7 Risks in Waterfall Development: A Practical Guide

What is Waterfall Development?

When most of us think about traditional project management, we’re picturing waterfall development. It’s that step-by-step approach where you finish one phase completely before moving to the next one. Winston Royce wrote about it back in 1970, and teams have been using it ever since.

But here’s the thing: as markets move faster and customer needs change more quickly, understanding the risks of waterfall becomes really important. In this article, we’ll walk through the seven biggest risks you face when using waterfall methods and help you decide when those risks might outweigh the benefits.

The 5 Stages of Waterfall Development

Waterfall breaks product development into 5 sequential stages:

1. Requirements gathering
2. Design
3. Development or coding
4. Testing
5. Delivery or deployment

Think about building a house as an example:

• Requirements is sitting down with your architect to explain what kind of house you want. You talk about bedrooms, bathrooms, floors, and so on.
• Design is when the architect takes your wishes and creates a blueprint of your future house.
• Development is when the contractor actually builds the house according to that blueprint.
• Testing happens when an inspector checks that the house is well-built and meets all building codes.
• Delivery is the day you get your keys and can finally move in.

This step-by-step approach works well when you know exactly what you need and there aren’t many unknowns. You’ll typically have a project manager making sure the team builds what was requested, finishes on schedule, stays within budget, and meets quality standards.

When Waterfall Still Makes Sense

Before we get into the risks, let’s be fair: waterfall isn’t always the wrong choice. According to the Project Management Institute, waterfall methods can work well in specific circumstances, especially in:

• Highly regulated industries where you need to document every step
• Construction and manufacturing projects with predictable physical components
• Projects with fixed requirements that won’t change much
• Safety-critical systems that need thorough verification before use

The 7 Key Risks in Waterfall Development

Despite its organized approach, waterfall introduces several significant risks:

1. Late Delivery of Value

In waterfall, customers don’t get any value until the entire project is complete. According to the Standish Group’s 2020 CHAOS report, this full-cycle delivery approach means users often wait many months or even years before seeing any benefit from the work being done.

Typically, your team spends months or years working hard, but customers can’t use anything until the very end. This delay means you might miss market opportunities while competitors launch faster.

This problem of delayed value delivery has led many organizations to adopt more incremental approaches, as noted in Harvard Business Review’s research on digital transformation.

2. Late Discovery of Bugs

In waterfall, you don’t find bugs until the testing phase or even after launch. According to research from the Systems Sciences Institute at IBM, the cost to fix defects increases dramatically the later they’re found in the development cycle.

Finding issues late in the game leaves little time to fix them, which often delays delivery. Late bug discovery usually leads to:

• Higher fix costs
• Schedule delays
• Quality compromises to meet deadlines
• Technical debt piling up

3. Cascading Delays

One phase can’t start until the previous one finishes. If any phase runs late, all following phases get delayed too. According to a McKinsey & Company study, IT projects run an average of 45 percent over budget and 7 percent over time, while delivering 56 percent less value than predicted.

This domino effect means early delays grow larger throughout the project. A small delay in requirements might balloon into significant project extensions as problems cascade through later phases.

4. Miscommunication Between Teams

Typically different teams handle each phase, and they communicate by passing documents back and forth: requirement docs, design specs, code, and test plans.

A Project Management Institute study found that ineffective communications is the primary contributor to project failure one-third of the time, and had a negative impact on project success more than half the time.

When teams work separately with little collaboration, you often see:

• Knowledge getting lost during handoffs
• Teams interpreting documents differently
• Important context vanishing between phases
• Testing teams discovering mismatches in what was intended

5. Changes Become Expensive

Once you move past requirements, making changes becomes time-consuming and costly because any change must cycle through all the phases again from the start.

As research published in IEEE shows, change costs increase exponentially as a project progresses through its lifecycle. Changes that would be simple to accommodate in early phases become exponentially more expensive later in the project.

6. Final Product Doesn’t Meet Expectations

After the requirements phase, stakeholders have little ongoing interaction or feedback. According to the Standish Group’s CHAOS report, a significant factor in project failure is lack of user involvement.

Stakeholders don’t see the product until testing or deployment, and the final product often disappoints them. This happens because:

• User needs evolve during development
• Written requirements rarely capture nuanced expectations
• Stakeholders struggle to visualize the final product from documents
• Business priorities shift during the long development cycle

7. The Product Is Outdated at Launch

Because waterfall projects often take years, technology or business processes might change before you finish, making your product outdated on arrival.

Markets, user expectations, and technologies change rapidly, potentially making carefully built features irrelevant before users ever see them.

How to Reduce Waterfall Risks

If you need to use waterfall, here are some ways to reduce these risks:

• Schedule more frequent stakeholder reviews throughout development
• Create prototypes before full development starts
• Start testing earlier, running it alongside development
• Develop better change processes that efficiently handle necessary updates

These hybrid approaches are supported by the Project Management Institute as effective ways to mitigate traditional waterfall risks.

Bottom Line

Waterfall development offers structure and familiarity, but comes with significant risks that can affect project success, budget, and market relevance. By understanding these seven key risks, your team can make smarter decisions about which approach to use or how to reduce problems within waterfall.

For digital products and software development, these risks have pushed teams toward agile approaches, which directly address many of these concerns through iterative development, constant feedback, and delivering value in small chunks.

Understanding when waterfall makes sense and when its risks outweigh its benefits helps you choose the right approach for your specific project needs.

Want to explore alternatives to waterfall? Check out our certified Scrum classes or contact us for help selecting the best approach for your specific project.