LeanPortfolioManagement

“DerFisch stinkt vonKopf”

StuartFish&Taghi PaksimaAgileTuesday,Munich,14.1.2020

Whybother?

Whatdowemeanbya“Portfolio”?

SmallEnterprisesmayhaveasingleSAFePortfolio

Strategic Themes

Portfolio

Single portfolioSmall Enterprise

LargeEnterprisesmayhavemultipleportfolios

Strategic Themes

SAFe Portfolio 1Strategic Themes

SAFe Portfolio 1Strategic Themes

Portfolio

Large Enterprise Multiple portfolios

..andwhatisaValueStream?

Understandneeds

Buildsolutions

DeployThesequenceofstepsusedtodelivervalue(products,services,andapplications)tothecustomer.

Itcontainsallthepeoplewhodothework,thesystems,andtheflowofinformationandmaterials.

PortfolioisdeliveredbyValueStreams

WemayhavemultipleValueStreamsinaPortfolio

WhatisaSAFePortfolio?

• ASAFePortfoliomanagesmultipleValueStreams• AportfoliotypicallyrepresentsaspecificareaoftheEnterprise(e.g.,businessunit,division)

Value Streams

Sowhatis“LeanPortfolioManagement?

• Strategy and Investment Funding• Agile Portfolio Operations • Lean Governance

The LPM function (from SAFe), provides three essential collaborations:

AnapproachtomanageportfoliosinanAgilecontext

• Traditionalprojectportfolioapproachesinhibittheflowofvalue• Projectcostaccounting• Annualplanningandrigidbudgetingcycles• Overloadofdemandversuscapacity• Phase-gateapprovalprocessesthatfailtomitigaterisk• OverlydetailedbusinesscaseswithspeculativeROI

Trytoavoidtraditionalprojectportfoliomanagement

Fundingprojects FundingValueStreams

VS

Fundingworkasprojectscausesfriction,unnecessaryoverhead,anddelays.

FundingValueStreams,alongwithBudgetGuardrails,enablesfastervaluedeliverywhilemaintainingfinancialandfitnessforusegovernance.

Guardrails ValueStreams

LeanBudgets

ProjectCostAccountingvsLeanBudgets

Annualplanning

Rollingwaveplanninganddynamicallyadjustingbudgetsenablesadaptingtochange.

Annualplanningandrigidbudgetingcyclesinhibittheabilitytorespondtochange.

Bigup-frontannualplanandbudget RollingWaveplanningandbudgeting

VS

Annualplanningandyearly€cyclesvs.Rollingwaveplanning

Bigup-frontcommitment InitialcommitmentlimitedtoMVP

LeanBusinessCasesprovidejustenoughdetailtoestablishviability,adefinitionofanMinimumViableProduct(MVP)withabusinessoutcomehypotheses,anddeploymentimpact.

Detailedbusinesscasesdriveover-specificityandcommitmenttooearlyintheconeofuncertaintyduetothelargeeffortinvested.

VS

Replacingfixedbudgetedscopebusinesscases&MVPs

LeanBudgeting?

BenefitsofLeanBudgeting

• Loweroverheadandhigherthroughput

• Createalignmentandtransparency

• Fosterdecentralizeddecision-making

• Improvedmorale

• ‘We’reallinthistogether’mindset

• Betterbusinessoutcomes

LeanBudgeting

FundValueStreams,notprojects

ApplyParticipatoryBudgeting

Guideinvestmentsbyhorizon

1

2

3

Beyond Project Cost Accounting

KeyLeanBudgetingpractices

4Aspartoftheenterprise’stotalbudget,anallocationofpeopleandresourcesisestablishedforeachportfolio

4TheportfolioallocatesthebudgetforeachValueStream

Allocationtoaportfolio Strategic

Themes

SAFe Portfolio

1)FundValueStreamsnotprojects

Time

Value

Horizon3(Growthoptions)Horizonthreecontainsideasforprofitablegrowthdowntheroad– forinstance,smallventuressuchasresearchprojects,pilotprograms,orminoritystakesinnewbusinesses.

Horizon2(Buildemergingbusinesses)Horizontwoencompassesemergingopportunities,includingrisingentrepreneurialventures,whicharelikelytogeneratesubstantialprofitsinthefuturebutcouldrequireconsiderableinvestment.

Horizon1(Extendanddefendcorebusinesses)Horizononerepresentsthosecorebusinessesmostreadilyidentifiedwiththecompanynameandprovidethegreatestprofitsandcashflow.

Source:McKinseyandcompany/Book:TheAlchemyofGrowth

The‘Threehorizonsframework’offersawaytoconcurrentlymanagebothcurrentandfutureopportunitiesforgrowth

2)Guideinvestmentsbyhorizonsofgrowth

DynamicallyadjustValueStreambudgetswithParticipatoryBudgeting

Strategic Themes

SAFe Portfolio

ValueStreamBudgets

3)ApplyParticipatoryBudgeting

Strategy&InvestmentFunding

Connect the portfolio to the Enterprise Strategy

Maintain a Portfolio Vision

FundValueStreamsBusinessOwners

EnterpriseArchitect

EnterpriseExecutives

EnterpriseArchitect

BusinessOwners EstablishflowwiththePortfolioKanban

LeanGovernance

Agile Portfolio

Operations

Strategy & Investment

Funding

Collaboration&Responsibilities

Adapted from Collins, James and William C. Lazier. Beyond Entrepreneurship: Turning Your Business into a Great and Enduring Company. Prentice Hall, 1992.

Enterprisestrategydrivesportfoliostrategy

FormingEnterpriseStrategy

StrategicThemesaredifferentiatingbusinessobjectivesthat:• Drivethefuturestateofaportfolio• ConnectthePortfoliototheEnterpriseStrategy• ProvidecontextforthePortfolioVisionandLeanBudgeting

GoodexamplesofStrategicThemes

• Increaseshareholderwealth• Maximizecorporatevalue

• Appealtoayoungerdemographic(18-29)• Reducewarehousingcostby35%

BadexamplesofStrategicThemes

(RetaileCommerce):

DefineStrategicThemes

PortfolioVisionandCanvas

ValueStreamBudgetsandGuardrails

PortfolioKanbanandBacklog

VisionandBacklogsoftheLargeSolution,ProgramandTeamlevels

InfluenceofStrategicThemes

• Definesthedomainoftheportfolio• DescribestheDevelopmentValueStreams

• RepresentsakeyinputindevelopingandmaintainingthePortfolioVision

CreateandmanageaPortfolioCanvas

4Establishanunderstandingofyourorganization’sstrengthsandweaknesses

4Identifiesthemostsignificantopportunitiesandpotentialthreats

IdentifyopportunitieswithinthePortfolio

FutureStatePortfolioCanvas

MakedecisionsExplorepossibilities

CurrentStatePortfolioCanvas

Identifyepics(Business/Technical

Initiatives)

1 2 3

Divergentthinking Convergentthinking

IdentifyapossibleFutureStagePortfoliocanvas

Progressismeasuredbasedontaskcompletion

Implementedbystable,cross-functionalValueStreamsandARTs

Implementedbytemporaryteamswhichdisbandafterworkiscompleted

Definitivestartandenddate;Scopeisfixed.Allscopemustbeimplemented

Implementationtypicallyfollowsphase-gated,sequential(waterfall)process

LeanBusinessCase,basedonbenefithypothesisanddefinitionofanMVP

EpicsProjects

Overlydetailedbusinesscase,basedonspeculativeROI

Nodefinitivestartandenddate;Scopeisvariable.ContinueuntilWSJFsaysotherwise

Progressismeasuredasoutcomesagainstthebenefithypothesis

ImplementationfollowstheLeanStartupBuild–Measure- Learncycle

≠

Afterbusinesscaseisapproved,up-frontcommitmentismadetotheentireprojectscope

AfterLeanBusinessCaseisapproved,commitmentistotheevaluationoftheMVP

ThedifferencebetweenEpic(initiatives)&Projects

AgilePortfolioOperations:Collaborationandresponsibilities

Coordinate Value Streams

Drive Operational Excellence

LeanGovernance

AgilePortfolioOperations

Strategy & Investment

Funding

Support Program ExecutionAgile

PMO/LACERTE and SM

CoP

LeanGovernance/Budgeting

Enterprise Architect

APMO

Forecastandbudgetdynamically

Measureportfolioperformance

Coordinatecontinuouscompliance

LeanGovernance

Agile Portfolio

Operations

Strategy & Investment

Funding

Business Owners

LeanGovernance:Collaboration&responsibilities

Internal/externaleconomicconditions

Marketchanges

+/- X%

Currentportfoliobudget

Nextperiod’sportfoliobudget

BudgetadjustmentfromEnterprise

=+

Enterprise&portfolio

performance

Productfeedback

ChangestoStrategicThemes

Thisisourbudgetingstartingpoint.

Enterpriseassignsoverall“portfolio”budgetallocation

ParticipatoryBudgeting

• WegenerallyhavemoreideasthanmoneyL• Weengageacross-sectionofourportfoliotofindbestwayto“spend”ourbudget

• Thisinfluencestheinitiativesweworkon,andthefundingofprogramsandteams

• Wedothisregularlytoadaptfundingbasedupon“inspectandadapt”

• TheconceptofParticipatoryBudgetingcomesfrom“innovationGames”–>manyofuskowthisas“buyafeature”

• Ithasbeenextensivelyusedinthepublicsectorformanyyears

ApplyParticipatoryBudgetingtoallocatebudgetstoinitiatives(Epics)andValueStreams

ParticipatoryBudgeting– SanJose

bit.ly/2WRMRel

.

Gathertherightpeople

This image cannot currently be displayed.

This image cannot currently be displayed.

PrepareEpiccontentandsetthecontext

Understandthebudgetcomposition

Preparing for Participatory Budgeting

PotentialportfolioEpicsandcostestimates

EPIC

PotentialepicsforeachValueStreamandcost

estimatesCurrentBudgetsforeach

ValueStream

RTB

GTB

NewValueStreambudgets

Keyinputs

AgreeduponlistofEpicsacrosstheportfolioforthenext

budgetcycle

Keyoutputs

BusinessContext

Participatorybudgetingisiterative,oftenwithmorethanoneroundofforums

Inputsand Outputs

• Product/ProgramOwners• AgileTeams• EnterpriseArchitects• SystemArchitects• BusinessOwners• LPMfiduciaries• Otherkeystakeholders

AgileTeams

ProductSolutionMgmt

EnterpriseArchitects

BusinessOwners

LPMFiduciaries

SystemArchitects

Gather the right people

EachValueStreamdesignateswhichpartofthebudgetisforRuntheBusiness(RTB)andGrowtheBusiness(GTB)

RTB

GTB

GrowtheBusiness

RuntheBusiness

• Maintaincurrentbusinesscapabilities• Keepthelightson

• Createnewbusinesscapabilities• Transformthebusiness

Understand the budget dynamics for each ValueStream

ParticipatoryBudgetingForum(s)

Newvaluestreambudgets

Totalportfoliobudgetallocationandguardrails

Currentvaluestreambudgets

StrategicThemes

Potentialportfolioepics

EPIC

PotentialepicsforeachValueStream

PortfolioRoadmapRTBGTB

EachvaluestreamdesignateswhichpartofthebudgetisforRuntheBusiness(RTB)andGrowtheBusiness(GTB)

RunthebusinessandGrowthe

Business

Participatory Budgeting Overview

ParticipatoryBudgetingExercise

EnterprisePortfolioStrategyFormulation:AnExample

StrategicThemes

Participatory Budgeting Exercise - setting

Setting:together,yourepresentacross-sectionofthepeopleworkingin,andinfluencedby,theTerrificTransportCorporationPortfolio.

Yourgoal:toprovideinputfortheportfoliobudgeting(andEpic)process(foranupcomingquarter)

Ourapproach– useParticipatoryBudgeting

Participatory Budgeting Exercise - instructions

1. Formgroups (circa8people /group)– you represent differentparts of the portfolio2. Agree who willbe the „facilitator“for each group3. Facilitator reads the StrategicThemes to the group (or you can read for yourselves)4. Groupparticipants then work alone for afew minutes:

• Readthrough the Epics,and based onyour understanding of the StrategicThemes,decide how YOU would allocate the available the available $3million.

• If you want to fund anEpic “Fully“then justtickthe Box• If you want to partly fund it,write the sum inthe „Partially“box• Don´t „spend“more than €3million

5. Facilitator then aggregates the individualresults to one table• Notehow many people have „fully“funded anEpic• How many people have „partly funded anEpic

6. Now collaborate to agree anallocation of funding (max.3million)as agroup• Facilitator can create afinaltable for the group

7. Prepare to present your results to the room

5mins

3 mins

10mins

10mins

30mins

ParticipatoryBudgetingForum(s)

Newvaluestreambudgets

Totalportfoliobudgetallocationandguardrails

Currentvaluestreambudgets

StrategicThemes

Potentialportfolioepics

EPIC

PotentialepicsforeachValueStream

PortfolioRoadmapRTBGTB

EachvaluestreamdesignateswhichpartofthebudgetisforRuntheBusiness(RTB)andGrowtheBusiness(GTB)

RunthebusinessandGrowthe

Business

Participatory Budgeting Overview

Participatory Budgeting - debriefing

Whatisuseful?

Wherearethechallenges?

Thanksforyourattention