What is Lean Portfolio Management (LPM)?
Lean Portfolio Management (LPM) is a process used by organizations to manage their portfolios of projects, programs, and value streams in a way that aligns with their overall business strategy and supports continuous improvement. It draws on Lean and Agile principles to promote transparency, collaboration, and continuous delivery of value. LPM is a continuous improvement process and requires collaboration and buy-in from all stakeholders, including executives, managers, and team members. It’s not “one and done” nor is it a process that can be delegated to a single stakeholder or team – in fact, participation is baked right into it. See participatory budgeting, as an example.
Getting started with LPM
Lean Portfolio Management has generated a lot of discussions over the last few years. Some people might be familiar with the term, but not necessarily what it is or how to get started. Getting started with LPM includes the following:
Define your strategic objectives:
Start by defining the overall goals of your organization and the projects, programs, and value streams that support those goals.
Assess your current portfolio:
Evaluate the current state of your portfolio and identify areas for improvement.
Implement Lean-Agile principles:
Incorporate Lean-Agile principles into your portfolio management process to improve transparency, collaboration, and continuous delivery of value.
Establish a governance structure to ensure accountability and decision-making within your portfolio management process.
Continuously evaluate and improve:
Continuously evaluate and improve your portfolio management process to ensure that it aligns with your strategic objectives and supports the delivery of value.
Optimize your portfolio operations by aligning Lean Portfolio Management to business strategy and other Scaled Agile processes at the enterprise level. Increase operational effectiveness and unlock the potential of your organization’s value streams by kicking off your LPM transformation today. Learn more today about how to implement LPM in your organization to deliver maximum value.
Enterprises can streamline and optimize traditional portfolio management processes by organizing work into value streams that provide more clarity to investment decisions and value-adding opportunities. Enterprise agility with LPM offers numerous benefits that include:
Lean portfolio management helps organizations streamline processes, eliminate waste, and focus on value-adding activities.
Better decision making:
By prioritizing projects based on their strategic value and potential return on investment, organizations can make more informed investment decisions.
Lean portfolio management prioritizes delivering small, incremental value quickly, reducing the time to market for new products and services.
Lean portfolio management helps ensure that projects and initiatives are aligned with overall business goals and strategies.
Lean portfolio management provides greater visibility into portfolio performance, making it easier to track progress and identify areas for improvement.
Better risk management:
By continuously reassessing and adjusting project priorities, organizations can better manage risk and respond to changing market conditions.
Although it looks easy listed like this, the actual practice takes a LOT of work and discipline – so don’t feel bad if you need to bring in some professional coaches from to help you jump through the hoops. It just so happens, ICON has a few that would love to support your organization.
How does LPM helps with investment decisions?
Lean Portfolio Management (LPM) is an approach that can help organizations make better decisions regarding the prioritization and investment of resources. It is a system of management that encourages continuous improvement and the elimination of non-value-added activities. It is used to help organizations focus on the most important initiatives and make decisions about how to allocate resources to achieve desired outcomes.
LPM is based on the principles of Lean, which emphasize the elimination of waste and the optimization of resources. With LPM, organizations can identify the most important initiatives and allocate resources accordingly. It helps organizations identify which initiatives are worth investing in, and which ones should be deferred or abandoned. LPM helps organizations prioritize initiatives by first analyzing the value they will bring to the organization. This analysis is based on a criteria that takes into account factors such as the cost, expected return on investment, and the potential risks. LPM also takes into account the customer’s needs and expectations, as well as the organization’s strategy and business objectives.
Once the priority initiatives have been identified, LPM then focuses on the efficient allocation of resources. This includes the use of metrics to measure performance and track progress, as well as the use of agile methods to ensure the successful execution. This helps organizations make decisions about how to best use their resources to achieve desired outcomes.
LPM is a powerful tool for organizations looking to make better decisions about how to prioritize and invest their resources. It helps organizations focus on the most important initiatives, and make decisions about how to allocate resources to achieve desired outcomes. LPM is designed to be an adaptive system that can respond to business threats and opportunities.
Resistance to Adopting LPM
The Resistance of Leadership
One of the biggest impediments to LPM is always is lack of leadership participation. Once you scale up from team-level to the portfolio, things like LPM become increasingly more difficult to do unless there’s leadership buy-in and the tacit understanding that new process need to be adapted to truly unlock an organization’s value. This change avoidance typically manifests as lack of support (at best) or openly resistant (at worst) to change at that level.
The Resistance of Middle Management
Lean Portfolio Management (LPM) is designed to enable organizational agility by transforming ways of working from traditional project construct to value organized construct. Another very common challenge when attempting to implement LPM is the resistance of middle management layer of an organization. This is a group that has generally spent time building their department and establishing processes, where key responsibilities often include budgetary control and people to manage. The move from tradition portfolio to lean portfolio explicitly describes how established processes will be broken down.
Moving this group from managing people, utilization and an area budget to a role that will, in the LPM world, focus on developing people, creating high performing teams and facilitating the delivery of value to the customer and business is extremely scary. The natural reaction is to resist. If this is not worked through, resistance to change from middle management layers of business will be a major impediment to implementing LPM successfully.
Prerequisites for LPM
This is by no means an exhaustive list, but having them will certainly contribute to a more successful outcome. As you will read in the next section, organizations are implementing lean portfolio management sooner in the agile transformation process. Here are several prerequisites that can contribute and bolster your organization’s ability to apply a lean framework to your portfolio:
Understanding of Lean principles
A good understanding of Lean principles, such as value stream mapping, waste elimination (LEAN) and continuous improvement, is essential for effective implementation of lean portfolio management. Not only understanding, but practicing them! It’s absolutely critical that some level of agile maturity already be in place before scaling up into LPM – otherwise you’re going to spend a lot time explaining concepts.
Clear strategic vision
The organization should have a clear vision of its strategy and objectives, and how the portfolio of projects aligns with these goals. Adopting an Objectives and Key Results (OKRs) strategy can be VERY effective in helping organizations refine and align their strategic goals to execution.
All stakeholders, including senior leadership, project managers, and team members, should be aligned and committed to the implementation of Lean portfolio management. This goes without saying, but a good phrase to use when going through a transformation is, “The transformation eats at the buffet table first.” – if you’re looking to fundamentally change your business processes, it can’t be #8 on the priority list.
Data-driven decision making
If you can’t measure it, you can’t improve it.
Effective cross-functional collaboration is essential for lean portfolio management, as it requires input and support from multiple departments and functions. Break down those silos! Value Stream identification and workshops are a great first step to move this in the right direction.
Standardized processes and procedures for portfolio management should be in place, to ensure consistency and efficiency in the management of projects. Things like having a business canvas, lean business case, and associated OKRs at the intake level, can make it much easier to decide which direction to go that best supports the organization’s stated goals. This does NOT mean write a 200+ step “Playbook” that that tries to cover every possible option! It needs to have just enough information for a decision to be made (go / no go).
These are just some of the things that help organizations move in the direction of lean portfolio operations.
Companies are choosing to implement LPM early during the transformation roadmap
LPM used to be introduced later in the agile journey as it was thought of as a more complex topic. Not anymore – companies are realizing that they need to decide what product development they will be investing in early to eliminate the waste that frequently happens from building the wrong things with scarce capacity. There are several reasons why many companies are implementing Lean Portfolio Management (LPM) early in their agile transformations:
Aligns strategy and execution
LPM helps to align the strategic objectives of the organization with the work being done at the team level. This ensures that teams are working on the most important initiatives and that they are aligned with the overall direction of the organization.
Promotes transparency and visibility
LPM helps to provide transparency and visibility into the work being done at the portfolio level, which is essential for effective decision-making and resource allocation.
Supports continuous improvement
LPM is based on the principles of continuous improvement, which is a key aspect of agile. By using LPM, organizations can continuously assess and optimize their portfolio of work to drive efficiency and effectiveness.
Enables faster delivery
By aligning strategy and execution, LPM helps to eliminate waste and reduce lead times, which enables faster delivery of value to customers.
LPM is an effective way for companies to align strategy and execution, promote transparency and visibility, support continuous improvement, and enable faster delivery, which are all important goals in an agile transformation.
The Difference between SWOT and TOWS analysis
SWOT and TOWS analysis are two important strategic planning methods used by businesses to identify and analyze strengths, weaknesses, opportunities, and threats. Both methods are part of SAFe LPM and can help businesses create effective strategies to maximize strengths, minimize weaknesses, exploit opportunities, and address threats.
The SWOT analysis is a tool used to assess the internal and external factors that can affect a business. The acronym stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses are internal factors, while opportunities and threats are external factors. It is a useful tool for understanding a business’s current position and creating strategies to improve upon it.
The TOWS analysis is an extension of the SWOT analysis. The acronym stands for Threats, Opportunities, Weaknesses, and Strengths. TOWS is a useful tool for generating strategies to address external threats and exploit external opportunities. It helps businesses to identify weaknesses that can be used to exploit opportunities and threats that can be effectively addressed.
The main difference between SWOT and TOWS analysis is the order in which the factors are assessed. SWOT is used to assess internal and external factors simultaneously, while TOWS is used to assess external factors first and then internal factors.
Both methods can be used to create effective strategies for businesses, but TOWS is better suited for businesses that face more external threats than internal factors.
6 Ways OKRs Help Align Companies Around Goals and Value
Organizational Key Results (OKRs) are a powerful tool used by businesses to set and measure goals. By setting and tracking OKRs, businesses can ensure that everyone within the organization is working towards the same goals and is aligned with the company’s values.
Here are six ways OKRs can help align your company around goals and values:
1. Increase Focus
OKRs help to focus the entire organization on a few key objectives. By setting and tracking OKRs, everyone in the organization is able to prioritize their efforts and ensure they are working towards the same goals.
2. Improve Communication
OKRs help to ensure that everyone in the organization is on the same page. By communicating objectives and key results, everyone can stay up-to-date on the progress and make sure all efforts are aligned.
3. Boost Motivation
Setting and tracking OKRs helps to motivate employees to achieve the set goals. By providing employees with clear objectives, they are more likely to be motivated to reach the targets.
4. Enhance Accountability
OKRs help to hold everyone accountable for their efforts. By setting and tracking OKRs, everyone in the organization knows what they need to do and when they need to do it.
5. Promote Collaboration
OKRs help to facilitate collaboration among team members. By setting and tracking OKRs, everyone in the organization can work together to reach a common goal.
6. Increase Visibility
OKRs help to increase visibility into the progress of the organization. By tracking OKRs, everyone in the organization can easily see the progress and adjust their efforts accordingly.
By setting and tracking OKRs, businesses can ensure that everyone in the organization is aligned around the same goals and values. OKRs can help to focus the organization, improve communication, boost motivation, enhance accountability, promote collaboration, and increase visibility into the progress. With the help of OKRs, businesses can ensure that everyone is working together to achieve success.
Value Streams – Understanding the Basics
Value stream management is a business process that focuses on identifying, analyzing, and improving the flow of materials, information, and value-added work within an organization. It is a key aspect of lean manufacturing and aims to eliminate waste, increase efficiency, and deliver value to customers in the most effective and efficient manner possible.
There are several key essentials that are important to understand about value stream management:
Value stream mapping
This is the process of creating a visual representation of the flow of materials, information, and value-added work within an organization. It helps to identify areas of waste and inefficiency, and provides a clear picture of the current state of the value stream.
Value stream management is based on the principles of lean manufacturing, which emphasizes the elimination of waste and the continuous improvement of processes. Lean principles include the identification and elimination of non-value-added activities, the reduction of lead times, and the creation of flow in the value stream.
Value stream management is an ongoing process of identifying and eliminating waste and inefficiencies in the value stream. It involves the continuous improvement of processes through the implementation of lean principles and the adoption of new technologies and best practices.
The ultimate goal of value stream management is to deliver value to the customer in the most efficient and effective manner possible. This requires a deep understanding of customer needs and preferences, as well as a focus on meeting and exceeding customer expectations.
Collaboration and cross-functional teams
Value stream management requires the collaboration and coordination of different departments and functions within an organization. It also requires the involvement of key stakeholders such as suppliers and customers to ensure a smooth and efficient flow of materials, information, and value-added work.
In summary, value stream management is a key aspect of lean manufacturing that aims to eliminate waste, increase efficiency, and deliver value to customers. It involves the continuous improvement of processes through the adoption of lean principles, the implementation of new technologies and best practices, and the collaboration and coordination of different departments and functions within an organization. Understanding these essentials is crucial for effectively managing the value stream and achieving long-term success in today’s competitive business environment.
Lean Portfolio Management (LPM) is a key enabler for businesses in navigating a world where change and disruption are happening extremely quickly. LPM enables business agility, which is a mandatory requirement to play the game. Those that do begin to adopt LPM (and the associated organization mindset & culture) will gain a significant competitive advantage. However, applying guardrails to LPM initiatives is a necessary consideration moving forward.
Establishing guardrails help ensure that investments are approved through the appropriate channels and that lean processes are continuously followed. Guardrails used in lean portfolio management provide barriers (like guardrails on a highway for instance) to guide investments, capacity allocation, and initiatives.
One of the most crucial guardrails when implementing LPM is capacity allocation. This goes for every level of the organization, from the team level to the portfolio level. As an example, let’s say one of the challenges an organization faces is an overspend on short-term expenses (OpEx) and little to no value being delivered that could be capitalized. This leads to problems reporting and prioritizing work. If all work comes from the same capacity bucket, then you are in danger of “squeaky wheel” syndrome.
In order to fix this, the portfolio leads and the teams work with an agile coach to determine the budget guardrails towards the capacity allocation for each type of funding. Based on historical spend and future product needs across the portfolio, they determined that the OpEx budget should be used solely to enable value-added work and fund cross-functional teams within ARTs.
In just a month’s time, the teams were able to report to the portfolio leads exactly where their time was being spent and where the money was going. The business could start prioritizing similar work that could be capitalized. Technical product owners and architects could start relying on their own spend to assist in making their technology more consumable. Prioritization and funding could shift to meaningfully investments at the portfolio level when necessary instead of being hidden behind a giant pool of OpEx spend because capacity allocation guardrails helped provide a focus on value