Learn Lean portfolio management back to front! Discover why mastering the ability to align strategic goals and execution can support your journey to business agility.
Today, organizations face challenges managing portfolios of projects and initiatives as the business landscape rapidly evolves. To address these complexities, many forward-thinking businesses are turning to Lean portfolio management (LPM) to close the gap between strategic thinking and execution.
LPM is a strategic approach that aims to optimize the flow of value through effective portfolio management, aligning investments with strategic objectives and ensuring efficient execution. This article will provide you with a comprehensive definition of LPM, why it's important, and we'll outline some guiding practices that can help for its successful execution.
Lean Portfolio Management (LPM) is a strategic approach that enables organizations to make informed decisions and maximize the value delivered by their portfolio of projects and initiatives. LPM draws inspiration from the Lean principles, which originated in manufacturing and have since been successfully applied to various business domains.
The Lean Portfolio Management (LPM) framework has three key dimensions including strategy and investment funding, Agile portfolio operations, and Lean governance.
The Lean portfolio management (LPM) competency offers several key benefits, including achieving business and organizational agility and enabling timely responses to market volatility and changing conditions while fostering an environment for innovation. Let's discuss the positive effects that LPM could enable when done correctly.
Mastering the Lean portfolio management (LPM) competency requires a deep understanding of the principles of a Lean process and applying them at scale to align strategy with execution. Here are the five cornerstones that can help you lay a solid foundation for a seamless Lean portfolio strategy adoption.
1. Define Clear Strategic Objectives: LPM starts with clearly articulating the organization's strategic objectives. These objectives serve as a compass, guiding the selection and prioritization of projects that align with the strategy of the organization.
2. Implement Lean Governance: LPM emphasizes lightweight governance structures that empower teams and promote decentralized decision-making. This enables quicker responses, reduces bureaucratic overhead, and fosters a culture of ownership and accountability.
3. Foster Value Stream Thinking: LPM encourages organizations to view their portfolios holistically as value streams rather than a collection of isolated projects. This allows you to zoom out and see your company as an interdependent network of services. This way of looking at the big picture stems from the Systems Thinking approach and empowers organizations to focus on optimizing their value streams by eliminating waste rather than focusing on local improvement.
4. Embrace Agile and Lean Practices: LPM leverages Agile and Lean practices to drive efficiency and responsiveness. Embracing Agile methodologies, such as Scrum and Kanban, enables teams to deliver value frequently, respond to feedback, and adapt quickly to changing circumstances.
5. Establish Metrics and Feedback Loops: Define relevant business and flow metrics of the portfolio to measure its performance and success. Establishing regular feedback loops and review mechanisms can help you assess progress, make data-driven decisions, and identify areas for improvement.
Differentiating between traditional and Lean portfolio management (LPM) is crucial in understanding the benefits and advantages of adopting a Lean approach towards achieving organizational agility.
Traditional portfolio management typically relies on a hierarchical decision-making structure, extensive documentation, and a focus on detailed planning upfront. It tends to be more rigid and sequential, making adapting to changing market dynamics challenging. On the other hand, LPM embraces agility and continuous improvement thinking. It fosters a culture of empowerment, collaboration, and decentralized decision-making.
By distinguishing between the two approaches, organizations can recognize the limitations of traditional portfolio management and leverage LPM to enhance flexibility and overall portfolio performance.
|Traditional Approach to Portfolio Management||Lean/Agile Approach to Portfolio Management|
|Hierarchical and centralized decision-making||Promotes ownership and a decentralized decision-making|
|Tendency for project overload due to large backlogs of multiple priorities||Limiting project work on a portfolio level|
|Top-down approach to planning driven by projects||Roller-wave planning - continuous planning based on the continuous flow of value; constantly realigned to the business goals|
|Project-based funding||Value-stream funding|
|Performance driven by the amount of output delivery||Outcome-focused value delivery|
|Business cases based on speculative project details (ROI, costs, risks, etc.)||Business cases with MVP|
Lean portfolio management (LPM) involves various roles and responsibilities to ensure effective portfolio management and value delivery. While the specific roles may vary depending on your organization's structure and size, here are the key roles commonly associated with LPM:
Clear role definitions and strong collaboration among these roles are crucial for the smooth implementation and operation of LPM within an organization.
In LPM, performance is measured using a combination of quantitative and qualitative metrics that provide insights into the portfolio's progress, value delivery, and alignment with strategic objectives. The specific metrics used can vary depending on your business goals, industry, and portfolio characteristics. The two key types of success metrics in LPM include Lean/Agile metrics and OKRs/outcomes.
Lean portfolio management combines Lean, systems thinking, and Agile methodologies to achieve a balance between efficiency, adaptability, and value delivery, allowing organizations to navigate complexities, respond to market changes, and optimize portfolio performance and outcomes.
Furthermore, systems thinking can help portfolio managers understand the broader impacts and interdependencies within the portfolio, enabling them to make informed decisions that optimize the overall system and avoid the sub-optimization of individual initiatives.
Agile methodologies further enable the ability to embrace change and respond quickly to market dynamics. Agile practices promote collaboration, transparency, and iterative delivery, allowing for adjustments and refinements based on customer feedback and changing business needs.
Finally, all three approaches emphasize continuous improvement. Lean practices drive process optimization, systems thinking identifies areas for improvement at the portfolio level, and Agile mindset seeks constant learning and enhancement within teams.
The three aspects of Lean Portfolio Management (LPM) include strategy and investment funding, Agile portfolio operations, and Lean governance. They refer to aligning the portfolio with strategic objectives, adopting Agile practices, and implementing effective governance mechanisms.
In Lean Portfolio Management (LPM), several vital roles are responsible for different aspects of portfolio management. Although the specific roles and responsibilities may vary depending on the organization's structure, size, and industry, the following are essential for the successful implementation and execution of Lean Portfolio Management: Portfolio Manager, Business Owners/Product Managers, Agile teams, including senior executives and key stakeholders.
for outcome-driven enterprise agility.
Lean Portfolio Management (LPM) provides organizations with a powerful framework to:
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