think of Don Reinertsen's Cost of Delay concept. the "optimal exercise point" is just before you get hit by the Cost of Delay.

So is Cost of Delay just on example, and if so, what are others?

Karl

--
Karl Scotland
Lean & Agile Coach
http://www.availagility.co.uk/

This e-mail (and any attachments) is confidential and may contain personal views which are not the views of the BBC unless specifically stated. If you have received it in error, please delete it from your system. Do not use, copy or disclose the information in any way nor act in reliance on it and notify the sender immediately.

Please note that the BBC monitors e-mails sent or received. Further communication will signify your consent to this

This e-mail has been sent by one of the following wholly-owned subsidiaries of the BBC:

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BBC World Distribution Limited, Registration Number: 04514408, Registered Address: BBC Media Centre, 201 Wood Lane, London, W12 7TQ

--
Karl Scotland
Lean & Agile Coach
http://www.availagility.co.uk/

• concerning the later graphic, I view this as a summary of lean risk management. It is letting the customer value pull the featuresets to be delivered, and then
Message 14 of 14 , Mar 29, 2010

concerning the later graphic, I view this as a summary of lean risk management. It is letting the customer value pull the featuresets to be delivered, and then letting the risk associated with each featureset pull the mitigation spikes to be performed. That way, the mitigation spikes get prioritised by customer value in just the same way as everything else, and you never waste time mitigating risks for functionality that may not ship (one of the drawbacks of a standard, project-scope risk log).

cheers

Julian

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Julian Everett
Sent: 29 March 2010 14:27
To: real_options_discussion@yahoogroups.com
Subject: RE: [real_options_discussion] A project plan....

Agreed as regards the graph Karl. The intersection would tell you the optimal exercise point:

http://julianeverett.files.wordpress.com/2010/03/optimal-exercise-point.gif

providing you are mitigating risk effectively

http://julianeverett.files.wordpress.com/2010/03/risk-profiles.gif

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Karl Scotland
Sent: 29 March 2010 14:14
To: real_options_discussion@yahoogroups.com
Subject: Re: [real_options_discussion] A project plan....

Ooh. Interesting.

When I think of Cost of Delay, I see it as a graph of CoD over time. What would happen if you graphed BoD over time, and what would the intersection tell you?

Karl

On 29 March 2010 12:54, Julian Everett <julian.everett@...> wrote:

.. where Benefit of Delay is essentially further mitigated risk.

From: Julian Everett
Sent: 29 March 2010 12:52

Subject: RE: [real_options_discussion] A project plan....

Hi Karl,

Ø  the "optimal exercise point" is just before you get hit by the Cost of Delay.

Bearing in mind the old mantra “never commit early unless you know why”, I would say it is actually the point when the Cost of Delay starts to outweigh the Benefit of Delay. I think the term “Cost of Delay” covers pretty much every example, as if the delay doesn’t cost you anything then why exercise the option now? You should instead be focussing on other options where a delay might actually be costing you…

cheers

Julian

From: real_options_discussion@yahoogroups.com [mailto:real_options_discussion@yahoogroups.com] On Behalf Of Karl Scotland

Sent: 29 March 2010 11:49

To: real_options_discussion@yahoogroups.com
Subject: Re: [real_options_discussion] A project plan....

On 29 March 2010 10:22, Julian Everett <julian.everett@...> wrote:

Ø  you do need to know is when you have to decide whether to exercise it or not.

Agreed. What you want is the ordering which results in the greatest cumulative value being delivered by the project plan. With that goal in mind, the decision whether or not to exercise an option needs to be made at the point when deferring any further will impact the value being delivered: I call that the “optimal exercise point” rather than the expiry date, as it may still be possible to exercise later but with a reduced delivered value (for example, a late-exercised option resulting in loss of first mover advantage into a new market sector).

This all makes me think of Don Reinertsen's Cost of Delay concept. the "optimal exercise point" is just before you get hit by the Cost of Delay.

So is Cost of Delay just on example, and if so, what are others?

Karl

--
Karl Scotland
Lean & Agile Coach
http://www.availagility.co.uk/

This e-mail (and any attachments) is confidential and may contain personal views which are not the views of the BBC unless specifically stated. If you have received it in error, please delete it from your system. Do not use, copy or disclose the information in any way nor act in reliance on it and notify the sender immediately.

Please note that the BBC monitors e-mails sent or received. Further communication will signify your consent to this

This e-mail has been sent by one of the following wholly-owned subsidiaries of the BBC:

BBC Worldwide Limited, Registration Number: 1420028 England, Registered Address: BBC Media Centre, 201 Wood Lane, London, W12 7TQ

BBC World News Limited, Registration Number: 04514407 England, Registered Address: BBC Media Centre, 201 Wood Lane, London, W12 7TQ

BBC World Distribution Limited, Registration Number: 04514408, Registered Address: BBC Media Centre, 201 Wood Lane, London, W12 7TQ

--
Karl Scotland
Lean & Agile Coach
http://www.availagility.co.uk/

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