How to make a LOT more money using agile - 0 views
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How to make a LOT more money using agile
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expectations must be set for releases to be smaller but still have significant marketable value. It also means managing scope for smaller releases so the value can actually be delivered to meet the expectations. If we make the assumption these two pre-requisites can be handled, then we can also assume faster releases are possible. Yes, I know, releasing software is expensive, requires other groups, etc. For now, let’s assume all of those costs are negligible compared to the potential results and see where we end up.
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ROI is calculated as $profit/$invested which in this case is ($2,000,000-$1,000,000)/$1,000,000 or 100%
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cash expended, which in this case exactly matches the investment since we did all of the investment prior to receiving any return.
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Let’s assume that scope can be managed so the product can be delivered in two phases, each taking 6 months.
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the amount of revenue during the first 6 months of release of the first half of the product would be $500,000 ($2,000,000 for full product for 12 months = $500,000 for half product for 6 months).
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matches the cost for building the second half of the product, so the cash expended is actually only $500,000 for building the product vs. $1,000,000 for building the product in one step.
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After phase 2 of the product is completed it too starts to bring in revenue. We now have the complete product, so we can get full value of it during each time period. In other words, during the next 12 months it will generate $2,000,000 in revenue. This brings total revenue to $2,500,000 which means our ROI is now 300% (higher profit divided by smaller investment - $1,500,000 profit / $500,000 invested).
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Month Expense Revenue Cash (Profit) Total Revenue 6 $500,000 $0 -$500,000 $0 12 $500,000 $500,000 -$500,000 $500,000 24 $0 $2,000,000 $1,500,000 $2,500,000