SAFe (Scaled Agile Framework) brings a new paradigm in portfolio management, one that includes lean practices and systems thinking approaches.
Lean portfolio management consists of applying lean principles to investment funding, governance, and agile portfolio operations.
A SAFe portfolio is a collection of value streams that deliver solutions to meet an enterprise’s business strategy. This allows the business to align their investments with strategic goals, focusing on solving issues in one area (or stream) at a time while using other competencies’ efforts elsewhere until needed.
In this article, we will discuss the steps involved in achieving a value-aligned portfolio as well as some considerations you should take into account during the process.
Lean Portfolio Management
In the context of a SAFe implementation roadmap, lean portfolio management (LPM) represents an essential competency in achieving business agility. Without it, it is impossible to determine whether the solution being offered is delivering value.
The core of lean portfolio management is a value stream. A value stream can be an operational or a development value stream. Operational value streams deliver solutions or products to customers, while a development value stream develops the products or solutions that support the operational value streams.
A SAFe portfolio consists of one or more value streams, each responsible for delivering solutions.
One SAFe portfolio is generally enough to govern the entire solution set for a small to medium-sized business. However, large corporations typically require multiple portfolios to govern and align their broad portfolio of solutions with their business strategies.
Three Dimensions of LPM
Lean portfolio management consists of the following three dimensions:
- Lean governance – represents the decision-making and oversight of audit and compliance, spending, and forecasting expenses, among others.
- Strategy and investment funding – ensures that the entire portfolio meets the business targets and is aligned around solutions that support the value flow.
- Agile portfolio operations – favors decentralized execution and operational excellence.
People who are in charge of LPM in a business come from a range of departments. Typically, they include business managers and executives who are responsible for the enterprise’s strategy.
Let’s take a closer look at each of the three dimensions of LPM.
Strategy and Investment Funding
At first glance, the purpose of strategy and investment funding is to ensure that the right investments are going to the right place – prioritizing and selecting the proper value streams and ensuring that the entire portfolio is aligned with business strategies.
However, the fundamental purpose of a portfolio strategy is to understand how it can connect to and support the enterprise strategy.
LPM has the challenging task of understanding the current state of a company’s portfolio and how it can be transformed to deliver the correct strategy. This is a complex process that needs time and foresight for it to be done correctly, and it is where the portfolio vision comes into play.
Simply put, portfolio vision describes how the portfolio and its value streams and solutions will look in the future. It is a combination of the overall vision and mission and the objectives that further define it.
Having such information will help you better understand where to focus your efforts when identifying and closing gaps in your portfolio, which will ensure that you get to the desired state faster.
By setting up a clear vision for your business, it is possible to make informed decisions about what should be done and when – this ensures that you are spending time on things that matter most and creating a purposeful portfolio roadmap.
A roadmap will help you predict your portfolio’s future state. The roadmap has to be flexible – after all, that is the foundation of Agile. If your roadmap spans several years, you will need to estimate long-term milestones and commitments using Agile methods.
However, when working on these long-term predictions, even though they can be useful, keep in mind that each commitment of this kind decreases your organization’s agility.
Epics and Portfolio Flow
Your Portfolio Vision can be realized through business epics. An epic in this sense is a significant initiative. There are two main types of epics in LPM:
- Business epics – delivering business value directly
- Enabler epics – supporting upcoming business or technical needs
The purpose of both of these types of epics is to capture, analyze, and authorize new technology and business initiatives.
Managing the epics is done through the Portfolio Flow, which ensures that there are never too many initiatives going on simultaneously. A portfolio’s total capacity has to be closely monitored to achieve a balance between new development work and ongoing maintenance and support.
The Portfolio Kanban system is generally used to reduce batch sizes and ensure that the long-term development queues are not too long.
Agile Portfolio Operations
On the one hand, a decentralized strategy empowers Solution Trains and Agile Release Trains (ARTs). On the other hand, systems thinking is required for ARTs and Solution Trains to align correctly with the broader business strategy.
Both are part of Agile portfolio operations, which ensure that the entire system is working correctly.
The Agile portfolio operations responsibilities include:
- Coordinating value streams – Value streams operate independently of each other. However, value stream coordination is necessary for taking advantage of the opportunities that lie only in the interconnections between different streams.
- Supporting program execution – Transforming the traditional Project Management Office to an Agile Program Management Office (APMO) assists in successfully executing program patterns across the portfolio. An APMO also helps maintain business agility by establishing significant metrics and objective reporting.
- Fostering operational excellence – Operational excellence includes continuous efficiency improvement and best practices for optimizing business performance. LPM assumes the leadership role in driving operational excellence, helping the organization achieve its business goals.
Managing forecast expenses, spending, and audit and compliance all fall to Lean Governance. This LPM dimension has the following responsibilities:
- Measuring portfolio performance – Assessing progress for a portfolio can be achieved through a range of measures, such as employee surveys, partner and vendor surveys, net promoter score (NPS), value stream KPIs, and more, depending on the goals.
- Dynamic forecasting and budgeting – The traditional planning process relies on financial commitments and fixed budget cycles. To replace this, SAFe provides a Lean approach where budgets are adjusted on a regular (short) time frame, usually every six months, or when significant events call for adjustments.
- Coordinating continuous compliance – Traditional organizations typically leave their compliance procedures for the end of the project, which can lead to late discovery and reworking. That’s why Lean audit and compliance coordinate continuous compliance with relevant standards while the project is still ongoing.
Finally, lean portfolio management consists of three significant events.
- Strategic portfolio review – This event aims to achieve the portfolio vision through continuous alignment with business strategy, implementation, and budget. An assessment usually takes place quarterly so that the value streams can respond to any changes that may take place.
- Portfolio sync – With a more operational purpose than the portfolio review, the portfolio sync serves to evaluate how well the portfolio is moving towards its objectives. This evaluation is done through reviewing various KPIs, epic implementation, dependencies, and removing obstacles in portfolio progression.
- Participatory budgeting – In this event, stakeholders decide how to distribute the portfolio budget across epics and solutions. Using participatory budgeting, budgets are typically adjusted twice a year. Less frequent than that lowers business agility, while more frequent adjustments endanger the ability to commit to any upcoming course of action.
Where to start?
Now that you are familiar with the concept of Lean Portfolio Management, it’s time to apply it in your organization.
To begin, establish the LPM function. Choose the right talent for each focus area.
Implement a Portfolio Kanban system. This system manages the flow of epics and solutions across the value streams while maintaining a steady and reliable workflow.
Finally, establish regular LPM events that we described above. Portfolio sync should be done monthly; a strategic portfolio review is a quarterly event, and participatory budgeting can occur every six months or so.
Managing your organization’s portfolio in an Agile way comes with a host of benefits. You can respond to market changes quickly, you’ll have more visibility into the workings of your portfolio, and it will be clear what each team is delivering. Moreover, teams can self-organize around business needs.
It is no secret that transforming an organization into a leaner, more Agile business requires significant changes. But one of the biggest advantages is that you can align your portfolio around value streams to drive better results for customers. After all, the whole purpose of embracing SAFe is to deliver more value faster.
To successfully implement lean portfolio management, it would be best to establish an LPM function that will coordinate across the board, as well as create efficient processes for event execution. Finally, you can set up regular portfolio events such as strategic review, portfolio sync, and participatory budgeting.
To learn more about lean portfolio management, don’t hesitate to contact us at i4 Group. We’re happy to share our knowledge and experience with you and help your organization transform into a leaner, more agile business.