In this fast and continuously changing world, customer expectations and preferences are changing with equal speed. This fast pace of change has caused organizations to adopt digital and agile transformations so that the agile team benefits increase manifold and are multiplied throughout the organization. But many organizations do not get the expected outcomes. So, if an organization has to get the full advantage of agile transformation, it must align its technology and business teams and make them stay that way. But there is a challenge here. There is always a gap between the team that allocates funds and the team that actually does the work. The issue is bridging this gap. And to do this, the leadership of the organization must have certain capabilities. They must be able to get the visibility of work in the backlog and demonstrations for the solutions that are coming up. They should be able to understand what works and what doesn't.
So, they must review the results after every increment to see if the project is progressing toward the desired outcome. And they should be able to optimize the investments. With more and more organizations seeking to align business teams with technology teams and making efforts for them to stay aligned, it has been found that the traditional methods of alignment do not prove to be that effective. So, the organizations have started adopting Lean Portfolio Management so that this alignment can be driven all through the organization. But what then is Lean Portfolio Management?
Lean Portfolio Management (LPM)
As the name suggests, Lean Portfolio Management is a method of managing company portfolios. It is used to enhance efficiency and increase the level of customer satisfaction. It explains the way the leadership of an organization applies Lean principles to join strategy with execution. It is used at the highest level of decision-making authority and accountability to achieve better results in the overall context of the organization. For organizations that seek to achieve Business Agility, it is also one of the core competencies. LPM works on the basis of lean management philosophy whose goal is to remove waste and focus only on the work that actually matters for achieving the highest possible value. In the overall context of the organization, it means making the maximum contribution to the goals of the organization thus helping in delivering on business strategy.
The portfolio management teams in LPM first understand the organization's strategy and then allocate funds for executing that strategy. As with other portfolios, the Lean Portfolio Management portfolio is also determined ingeniously and is managed actively throughout the investment lifecycle. The main focus is always on aligning agile development with the business strategy with an aim to push value delivery to the customer by building products and solutions. Lean Portfolio Management has three objectives. They are:
Maximize the value output - It means that the investments backlog should be so managed as to identify the opportunities having the highest value and manage the work-in-progress in the team of teams in a way that accelerates the value delivery to the customer.
Prevent blockages - The portfolio budget should be used in a manner that balances the funding for capacity and the demand for the opportunities with the highest value.
Showing good servant leadership - Hindrances should be eliminated so that the delivery cycle of the value remains low.
Why Lean Portfolio Management?
The world is a global economy today and digital disruptions are quite common. So, organizations following the traditional methods of portfolio management just do not remain competitive enough. But LPM works on the basis of the Lean-Agile approach so it is basically different because here the focus is on value and people are organized around it. LPM brings the pragmatic features of Agile into those functions of the organization that is strategic in nature. Besides, it promotes practices that can optimize the value delivery to the customers and as a result, to the organization.
Having learned about Lean Portfolio Management and its importance and contribution to value-optimization, we will learn the ways to start Lean Portfolio Management.
How to implement Lean Portfolio Management
Whatever portfolio management the leadership of an organization might be following, adopting Lean Portfolio Management practices into them brings about significant changes and can be done only by robust change management practices in the organization. The following steps are followed for a smooth adoption of Lean Portfolio Management practices.
1. Bring out the leaders
The teams managing the portfolio are cross-functional teams of servant leaders with a high level of performance. Releasing and using the collective power of a leadership team is as important as providing power to a development team. If the leadership team is put together properly, implementing Lean Portfolio Management becomes easy. So, the first step in implementing LPM is to find and assemble a team that would be able to efficiently connect strategy with execution for a particular section of the organization. This team should have leaders with skills in financial matters who can help in aligning the business strategy with the project execution. These leaders must have an excellent knowledge of the ways to collect data, monitor the progress of the project, and be able to influence people managing priorities. These people can be found from the internal teams by evaluating their strengths or can be hired from outside by collaborating with the hiring managers and briefing them about the skills required for these important positions. This would create the portfolio leadership team.
2. Arrange the funding
Even when you have a portfolio leadership team ready to take charge, nothing much can be accomplished if they don't have adequate funds to carry out their work. LPM requires proper funding for aligning business strategy with execution. No doubt, every portfolio method requires funds but the difference here is that in Lean Portfolio Management the strategy and investment model moves from funding the project to funding the team of teams. This means that the relationship between the strategic goals of the organization and the method that the team of teams uses to make plans should be understood more deeply and there should be more visibility. So, certain things have to be kept in mind. The first is who is making the funds available and what are their expectations from it. Then who is providing the funding to keep the business running? And lastly, how many different strategies, each of which is independently funded, would be there to steer the portfolio? Generally, the funds have to be found from the existing resources of the organization and it has to be seen where the project can fit into the organization's budget.
3. Build an operating structure
Now that you have a strong portfolio leadership team in place raring to go and have been provided with the required funding, it's time to make a plan or a strategy about how would you like to begin. Where would you like to start and if all members of the team would work together or each member would handle a different and specific task? No two teams want to take a similar route to agile portfolio operations. So, it is important to know and understand the requirements and expectations of the leadership team. Hold discussions with the leadership team to see how the transition to a leaner operational plan would take place. Look out for the areas where waste is taking place in your earlier portfolio management method. Create an operating structure keeping the main principles of LPM in mind and make it feel like being tailor-made. The key here is to keep customer satisfaction as the highest priority. Create an operating structure that encourages lean portfolio performance.
4. Apply a lean workflow
With a team assembled, funds available, and an operating plan in place, you can now move toward creating a lean workflow. Remove the tasks that are not required and that cause inefficiency in your portfolio management process. Like, you might have faced delays in project prioritization previously because the project manager did not provide timely information. Create a pull system so that you can be notified when the previous stage of the process is completed. This pull system can be created with the help of portfolio management software. Take up the active work that has been funded and reshape it into leaner constructs that will give better support to the flow of value. Take this chance to reevaluate the logic behind doing this work. Various stages of the portfolio management process can be viewed with the help of Kanban tools or Gantt charts. Lean asks organizations to "maximize work not done". So, identify if any active work can be stopped or scaled back.
5. Remodel with clarity
Now that the portfolio management process has been established, you would like to test it and see if there are still any elements that can cause a disturbance. This is because LPM introduces new techniques for making decisions. These include putting more emphasis on viewing whether the work is strategically aligned or not and governance based on the guardrail concept. When the focus is on lean initiatives, the workflow should run without any hindrances. However, since the leadership will have to make adjustments for adopting Lean Portfolio Management, this would call for bringing more clarity and upgrades. This would necessitate the remodeling of the existing management systems so that new disciplines can be added and more clarity is added. Flexibility and a continuous willingness to improve are essential for operational excellence. The best way to transition from the traditional ways of portfolio management to Lean Portfolio Management is by using change management best practices. By making use of the change management best practices, you can make this transition trouble-free and as smooth as possible.
In Lean Portfolio Management, the decisions and improvements are made at a set tempo by the portfolio leadership teams. The teams must celebrate these improvements. Whenever a project is completed and delivered successfully, it is important to celebrate that success. It motivates and satisfies to see your business strategy come alive and produce enhanced customer satisfaction. All due to lean budgeting. The improved flow of value and positive feedback are achievements that called for celebration. Even if the project has not given all the desired outcomes or has not gone as per plan, the mistakes made can be used for learning the lessons and making improvements in the future. These will help in better decision-making in the future. So, maintain a portfolio vision that seeks to become better all the time and improve the flow of value.
For the teams and leaders who can propel change in their organizations, Lean Portfolio Management provides them with proven lean principles. But for changing to a lean portfolio, patience and focus are two essential requirements. By following the lean principles, you can increase the flow of value and improve the agile workflow. In short, the lean approach brings dependable value delivery, and reduction in time to customer value, It also makes sure that the team can hold on in spite of changes in the market or customer requirements. Lean Portfolio Management provides a way of making maximum use of these benefits and creating an organization that is better connected.
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