Enterprise Agility through Lean Portfolio Management
Over the recent years, especially through the pandemic, we have witnessed an accelerated rise in market disruptions introduced by companies that barely existed before that period. These newcomers have quickly turned into serious competitions by showing a degree of market adaptability and customer targeting precision that requires levels of Agility that were not experienced, nor known, before.
In simpler terms, they enjoy a degree of “Enterprise Agility” that the traditional incumbents have been missing and through that, they are capable of following the market trends and customer demands as they manifest in the horizon and can meet and exceed them in such short times that no “non-Agile” organization is capable of.
Their Business Agility is rooted in several Lean and System Thinking factors, the most prominent of which being identified as the Lean Portfolio Management.
Lean Portfolio Management aligns organization’s strategic plans with what they actually implement and deliver through their Value Streams. It does that by using Lean and System Thinking mindset towards managing their portfolios, running their governance and fund their initiatives.
Each Value Stream is an individual and yet part of the aggregate value delivery system that the organization uses to turn ideas into products and service that is then provided to the customers to create certain Business Outcomes (mostly in the shape of revenue).
Lean Portfolio Management (LPM)
An Enterprise Portfolio manages multiple Values Streams which serve creating and supporting a set of products and services provided to customers. The larger the enterprise, the higher the number of portfolios covering specific areas (or lines of business) in that organization.
Organizing those portfolios around Value Streams help the organization to move away from project-based delivery of value, and towards continuous value creation and delivery, where change is the outcome of the feedback collected through short release cycles to the market and observing their impact.
It also helps the organization establish long-lasting and strong teams where the core knowledge and competency stays with the people doing the work (as opposed dissolving the teams after a project is completed or ran out of money). This fosters higher quality and improving productivity from the well-formed and mature team structures and raises their ability to speed up their time-to-market.
This mindset shifts organization’s focus from spending funds and time and energy, completing long-hauled, pre-planned (best-guessed) responses to market needs, and towards incremental market re-targeting with the goal of generating a continuously growing amount of Business Outcomes (i.e., Revenue).
Lean Portfolio Management (LPM) provides the highest level of leadership in setting the path for the organization to follow and provides the required funding to make it happen.
LPM ensures that the enterprise portfolio is in alignment, and adequately funded to create and maintain the solutions required to meet the business targets. It visualizes the portfolio’s current state and lays out the incremental evolutionary plan towards the better and elevated future state and uses the aggregate feedback from all Value Streams to continuously fine-tune the strategic vision and the path to respond to the changing market landscape.
LPM funds the most effective initiatives to create the most impactful products and services to create the highest level of desired business outcome, through serving as a bi-directional bridge between the enterprise strategy and portfolios, supporting the strategic business objectives and receiving the needed feedback for recalibration of work towards better market retargeting.
Leadership’s Strategic Vision provides a high level description of the targets that the enterprise is aiming for and is the guideline for the Value Streams and their serving teams / programs in the organization on what to target within which timeframe.
This is supported through the LPM and exists as a live picture that is in constant re-calibration and fine-tuning through the impact of feedbacks collected across the Value Streams and the Flow KPIs and aggregated into portfolio level corrective and optimizing action items.
LPM supports the Strategic Roadmap to enrich the Strategic Vision and to serves as a pathfinder for all organizational segments, communicating the vision across all functions and teams. The enterprise leadership uses LPM to perform recurring assessment of the enterprise Agility in certain intervals (can be monthly, quarterly, semi-annual, and annual) and to experiment with a variety of parameter adjustments in search of the optimization points that has the highest resonation with the market status in that timeframe.
The vision supported by the LPM guides the organizational technology structure and architectural composition as the serving backbone of the entire product and service creation and delivery platform. Enterprise architecture works hand-in-hand with the business to map their ideas into feasible and sustainable technological solutions.
Of course, the search for stability should not impede the innovative side of the organization and affect their ability to R&D as that function should be properly budgeted and supported as part of the LPM.
The Evolution of Budgeting
Organizations which are still following the traditional approach to portfolio management find themselves at odds with the dynamics of the new world and the accelerated shifting markets. They have their staff organized in silos, separated based on their functions, and have invested heavily in PMOs and running deliverables as projects. They would budget these projects and reconcile against project-costs.
These organizations have been trying their luck at forecasting and planning entire fiscals upfront, with large annual planning and budgeting for the entire year. Of course, the market and its continuously changing factors would cause numerous changes to the scope of the projects, aggregating into many necessary updates to the planned budget and missing the mark year after year.
Their attempts at doing a perfect work in envisioning how the market would behave during an entire year always led to creating overly comprehensive and detailed business cases and unrealistic ROI’s which would change as the year would reveal itself.
The slow pace of Waterfall delivery with numerous checkpoints and phase gates has been another major hurdle in their ability to show any rapid reactions to market changes and meeting what the customers really needed when their products would go out to the customers.
This is while the Agile Organizations (aka our new market entrants), have been busy forming their teams around their Value Streams, enforcing the continuous value delivery mindset, and shortening the lead between ideas and their manifestations as products and services. They see each Value Stream as an ongoing value generation flow in continuous improvement and optimization.
Such mindset dictates that the budgeting should be done with focus on funding the Value Stream as never stopping value creation engines. This is done through lean budgeting (waste-trimmed and impact-prioritized funding) and establishing multiple guardrails and threshold to safe keep the flow of funds for new work in balance with maintaining what is already in production and retiring any existing technical debt.
They would have Value Streams leaders participate in prioritizing and funding the work and fine-tuning and adjusting that as the market landscape would shift and the parameters would change.
Their decentralized decision making processes allow for quick market retargeting moves and they incremental approach in value delivery would allow them to break down the budget towards MVPs (Minimum Valuable Products), testing them by hypothesises, agile forecasting and re-calibration based on the feedback created through short cycles.
LPM establishes the leadership’s view into the cost of implementing each component of the Strategic Vision. This cost (which is comprised of implementation and opportunity cost items), helps LPM to allocate proper funding and set the needed guardrails to maintain the balance between “keeping the lights on” and “becoming a market leader”.
LPM uses Lean Budgeting as a set of specialized lean financial practices based on waste reduction and ROI optimization. This is the next level of Lean Agile transformation where Agile financing shifts the funding model from one-shot project based delivery towards on-going funding of Value Stream – in alignment to the portfolio strategy - where change is expected as part of day to day work (and not tagged as a “scope creep”), there is no upfront funding request tied to an assumed understanding of requirements and their cost of implementation, and there is no need for re-financing the delivery work whenever a needed change happens to the scope of delivery.
LPM supports use of investment ranges (timeframes) to ensure the organization maintains the balance between the need to explore and discover market opportunities (through early assessment and evaluation of ideas) and the completion of short-term (and immediate) revenue generating initiatives. This way, LPM ensures that the enterprise is investing adequately on all the needed timeframes, avoiding over-spending on one and drying out the other.
LPM promotes collaborative budgeting with participation of all stakeholders in a joint value delivery partnership between business and technology groups. This is a recurring and ongoing practice to size and allocate funding for the most impactful deliverables through the Value Streams, reviewing the effectiveness of guardrails and KPIs, and to make any needed tuning and recalibration to the budget.
Enterprise Guardians of Lean Excellence
LPM promotes the existence of an EACOE (Enterprise Architecture Center of Excellence), as the owner and promoter of best practices, tools, and processes in service of teams that are supporting Value Streams. They are also responsible for Technical Governance and policy setting to ensure the innovations and R&D are promoted and encouraged, but at the same time they would not expose the enterprise to unnecessary risks that can cause financial and reputational damages.
LPM also uses LACE (Lean Agile Center of Excellence) or APMO (Agile PMO) in organizations as a focal point for Lean Agile knowledge, training, exploration, and promotion of best practices in agile leadership at all ranks across the enterprises.
In some organizations, Guilds or CoPs (Communities of Practice) are formed to establish circles of self-organizing groups of people interested in continued learning and improvement in specific topics. These groups share their success stories and patterns with the rest of the organizations and centers of excellence.
LPM also leads the charge in operational excellence of enterprises through promoting and supporting a culture of continuous learning and improvement across all organizational ranks. These efforts leads to an ongoing and growing waste-repellent mindset of optimization, improvement, transparency, and accountability in the organization.
LPM establishes a number of KPIs to track the progress and success of Value Streams (and their aggregate impact at portfolio level) in:
- Implementing the Strategic Vision
- Alignment of budgeting and spending with the business goals
- Improvement of customer experience with the products and services
- Rising engagement levels of personnel and their level of happiness
- Improved relationships with vendors and economic partners
- Rising ROI in Value Streams through ever improving efficiencies
- Rising quality and number of successful product releases
The adoption of Lean Portfolio Management by Agile enterprises is the next definitive level in rising the organizational level of Agile Maturity and serves as a proven practice to align corporate finances with the required Agile format of business value delivery by the enterprise.
Over the past few years, LPM has shown tremendous success in creating and implementing strategies fit for an ever changing and uncertain market on an accelerated pace.
LPM is the modernized Lean-Agile portfolio management practice that puts the organization’s power around serving Value Streams in delivery of ever improving continuous flow of products and service to the customers and generating the desired business outcome.
LPM brings together the best of organizational potentials and competencies towards a new level of ever improving efficiency and impactfulness that provides the best opportunities for the enterprise to push forward to the front row of market leadership and break through that into leading the charge in their sector.
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Arman Kamran is an internationally recognized executive leader and enterprise transition coach in Scaled Agile Delivery of Customer-Centric Digital Products with over 20 years of experience in leading teams in private (Fortune 500) and public sectors in delivery of over $1 billion worth of solutions, through cultivating, coaching and training their in-house expertise on Lean/Agile/DevOps practices, leading them through their enterprise transformation, and raising the quality and predictability of their Product Delivery Pipelines.
Arman also serves as the Chief Technology Officer of Prima Recon Machine Intelligence, a global AI solutions software powerhouse with operations in US (Palo Alto, Silicon Valley), Canada (Toronto) and UK (Glasgow).