Why Portfolio Management
The adage for a company to achieve its business goals and strategies is something like this… Evaluate the current state vs the future state vision and assess and prioritize the gaps that would enable it to meet the future state (i.e., achieve its business goals and strategies). The prioritized work would be organized into programs/projects to meet the future state, and then be operationalized into the company.
Conversation flowed into the number of projects identified and that no company has all resources needed to take on all defined projects. Enter the world of traditional portfolio management establishing governance and methods to determine what are the “right” projects to align business strategies with execution and delivery.
Product-Focus Shift in Portfolio Management
Organizations continue to shift from projects to product delivery; in 2019 Gartner communicated that 55% of those surveyed were moving toward product delivery.1 A company’s traditional delivery and portfolio management methods were no longer as effective in achieving its strategies at the desired pace expected by its customers.
With an increasing focus on agile delivery and further adoption throughout each organization, portfolio management had a need to transform, supporting the product-focused delivery framework. Lean Portfolio Management (LPM), a competency within the Scaled Agile Framework®, moves the discussion from predictable approaches to working in the digital age and more uncertainty. The core portfolio management concepts of more work than resources and aligning to business needs still apply, yet with a method to more easily and frequently adjust to measured results and customer demand.
Starting my career in traditional portfolio management, my first glance saw the similarities between that approach and LPM:
- Each identifies business strategies
- Each recommends models for prioritizing “work” to best align with an organization’s strategies
- Each determines the “right work” to complete by prioritizing against available investments
- Each method uses a business case, mechanisms for prioritization, high level estimates, dependencies and risks when evaluating proposed “work”
- Business and IT individuals need to coordinate and execute on the scope/features to be delivered, coupled with successful change adoption, to realize all benefits / expected value
- Each has an approach to govern the portfolio budget and spend to high priority work, re-evaluating and adjusting as needed
- Traditional portfolio management is, at times, primarily associated with annual business planning. However, it also includes a portfolio performance component, to conduct periodic portfolio assessments, improve the portfolio to align with changing business strategies, and reviewing demand/capacity management to optimize portfolio effectiveness
- Each can measure its (program, project and/or product increment) delivery effectiveness as well as whether it achieved its expected business outcomes
The Value-Based Approach to Portfolio Management
Digging deeper into LPM helped me uncover its methods supporting adaptive vs predictable decision making. Centering on business unit-based value streams, it focuses on what each value stream needs to achieve to support meeting the company’s strategies. The value streams, used to develop the products or solutions to meet customer demand, is the basis for evaluating that the portfolio is focused on the right value stream delivery at any given time. The flexibility required to pivot if not achieving the customer’s needs must happen more quickly and enable reprioritization and funding to support these changes. Some of the keys to LPM not found in traditional portfolio management:
- A product focus prioritizes delivery of the value stream solutions
- Fluid product needs drive a need for more real-time and adaptable priority adjustments in delivering the right solution
- Portfolio budget agility is necessary in lean portfolio management
- Annual planning is associated with a traditional portfolio management approach vs the rolling wave planning in an LPM approach
- Development validates a product hypothesis which is then elaborated or pivoted to a different priority (if the hypothesis does not prove out), allowing for continued flexibility to focus on high customer demand solutions
- LPM delivers a product increment, even when there is a need to pivot to higher priority items. (Traditional portfolio management includes assessing and realigning priorities yet pivoting could mean that a project did not deliver anything if priority level is reduced.)
- Value is delivered within each product increment. (Traditional portfolio management results in achieving business outcomes only if the program/project is delivered.)
How to Get There
Adopting any portfolio management method is not easy. It takes a cross-Enterprise focus and investment of resources willing to maintain the cadences required to evaluate, prioritize, agree/approve, deliver, and assess results. It also requires a common mindset of focusing on the overall company priorities rather than an individual department or business unit.
If your organization has a traditional portfolio management approach, it may help with the human side of collaborating across the Enterprise. That said, there are things that will need to be adjusted and cause initial challenges until new supporting processes are established. One common area is an organization’s funding process, another is in how it is organized to deliver.
Depending on your current organization, here are some ideas for transforming to LPM in a phased approach, enabling course correction and finding the most effective way for your organization.
- If the organization does not have a portfolio management process, start new teams with an LPM mindset. This can be small, such as focusing on one value stream with one epic and a few features, delivering the product and determining its disposition
- Start in a portfolio that is already using agile principles for delivery
- If annual planning was completed using traditional portfolio management, explore a portfolio that can be translated into value streams, determine if the approved portfolio budget can be shifted as needed against its value streams
Any portfolio management adoption is a cross-Enterprise initiative and should include change management adoption methods. (Check out Aspirent’s series on Five Common Pitfalls When Scaling Agile by Dan Petell, focused on scaling agile at the Enterprise level and applicable to implementing Lean Portfolio Management.)
There will always be a need for portfolio management processes. It is the bridge between strategy and execution. The key is to align your portfolio management and delivery approaches, achieving your company’s priorities and business needs.
1CIO (2019). “Making the Shift to Product-Based IT”