The What, Why, and How of Implementing Lean Portfolio Management (SAFe® )

The world is changing fast, and as it changes so do customer expectations–and as Artificial intelligence (AI) and Machine Learning (ML) adoption increases, the changes will get faster and the expectations will be bigger! Enterprises heavily invest in digital and agile transformations, but achieving desired results is difficult without alignment between business and technology teams. An aligned enterprise is crucial to compete in the modern economy.

The agile mindset, paired with design thinking and behavioral economics, can transform the way companies measure value and productivity. However, implementing agile across the entire enterprise can be challenging and expensive, and it is not a one-size-fits-all solution. Many companies struggle to balance thinking and being agile, often expecting agile methods to fit within traditional linear timelines.

What is Lean Portfolio Management?

Lean Portfolio Management (LPM) aligns strategy and execution by applying Lean and systems thinking to investment funding, Agile portfolio operations, and governance and prioritizing them into high-value initiatives. LPM allows stakeholders and clients to focus on the most valuable features. LPM is a core competency of the Lean Enterprise, essential for achieving Business Agility by emphasizing results validation over task and resource-driven approaches.

The primary goal of Lean Portfolio Management is to align business strategy and agile development to deliver value to customers and improve enterprise agility. Alignment of strategy and execution is critical to organizational success and a key aspect of the Scaled Agile Framework (SAFe®). LPM enables cross-silo collaboration, team empowerment, and value-driven organization for faster adaptation to customer needs.

The LPM investment portfolio is creatively determined and actively managed throughout the investment life cycle. The primary focus of LPM is to align agile development with business strategy, with the objective of delivering value to customers through the creation of products and solutions. Combining LPM with agile development practices provides a way to enhance business agility.

Why Lean Portfolio Management?

Traditional portfolio management is ill-equipped to handle the rapid change and disruption in today’s market, as it was not designed for a global economy or the impact of digital disruption. Enterprises must now work under higher uncertainty and deliver innovative solutions faster. Legacy portfolio practices, which often focus on multi-year projects and out-of-date goals, can hinder progress. Lean Portfolio Management, informed by lean principles and a focus on delivering customer value quickly, offers a remedy to common pain points in large organizations. Applying a lean-agile approach in portfolio management is crucial in keeping up with the rapidly changing world.

Lean Portfolio Management involves managing an enterprise’s product portfolio, prioritizing high-value investment proposals, and providing funding. LPM also creates feedback loops to help the organization deliver its products or solutions more quickly.

LPM can enhance agility when executed properly – achieved by aligning the organization’s planning, funding processes, and business strategy with its desired business outcomes. LPM differs from traditional project portfolio management in a number of ways.

Implementing Lean Portfolio Management offers several benefits, including:

1. Reduced obstacles: By applying lean portfolio management principles, enterprises can reduce obstacles when balancing demand and opportunities.

2. Maximized value throughput: LPM helps identify high-value opportunities and manage work in progress across teams to accelerate value delivery.

3. Reduced delivery time: LPM also helps eliminate obstacles that can lead to longer delivery cycle times.

There are three important elements or dimensions of lean portfolio management that help bring about these desired results. They are strategy and investment funding, Agile portfolio operations, and lean governance.

Strategy and investment funding: Lean Portfolio Management enables organizations to align and finance their portfolio to meet business targets by creating a structure to plan, fund, and map strategic objectives to value streams. However, this initial alignment may require a shift in how organizations traditionally think about portfolio initiatives within a traditional project management model. To achieve this, Lean Portfolio Management planning and steering meetings are created as a forum for determining opportunities and how different parts of the organization must collaborate to meet desired business outcomes in a more iterative way through continuous planning.

Agile portfolio operations: Lean Portfolio Management enables Agile teams to quickly adapt to change and address issues through continuous planning and iterative releases. Instead of annual funding, LPM creates funding guardrails and utilizes constant feedback loops. Quarterly planning meetings ensure high-value priorities are well-funded, maximizing the value delivered with each release. These shorter cadences and iterative practices require effective stakeholder expectation management, which the PMO facilitates by promoting collaboration and maintaining alignment throughout the process, regardless of work management or methodology.

Lean governance: Lean Portfolio Management establishes guidelines for expenditure, audit, compliance, and cost forecasting. It empowers value stream leaders and teams to exercise autonomy by trusting them to allocate their capacity and budget to focus on the prioritized features and deliverables. The PMO collaborates with the teams to facilitate the smooth flow of prioritized items and improve their efficiency and speed. Lean governance offers sufficient guidance to achieve value-based delivery while allowing the flexibility to experiment and learn from both successes and failures.

How to Implement Lean Portfolio Management

Introducing lean practices to existing portfolio leadership teams is a significant change that requires effective organizational change management. The process can be likened to building a plane while flying it, with both high levels of stress and satisfaction. When implementing Lean Portfolio Management, it is important to consider the following tips:

Identify and Involve all Stakeholders – Portfolio leadership teams are composed of high-performing, cross-functional servant leaders. Empowering these leaders is crucial to connect strategy to execution for a specific part of the organization. The first step is to identify and form the group that will make up the portfolio leadership team.

Strategy and Investment Funding – The goal of Strategy and Investment Funding in Lean Portfolio Management is to ensure that the entire portfolio is aligned and properly funded to achieve business targets. Allocating the right investments to build the right solutions is critical for an enterprise to achieve its objectives. However, portfolio strategy goes beyond prioritization and investment selection; it must also understand its role in realizing the enterprise strategy. Therefore, LPM must assess the portfolio’s current state, create a plan to evolve to a better future state, and continuously adjust the vision and plan to address the changing business context.

LPM shifts the investment model from funding individual projects to funding teams of teams. This requires a deeper understanding and visibility into the connection between the business’s strategic aims and how teams build plans. To achieve this, several questions must be answered, such as who is providing the funding to the portfolio and what are their expectations, who funds business maintenance versus business transformation, and how many independently funded strategies are driving the portfolio. By answering these questions, LPM can ensure that the portfolio is properly funded and aligned with business strategy to achieve desired outcomes.

Needs and Expectations – Every portfolio leadership team may have unique requirements and preferences when it comes to adopting agile portfolio operations. It’s essential to understand their specific needs and expectations, including where they want to start in terms of their current and desired future state. From there, an operating structure that incorporates the fundamental principles of LPM should be established with a tailored touch to meet their specific requirements.

Realignment – Implementing Lean Portfolio Management (LPM) requires adopting new decision-making techniques and operating structures, such as visualizing strategic alignment and “guardrail-based” governance. This entails realigning active funded work to leaner constructs that enhance value flow and making adjustments to existing work management systems to ensure clarity and consistency. LPM also emphasizes “maximizing the work not done” by reviewing current work to determine if any can be stopped or scaled back. When building an operating structure that promotes LPM, it is crucial to prioritize customer satisfaction and utilize their feedback to improve operations. Additionally, Agile practices should be given priority to ensure that the portfolio flow remains adaptable.

Continuous Improvement – Continuous improvement is a crucial aspect of adopting the lean portfolio management framework. While focusing on lean initiatives can help streamline your portfolio management workflow, your team will likely require some immediate adjustments based on feedback and evaluation. In the long term, it’s essential to understand that iterative processes and striving for operational excellence require flexibility and a constant desire to improve.

Celebrate improvements – Completing a project is a chance to acknowledge progress and appreciate success. It is satisfying to witness the business strategy materialize and deliver value to customers through lean portfolio management. Even if a project does not go according to plan, lessons learned from any missteps can inform and optimize future projects and decision-making. Maintaining a portfolio vision of continuous improvement means that even projects that do not yield a significant return on investment can still be recognized and celebrated for the progress made.­­

Final Thoughts

Shifting towards Lean Portfolio Management requires a change in mindset and organizational culture at the topmost level of an organization. It encourages a shift towards a customer-centric approach, allowing leaders to constantly revisit and evolve their planning and funding to meet the organization’s needs. This promotes an environment of creativity, where high-value products can be developed.

Implementing Lean Portfolio Management promotes servant leadership, allowing for flexibility and change based on feedback and iterative cycles. With this approach, organizations can find the right balance of work styles, funding, and planning cycles to maximize value delivery.

The PMO plays a key role in driving this shift, by leading the adoption of Lean Portfolio Management practices and empowering teams to be more flexible and predictable in delivering solutions. By embracing lean principles, organizations can reliably deliver value to customers, reduce time-to-market, and pivot quickly in response to changing demands.

In summary, implementing Lean Portfolio Management offers a path to building a more connected enterprise, promoting customer-centricity, and maximizing the benefits of lean principles.