Streamline Your Business Success with Lean Portfolio Management
What is Lean portfolio management?
For organizations to respond at speed, to environmental and market changes, they must be able to quickly organize around opportunities. Lean Portfolio Management enables organizations to move from identifying an opportunity, to the process of testing and learning. Lean Portfolio Management along with Lean Budgeting provides a mechanism to rapidly evaluate business hypotheses through funding the development of low-cost versions of solutions and products.
The goal of Lean Portfolio Management is to build and maintain customer solutions across their lifecycle whilst connecting the portfolio to the enterprise strategy. Lean Portfolio Management helps deliver complex and long running outcomes which require collaboration across organizational units. Taking a “portfolio” view requires the consideration of factors such as alignment to purpose, skills capability management, funding, prioritization and governance.
Key Aspects of Lean Portfolio Management include;
- Strategic Investment Funding: Defines the organization’s vision, objectives and allocate budget towards high-value initiatives.
- Agile Portfolio Operations: Delivers value to the organization through cross business unit alignment and program delivery skill development while keeping a customer centric lens.
- Lean Governance: Enables fast and effective decision making through implementing lean governance framework.
- Continuous Prioritization: Reviews priorities based on the current landscape and continue to prioritize work that will deliver the highest value to the customer.
- Value Stream Management: Identifies, optimises, and improves the flow of work throughout the organization, from ideation to delivery of the outcome, to deliver value to the customer.
Why use Lean Portfolio Management? What problems does it solve over traditional approaches?
LPM practices drive sustained cost reduction through reducing waste by focusing on delivering work that progresses the organization’s strategic outcomes.
- LPM aligns strategy to execution: Strategic objectives of the organization are linked to the work done in teams. This allows the teams to plan, prioritize and deliver work that directly contributes towards the organizational goals.
- Aligning solutions to enterprise architecture: High-level Portfolio Initiatives are designed and analysed to ensure compatibility with existing and future technology, practices and solutions.
- Efficient resource allocation: Initiatives are broken down into smaller, more manageable work items and scheduled according to priority, for maximum customer value. This focus enables organizations to shift their resources to high-impact work.
- Faster time to market: Waste reduction through planning smaller more easily understood work items with an iterative delivery mindset. This accelerates product delivery, reducing the time it takes for the organization to get its product or service to customers.
- Improved visibility and transparency: Discussions on outcome progress, obstacles and opportunities are managed through cross value stream events and the use of visual management boards. The outcome of this is greater alignment and collaboration in managing risks and dependencies.
- Encourage innovation and continuous improvement: Long-term visions drive an understanding of what future capabilities and skills are required. By taking a holistic Portfolio view, Business Owners along with Architects can plan activities to reduce technical debt, address operational issues and develop the business capabilities required for anticipated customer needs.
- Risk mitigation: Collaboration through the early planning of Initiatives ensures that leaders are aware of what may impact the achievement of Objectives. The earlier these Risks are known, the greater the ability for the organization to mitigate and enable work to proceed efficiently.
- Enhance collaboration and cross-functional coordination: Accountability for collaborating between value streams is essential for resolution of dependencies and delivery of complex solutions. Establishing a Lean Portfolio Management function, provides clarity on who is responsible for coordinating cross stream events and activities.
- Cost reduction and improved ROI: Frequent reviews that revalidate work prioritization as circumstances change, can increase their return on investment by ensuring the right work is being done at the right time.
Is Lean Portfolio Management different to Agile Portfolio Management?
The terms Lean Portfolio Management and Agile Portfolio Management are not mutually exclusive and are at times used interchangeably. It is common for organizations find success taking practices and principles from each.
- Lean Portfolio Management focuses on optimisation of value, waste elimination and continuous process improvement.
- Agile Portfolio Management focuses on rapid response to change through being flexible and adaptable.
- Both focus on value delivery, frequent prioritization, and alignment to strategy.
“Lean Portfolio Management is an effective cross organization tool, especially when considering operating models, funding, and long-term investments. Agile Portfolio Management practices drive the business agility required for organizations to succeed in changing markets” – Steve Walton ADAPTOVATE Partner
What are the three elements of Lean portfolio management?
Funding aligned to strategy
To deliver on strategy, organizations need to invest in the right things at the right time. This often requires executives to adapt their visions and plans to achieve the desired outcomes. To deliver on these plans, they articulate and gain support for large Initiatives which may span multiple quarters. Leaders within the Business Units then break down these Indicatives into Epics that can be planned across quarters:
- Long term Initiatives are often aligned to Business Unit Objectives that connect back to the wider organization.
- Shorter term Epics deliver the changes required by their parent Initiatives, to drive Quarterly Key Results.
Lean Governance
Lean Governance aims to maximise value delivered while minimising waste and simplifying bureaucratic processes by:
- Promoting synchronisation, collaboration, transparency, and collective decision-making.
- Emphasising outcome delivery rather than output delivery.
- Coordinating continual compliance by implementing essential governance processes to empower de-centralised decisions and eliminate unnecessary approvals.
Operational support of decentralis
Operational support of decentralised execution
Lean Portfolio Management Operations are the activities that drive delivery and improvement. There is not typically a role defined as Lean Portfolio Manager, however teams with names like Value Management Office, Lean Agile Centre of Excellence and Agile PMO are resourced with people in roles such as Epic Owners and Enterprise Architects to drive these activities. Collectively these people manage the portfolio using “Lean” principles. These operational activities include:
- Sharing processes, practices, and tools that allow decision-making and execution to occur at the appropriate level within an organization.
- Driving collaboration events across the organization, by scheduling activities such as Big Room Planning.
- Coordinating the cascade of Objectives and Key Results.
Lean Portfolio Management builds on existing best practices
Portfolio management refers to practices related to managing the lifecycle of multiple products or services through the delivery of projects. Lean Portfolio Management enables the fast feedback and rapid investment adjustments which are ideal in times of change and has evolved from earlier approaches:
- Business Unit Portfolio Management – Used in large organizations with highly distinct customer groups.
- Product Portfolio Management – Ideal for establishing independent product lines.
- Project Portfolio Management – Focused on delivering specific changes or outcomes.
- IT Project Management – Focused on discrete business system changes rather than holistic portfolios.
- PPM for Agile (Portfolio and Program Management) – Incorporates Agile delivery metrics and demand management practices.
- Lean Portfolio Management – Designed to delivery on organizational Objectives and incorporates elements of earlier approaches.
Lean Portfolio Management applies a Kanban, continuous flow methodology, to demand management. This practice manages the development and prioritization of ideas into a backlog of work items for teams to deliver.
Lean Portfolio Management builds on existing best practices
Lean Portfolio Management is based on Agile principles that prioritize interactions between people, delivery of valuable output, getting feedback and adapting plans to changing environments. Whilst there is a focus on delivery of organizational strategy, there is equal focus on continuous experimentation & Agile portfolio prioritization.
Taking a longer view
Using Lean Budgeting principles, Lean Portfolio Management practitioners take a whole of lifecycle view to investment across three sets of time horizons.
Horizon 3 – Preparing for the future it is essential to be evaluating and exploring potential new products and solutions 3 or more years into the future. Investment is focused on hypothesis testing with a minimum viable product mindset. This experimentation builds in learnings, which create the ability to stop projects early. This differs from traditional projects which may not receive feedback until significant investment has taken place.
Horizon 2 – Launching new products and solutions is essential and requires investment 1 – 2 years ahead. As delivery of features is iterative, there are repeated opportunities to decommission and redirect future investment.
Horizon 0 and 1 – Extracting value from a successful product may require continued development. Each current year, Product Owners, Product Managers and other leaders make decisions on which products and solutions to continue to mature/develop and which to retire.
What are the steps to start Lean Portfolio Management?
Step 1 – Define what Lean Portfolio Management means for your organization
- Align portfolio vision to strategy – Cascading prioritized Objectives and Key Results to determine and sequence the work that should be delivered by the portfolio.
- Enable and improve decentralised program execution – Providing clear budgets, priorities, design guardrails and structured progress visibility practices, to increase autonomy in teams.
- Provide governance oversight – Establishing a governance model that provides structure and oversight includes defining roles and responsibilities, decision-making processes and performance metrics. It is important to maintain a flexible governance model as the needs of the portfolio will change over time as it matures.
Step 2 – Identify who will be responsible for managing the Lean Portfolio Activities
- Identify the scope – Which Portfolios or Value Streams do you want to manage with Lean Portfolio Management.
- Verify the delivery skills and capacity needed – The size of the scope and the maturity of the organization will determine the types of delivery skills and experience required. People who are new to Lean and Agile practices and principles may require coaching – this may be at team or management levels. Team level support may require the assistance of Agile coaches, while executive and leadership coaching may require Enterprise Agility coaches.
- Form the Lean Portfolio Management team – This may be an existing Value Management Office, Program Management Office or Agile Centre of Expertise. In other cases, it makes sense to form a new group with a fresh purpose.
Step 3 – Apply Kanban at the Portfolio Level
- Map the workflow – Identify the steps taken from ideation to delivery.
- Create a portfolio board – Create columns with entry and exit criteria for each stage of work, to visualise the flow through the portfolio system.
- Monitor and optimise – track the length of time each work item stays in each of the columns and how long it is idle to determine how to improve portfolio management and delivery practices.
Step 4 – Coordinate Portfolio events
- Establish routine cadence – Work with delivery groups, business and finance stakeholders to determine appropriate touch points to align on strategy, review progress and prioritize future work.
- Monitor and adjust Portfolio Management practices – Request feedback on how the Portfolio is being managed and take actions to improve.
- Evaluate and Improve on Portfolio events – Seek feedback after each event to determine how to make them more productive.
Step 5 – Portfolio Management tools
Managing a complex portfolio requires synthesising large volumes of information. Using an Enterprise Portfolio Management tool can assist in providing insights and tracking progress.
A portfolio management tool (such as Jira Align) enables connectivity between Strategy and work in three keyways:
- Visualises the cascade of Objectives and Key Results through the organization – to enable easy tracking of progress towards the desired outcomes.
- Connects work, risks, dependencies and impediments with Objectives to drive discussion on what actions are needed to achieve success.
- Connects work across teams, value streams and portfolios to drive the collaboration required for effective delivery.
The team at ADAPTOVATE can help you determine what Portfolio practices will work for you and determine the most effective path to achieving:
Improved alignment to strategy – to work on the right thing at the right time.
Greater transparency of progress and issues – to reduce delays and costs.
Expanded flexibility – to adapt to environmental and market changes.
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