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Enterprise Agile Planning, Lean Portfolio Management

6 Recommended Practices for Lean Portfolio Management

Published By Brook Appelbaum


In our last post, we shared the differences between traditional portfolio management and the Lean Portfolio Management approach and why they matter for organizations looking to embrace agility at the enterprise level.

At some point, efforts to increase agility will be stunted by traditional portfolio management practices, and it’s not enough to simply improve workflow management or practice Lean-Agile thinking at the team level. True agility requires structural support.

If you take a look deeper into the organizations that are thriving today, you’ll find they are all recognizably implementing Lean Portfolio Management in that they:

  • Operate in short planning and funding cycles;
  • Work in small, self-sufficient, cross-functional teams in networked organizational arrangements;
  • Focus on delivering value to customers by decentralizing decision making and empowering teams to make decisions based on customer data and feedback loops; and
  • Aim to hire, empower, and retain top talent by providing a work environment that allows for autonomy, mastery, and purpose.

These companies are able to adapt, scale, and dominate in this new global landscape because they are built to do just that. Led by a shared set of ideals that systematically promote innovation, adaptability, and growth, and bolstered by funding, planning, and hiring practices that support them, they are inherently better equipped to tackle the challenges ahead.

In this article, we’ll discuss how to evolve from traditional portfolio management practices to Lean Portfolio Management, with the goal of helping your organization thrive amidst the volatility of the modern world.

Lean Portfolio Management for the PMO

1. Emphasize strategic alignment through leadership training.

In a recent survey by Innosight, 80% of enterprise executives agreed their company needed to transform their core offerings or business model in response to rapidly changing markets.

When asked what factors presented the greatest threat to their transformations, two factors were seen as the greatest threats:

  • Finding and retaining the right talent
  • Day-to-day decisions across functions undermine stated strategy

76% of executives said that finding and retaining the right talent was a moderate to major obstacle, while 69% pointed to “shadow strategy”, where day-to-day decisions undermine the stated strategy. Ultimately, these two factors are closely linked: In order to execute long-term strategic objectives, executives need to align the efforts of individuals across the organization around those strategies. They need to rely on the right people to stay focused on both the present and the future.

And change, of course, is not easy. Often, the type of leadership required to embrace a Lean-Agile transformation, is quite different than what has been implemented in enterprises for the past 100 years. Typically, reflecting a very top-down, command and control management style.

To ensure the success of the transition to Lean Portfolio Management, enterprises must emphasize strategic alignment through a focus on retraining (or, if necessary, replacing) leaders throughout the enterprise to embrace Lean-Agile practices and ideals. This starts by understanding how a different mindset, a Lean-Agile mindset, is critical in steering an organization toward change. It also means committing to a Lean-Agile culture change, which starts at the top.

2. Reorganize into value streams.

One of the key tenets of any Lean-Agile practice is the idea of maximizing value for the customer. And yet, organizations aren’t typically structured in a way that allows them to do so. Teams are oriented around their function (marketing, sales, operations), instead of by objective. So, decisions are made to optimize the efforts of those functions, rather than to optimize the creation of value for the customer.

In Lean Portfolio Management, teams are oriented around the value they’re intended to provide.

Value streams are formed around a specific product or solution, specific verticals, or in other ways, sometimes with teams grouped by capability. While individuals or teams will still perform specific functions, they do so in direct collaboration with others who share the same goals.

Reorganizing this way helps the enterprise increase agility in several ways:

  • Value streams can stay focused on delivering upon long-term organizational objectives and optimize resource allocation to that end.
  • Teams within value streams are empowered to make decisions based on market feedback and customer insights, improving speed to market.
  • Long-lived teams are proven to achieve higher levels of performance than short-lived, project-based teams that quickly form and disband.

Of course, before you can organize into value streams, you must have clarity at the enterprise level as to how value actually flows through the organization. This is often done through an organization-wide value stream mapping exercise.

3. Evolve the role of the PMO.

In our last blog, we shared why the role of the PMO had to change in order to embrace agility at the enterprise level: To ensure the way we make funding decisions aligns well with the business outcomes we’re trying to drive.

To that end, in Lean Portfolio Management, value streams are empowered with the autonomy to allocate budgets as needed to best achieve organizational objectives (with guardrails to define spending policies, guidelines, and practices for that portfolio).

This allows the role of the PMO to shift away from day-to-day decision-making power around program strategy, funding, and execution, toward:

  • Coordinating value streams
  • Supporting program execution
  • Driving operational excellence

This optimizes the skills, experience, and relationships of the individuals within the PMO while creating a structure more conducive to sustaining organizational agility.

4. Encourage data-driven decision making and objective, fact-based measures of progress.

In traditional portfolio management, teams and the individuals who lead them are evaluated based on their ability to execute plans—to deliver certain deliverables by certain dates. This is misaligned with the fundamental goal of any Lean-Agile initiative, which is to maximize value for the customer.

Instead, Lean Portfolio Management encourages objective, fact-based measures and outcomes. Not, “How well are we executing the plan?”, but rather, “How well are we achieving the goals we set out to achieve?”.

Leaders throughout the enterprise should promote this Lean Portfolio Management practice by encouraging teams to base all decisions on data, rather than ‘gut’ or opinion. This might sound obvious, but if you really think back to how decisions have been made in your organization, you’ll realize that it’s usually not customer feedback or market data that’s truly driving decision making.

Instead, decision-making power informally lies with the highest paid person in the room, or with the squeakiest wheel at the table. As harmony-seeking creatures, we tend to see conflict as a negative thing—disagreement with the person in power isn’t typically an advisable strategy for career advancement.

In Lean-Agile organizations, decisions are based on data, rather than opinion. Conflict is seen as a necessary, healthy part of the decision-making process because it isn’t an issue of “my idea” vs. “your idea”. Instead, ideas are evaluated based upon whether or not there is data to support them. The ‘best’ ideas are those supported by data, that achieve organizational goals in the most efficient, or value-adding way.

By using data as the basis of both how decisions are made, and how their success is evaluated, Lean-Agile organizations promote experimentation and continuous learning, and therefore innovation and growth.

Leaders can encourage this by asking simple questions like these to ensure that teams are following a scientific approach in their work:

  • What data do you have to support that hypothesis?
  • How do you plan to measure that?
  • What is our baseline for this?
  • How will we know whether or not it’s working?
  • When will we know whether or not it’s working?

5. Celebrate learning.

Theoretically, every organization should want to encourage experimentation. And yet, when we build incentivization structures around executing plans, we actively discourage it.

So how do you encourage experimentation? First, you fundamentally have to shift how ideas are funded, how work is planned, and how we make decisions throughout the enterprise, which we covered above.

From there, it becomes a cultural thing: You have to celebrate learning, regardless of outcome. You have to, as an organization, reexamine how you view ‘failure’. In a Lean-Agile organization, the goal is always to maximize customer value. So any information that helps achieve that goal should be celebrated. Even if that information is that you tried something (based on the data available at the time), and it didn’t work. To borrow from Thomas Edison, you learned another way not to invent a light bulb, which in many ways, is just as valuable as learning how to invent one.

This is a fairly bizarre idea in an achievement-oriented culture like ours, but it’s necessary for real innovation. When we only celebrate success, we discourage progress. At every level of the organization, and especially among leaders, we have to celebrate learning if we want innovation to thrive.

Why Lean-Agile Culture Shifts Fail

6. Utilize the PMO to drive operational excellence.

As we discussed at length in our eBook, Why Lean-Agile Culture Shifts Fail, the hardest part of transitioning into a Lean-Agile organization is that it requires a shift in mindset. As Agile expert and author Steve Denning explains:

“The elements of a culture fit together as a mutually reinforcing system and combine to prevent any attempt to change it. Single-fix changes at the team level thus may appear to make progress for a while, but eventually the interlocking elements of the organizational culture take over and the change is inexorably drawn back into the existing organizational culture.”

Transforming a culture meaningfully requires time, consistent effort, and accountability. “This isn’t like fixing a car where if you fix a tire, the tire stays fixed,” Denning continues. “Instead the organization acts more like an ingeniously morphing virus that steadily adapts itself to, and ultimately defeats, intended fixes and returns to its original state, sometimes more virulent than before.”

This is why continuous Lean-Agile education is critical for any organization trying to practice Lean Portfolio Management: Many of the fundamental practices of Lean Portfolio Management are counter-intuitive, especially to those who have built careers within traditional enterprise cultures. It requires more than a declaration by a few well-meaning executives to transform into a Lean-Agile enterprise.

Earlier we mentioned that the Agile PMO can serve to drive operational excellence. There are two primary ways that the APMO can drive operational excellence in LPM: through sponsoring Communities of Practice (CoP) and a Lean-Agile Center of Excellence.

Communities of Practice (CoPs)

Communities of Practice (CoPs) are organized groups of people who typically share a common, specific technical or business domain. They meet regularly to share information, improve their skills, and actively work on advancing the general knowledge of the domain within the organization.

An example of a CoP would be a group of Product Managers from across your portfolio who may not typically work together on an Agile Release Train, but who can benefit from sharing best practices, insights, etc. CoPs not only help to drive operational excellence, but they also provide employees with rich opportunities for mentorship and professional development that they might not otherwise have.

Lean-Agile Center of Excellence (LACE)

A Lean-Agile Center of Excellence (LACE) is another area where APMO involvement can help to promote the sustainability of LPM. A Lean-Agile Center of Excellence describes a small group of people dedicated to promoting the Lean-Agile way of working. Typically, the presence of a healthy, high-performing LACE is the differentiator between organizations who achieve better business outcomes through Lean-Agile implementations, versus those who simply practice Agile in name.

The responsibilities of the LACE typically include everything from communicating the need and urgency for change, facilitating Lean-Agile training, reporting on the progress of Lean-Agile initiatives, and assessing progress on each of the Five Competencies of the Lean Enterprise.

The LACE may be part of the Agile PMO, or it may exist as a standalone unit. In either case, it can serve as a continuous source of energy to power the enterprise through necessary changes. Often, as the organization matures in its Lean-Agile development, the LACE evolves into a longer-term center for continuous improvement.

Learn More

Transitioning to Lean Portfolio Management may feel overwhelming, but like with any large undertaking, it can be achieved through small, intentional steps.

Emphasizing strategic alignment, reorganizing into value streams, evolving the role of the PMO, encouraging data-driven decision making, measuring progress objectively, celebrating learning, and utilizing the PMO to drive operational excellence are all recommended practices for making this transition toward a more dynamic, more sustainable future.

To learn more about how to successfully shift from traditional to Lean Portfolio Management, read our whitepaper, Lean Portfolio Management for the PMO.

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Written by Brook Appelbaum Director, Product Marketing

Brook Appelbaum is the Director of Product Marketing for Planview’s Lean and Agile Delivery Solution. With nearly 20 years of marketing experience, Brook has led many different product and digital marketing teams. However, her favorite leadership role is that of a Product Owner. As part of an Agile marketing team inside Planview, Brook drives the campaign and product marketing strategy for the Lean and Agile Delivery Solution. And she thinks LeanKit is the coolest.