Agilely Fund Change with a Lean Portfolio Management Approach

Alfred Maeso Aztarain

Alfred Maeso Aztarain

Agilely Fund Change with a Lean Portfolio Management Approach
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At the beginning of 2020, companies probably made decisions about what they would invest in for the upcoming year. Business cases were approved, and the corresponding programs and projects were launched. However, two months later, a global pandemic hit and many organizations were forced to rethink their priorities. 

At Netmind, we committed our efforts to business continuity by halting work on several of our ongoing change initiatives and investing in new initiatives that were focused on ensuring our remote work environment could support our team and clients’ needs. Among those, we acquired new tools, defined our virtual work policies and procedures, and established a personnel training plan. But, what about the previously approved initiatives? How easy or difficult is it to disinvest in those initiatives that are no longer a priority? And how easy or difficult will it be to start investing in new ones?

Adapt to Change

An organization’s ability to survive in the VUCA world we are in today is based on how well they adapt to change. All organizations have two main functions: regular activity and change activity. The first allows you to generate income and earn a living. The second allows you to survive and thrive long-term.

Portfolio management allows organizations to adequately balance these two main functions in a way that achieves the strategic objectives and expected benefits. Organizations must change their traditional approach to portfolio management (which often consists of a rigid and slow decision-making structure) to be more agile and flexible.

While Scaled Agile Framework did not invent portfolio management, it does offer a Lean Portfolio Management approach for applying an Agile mentality to making big investment and change decisions. From here, I’ll share how Lean Portfolio Management is different from the traditional portfolio management approach.

Traditional vs. Lean Portfolio Management Approach

Hierarchy vs. Network

In his book XLR8, John Kotter says that traditional organizational hierarchies are initially built to maximize efficiency and increase stability for growth. However, adding structure also generates more role specialization, department creation, and, inevitably, an environment full of silos. While there are some negative aspects to hierarchies, they are also necessary to establish organization and avoid chaos.

An element that can easily be overlooked though when working in silos is the need to understand that value streams reach across silos. And when we introduce change, innovation, and improvements, we seek efficiency and work better when using a network structure. The hierarchy works for the normal, day-to-day, repetitive activities, while networks work better for rapidly shifting market and customer needs. Kotter proposes the “dual operating system”, i.e. not breaking the way we structure ourselves (the hierarchy), but making these two structures coexist: hierarchy and network working together.

Portfolio management is the highest level of decision-making around organizational change. Therefore, it must be part of the network structure. SAFe® proposes that people in an Agile environment, at all levels, need to organize around value by forming multi-disciplinary teams called ARTs (Agile Release Trains).

Financing Projects vs. Financing Value Flows

The traditional way of incorporating changes in organizations has been to start projects. This way of working causes tension, friction, and entails the overhead of starting, stopping, and changing projects and causing delays.

Instead, SAFe® proposes to finance value streams. Build stable teams around a flow or development value chain to eliminate overhead and, by having greater continuity in teams, the level of learning and the speed of delivery can be increased.

Organizing in value streams has a series of associated policies and practices or Lean Budget Guardrails that must be applied:

  • Guide the investment in each value stream based on the investment horizon (long, medium, or short-term solution).
  • Assign capacity by considering, in each financing period, where the heaviest investment should be (new features, technological innovations, reduce technical debt, …).
  • Approve major investments. Establish a threshold from which more formal approval is required.
  • Continuous participation.

Annual Planning and Budgeting vs. Gradual Planning and Budgeting

Rigid annual planning inhibits our ability to adapt to change (who knew there was going to be a global pandemic?). And, any decision we make regarding what will happen a year from now will be associated with a lot of uncertainty.

Instead, SAFe® proposes cadence and synchronization between the teams in the network at regular points in time to make decisions about what to do next. These periods are normally associated with the completion of the Program Increments in progress, which are blocks of approximately 10 weeks. The budgeting decision for the next period will be made collaboratively in order to reduce uncertainty and provide greater ability to adapt to change.

Unlimited Job Approval vs. Demand Management Using a Kanban System

The approval of initiatives in a traditional approach to portfolio management sometimes does not take the true existing capacity into account: in reality, how much change can we implement? In addition, there is often no visibility or transparency around initiatives in progress and those pending start.

SAFe® proposes investing in Epics and using a Kanban system at the portfolio level to provide visibility into current and upcoming initiatives and to limit work in progress (WIP) to actual capacity.

Phased Development vs. Incremental Development Process

To be able to understand the progress and status of the initiatives in a portfolio, traditional portfolio management defined a life cycle of projects organized in phases, with control points at each phase. For example, each project reports if it is in the requirements phase, design phase, development phase, etc. The incremental development proposed in SAFe® is based on synchronizing the delivery rate of the different initiatives in order to evaluate the value contribution of each one, thus guaranteeing a more realistic vision of progress and a greater capacity for learning and adaptation.

Great Upfront Commitment vs. Initial Commitment Limited to MVP

How much time do we spend preparing detailed business cases that cover all aspects of a pending change initiative? We look for detail too early and make big investment decisions based on assumptions that we can’t yet validate.

SAFe® proposes committing to an initial investment in a minimum viable product (MVP) with the aim of validating hypotheses and reducing uncertainty. We can develop Lean business cases that allow gradual progress, increasing learning and added value, without committing to the full investment at the beginning.  


If you want to learn how to put the concepts explained in this article into practice in your organization, see our Lean Portfolio Management course.

Gracias,

— Alfred

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About the Author

Alfred Maeso Aztarain

Alfred Maeso Aztarain

Alfred, Netmind Lead Expert in Business Analysis, Change Management, Portfolio, Program and Project Management, has over 15 years’ experience in leading IT projects and IT services for different organizations and public administration. Alfred's focus of interest and expertise is on Business Analysis and Program and Project Management. He holds a degree in Telecommunications Engineering and is certified as a MSP, MoP and ITIL Approved Trainer. He works to inspire change in organizations and believes that knowledge and continuous learning are the pillars of change. Alfred is passionately dedicated to learning and sharing knowledge with the people he collaborates with. His certifications include CBAP, SAFe® 4 Certified Program Consultant, AgileBA Practitioner, Change Management Instructor, PRINCE2 Agile Instructor, CSM Certified Scrum Master, PMI-PBA®, and PMP® Project Management Professional. Connect with Alfred on LinkedIn.

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