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Lean Portfolio Management

Improving alignment between strategy, funding and value delivery

Agile practices are not just for the execution level, but should be used at all levels of the business – from planning to value attainment.  Lean Portfolio Management is what many organizations use to integrate agile working methods with more traditional portfolio management approaches.

What is Lean Portfolio Management?

Lean Portfolio Management is based on the philosophy of Lean management that aims to eliminate waste by focusing only on work that really matters.  Essentially, that means ensuring that all of the effort expended is delivering the best possible value, which in the case of Lean Portfolio Management means making the largest possible contribution to achieving organizational goals and objectives and successfully delivering strategy.  Lean Portfolio Management is an approach to scaling agile principles and practices from the execution layer of the business to all functions in order to achieve the same performance improvements and deliver greater value.

Why Lean Portfolio Management?

Many organizations have experienced challenges with scaling agile from the bottom up – starting with work execution and elevating agile concepts to strategic levels of the organization where governance, planning and funding are handled.  Organizations run into the need for portfolio management capabilities, but traditional portfolio management won’t work.  As a result, Lean Portfolio Management emerged as a way to bring those value-driven agile principles to planning, governance and management activities, allowing those elements to become more effective and efficient while allowing delivery teams to operate without disruption. 

Elements of Lean Portfolio Management

Lean Portfolio Management is a combination of a shift in thinking and effective execution approaches.  There are a number of distinct aspects to it that combine to help organizations deliver the concept.

  • Establishing strategic themes and outcomes.  Business strategy should be decomposed into distinct business objectives, each matched with a set of required outcomes.  These themes provide context to the work associated with them and combine to form an overall lean portfolio that aligns with business strategy.
  • Funding, management and allocation by value stream.  Value streams represent the sequence of activities that connect strategies and objectives with fully implemented solutions.  They’re the products, services, capabilities, programs, etc. that represent strategy execution.  With cost planning software, leadership can allocate resources and manage at this value stream level. This allows them to retain control and insight over the work without inhibiting the flexibility of work teams to deliver in a way that works best for them.
  • Capturing and managing demand by value stream.  The value stream should also be the unit of management for organizational demand. Demand management software supports automated workflow to capture requests, enable identification of new epics, and complete lean business cases focused on estimates, key milestones and KPIs.  It should also allow for effective and efficient prioritization and the updating of roadmaps based on those approval and prioritization decisions.
  • Shifting to continuous and adaptive planning.  Those roadmaps represent one of the elements of the shift away from annual planning that must also be an element of .  Planning must be continuous and adaptive in response to emerging threats and opportunities with tools to actively manage roadmaps for all strategies and investment areas that help maintain alignment between strategic priorities, the work being done, and the benefits being delivered.
  • Optimizing resource management.  The shift to value stream-based delivery will result in the establishing of dedicated teams that in some cases will be permanent or semi-permanent.  While these self-organized teams can simplify the resource management process within individual value streams, at the strategic level Lean Portfolio Management must deliver to manage individual and team capacity, to run what-if scenarios to maximize resource utilization, and to identify emerging staffing needs as the business evolves.
  • Supporting continuous delivery and reporting.  Value is only obtained when the right solutions are delivered to clients so Lean Portfolio Management must integrate with the continuous delivery pipeline to ensure that is occurring consistently.  In addition, there must be complete, real time visibility into the work that is happening and the value being realized through contextualized, value-based reporting.
  • Managing outcomes and value realization.  Measurement of performance is not enough.  Lean Portfolio Management must also employ outcome management tools to address any variances between actual and expected value.  That starts with clear objectives and defined metrics, continues with tracking KPIs throughout the delivery process and analysis of performance to identify variances and corrective actions.
  • Implementing lean governance.  Governance is not a bad thing.  The reason it is seen that way is that it often gets in the way of effective delivery.  Lean Portfolio Management must deliver governance at the value stream level that provides leadership control without hampering delivery teams.  That governance must integrate with funding and allocations and be flexible enough to operate within an adaptive planning model.  It must also provide standardized performance measurement across all work modalities and investment types.

Challenges

The biggest challenge of Lean Portfolio Management is not actually anything to do with Lean Portfolio Management itself.  Lean Portfolio Management is often a response to failed attempts to scale agile through an organization.  Traditional portfolio management is not designed for the less structured, more adaptive approach that characterizes agile and Lean Portfolio Management is therefore implemented to provide that framework for agile delivery.  But that means it is only ever likely to be a partial solution – organizations need to be able to embrace both agile and other work modalities at the portfolio level.

While organizations are increasingly adopting agile principles in many aspects of their work, that doesn’t automatically mean that Lean Portfolio Management is the appropriate approach to all portfolio investments and work modalities.  Stakeholders, especially at the strategic and leadership levels, will need Strategic Portfolio Management software to be able to manage priorities, objectives and value management across multiple planning and investment approaches in parallel.