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Agile Portfolio Management - Bringing Agility at a Global Level

Agile portfolio management is about bringing transparency and embracing uncertainty across multiple projects, programs, etc. Learn more in our practical guide.

Nowadays, Agile is everyone's buzzword. Its practices for managing projects have been largely explored in the past 15-20 years as more and more companies from all business sectors realize their effectiveness.

This trend has encouraged experts to look for ways to spread them across different organizational levels - from project execution all the way up to the company strategy. Here comes one of the connecting elements between the two - the portfolio, where agility finds its place too.

In the following paragraphs, we will explore what Agile portfolio management is, what the concept of managing an Agile portfolio entails, and how to implement it in practice.

Table of Contents

Traditional vs. Agile Portfolio Management

To begin our discussion, let's quickly set the ground with a few basic terms from the project management world.

By definition, a portfolio usually represents a collection of projects, products, investments, programs, etc., in a single business unit inside the organization. In turn, the process of managing that portfolio is all about identifying projects for execution and prioritizing them to ensure that the right things are done at the right time.

Agile Portfolio ManagementImage Credit: https://www.pmi.org/

Traditional Portfolio Management

Traditionally, this happens by planning in detail a roadmap of projects and then applying for budgets based on those plans. Once the required funding is approved, the portfolio is implemented. Here, we should mention that many organizations are tempted to start as many projects as possible simultaneously.

The problem with this approach is that it requires heavy upfront planning for the projects to be approved, and in today's highly volatile business environment, it’s risky to rely on that.

Furthermore, when too many projects are in progress, teams get overburdened by juggling many priorities simultaneously, resulting in low productivity. Another issue includes low transparency of the management process, which can also lead to misalignment between the company's strategy and its execution.

Introducing Agile Portfolio Management

To deal with all of those, Agile applies the "test, learn and adapt" principles and decentralized control concept on the portfolio level.

For example, through rapid feedback loops, portfolio managers regularly review a particular set of projects and how they align with strategic initiatives. They also frequently engage in collaborative discussions with project managers or different team leaders to identify small experiments to evaluate projects or improve a given product/service delivery. This allows them to gather fast feedback and make data-driven decisions.

Moreover, instead of preparing highly detailed project roadmaps to apply for budgets, Agile portfolio management entails planning on multiple levels and cascading power downwards. In turn, financial resources are allocated towards experiments and value streams within the organization rather than separate projects.

Agile Planning Onion

This approach promotes flexibility and enables portfolio managers to reallocate funds to emerging priorities based on changing customer requirements or new ideas that can be more valuable than the old ones.

Main Pillars of Agile Portfolio Management

To sustain agility within their operations, Agile organizations:

  • focus on maintaining transparency,
  • continuously experiment to determine whether a project is valuable,
  • and align strategy with execution.

Those together form the main pillars of Agile portfolio management. Let's break them down and briefly discuss each one of them below.

1. Scaled Transparency

Creating transparency in the portfolio and overall project management processes is critical in today's rapidly changing business environment.

Traditionally, there is a big emphasis on detailed status reporting performed by portfolio or project managers. The problem is that this takes a lot of valuable time, and often the reporting turns out to be wrong because it's reliant on flawed estimations.

Agile, in turn, focuses on creating a shared purpose for everyone to follow both from a strategic and project management point of view. By implementing connected visual boards, portfolio managers can easily capture ideas for multiple projects and create a shared understanding of what's happening inside the portfolio. The desired outcome is to establish an open environment where all concerned parties can quickly check the status of a project and thus reduce the need for preparing extensive reports.

Project transparency

Furthermore, rather than estimating based on gut feeling, Agile emphasizes high-level forecasting project plans that the teams progressively refine. The idea is to take actual data into account and retain the flexibility to update the plans based on new information.

2. Continuous Experimentation & Agile Portfolio Prioritization

Sometimes you might end up with a lot of project ideas that, at first look, tend to provide customer value in one way or another. However, starting work on all of them can overload teams and result in high inefficiencies, especially if you are dealing with limited capacity. That's why you need to learn how to pick only the most valuable ones and prioritize them accordingly.

Here comes the concept of rapid experimentation that is central in an Agile environment. To determine whether a given project is worth pursuing, you can run small experiments as part of its validation process. The idea is to quickly gather data before rushing to make any big commitments, only to find out that the chosen project will not bring the expected value.

Other than that, it's not uncommon to end up with a bunch of validated projects which are all highly valuable. How do you decide which one of them to execute first then?

For that, you can use the powerful concept of cost of delay (CoD) to make sequencing decisions. It's based on pure economics and shows how much money you would lose if you delayed project delivery.

So, as a rule of thumb, the higher the cost of delay, the higher the priority of a given project. In case two or more projects have the same cost of delay, you should start with the shortest one. However, keep in mind that you should use the cost of delay as an input to other variables (such as market and technical risks) rather than a "one-size-fits-all" solution.

3. Aligning Strategy & Execution

Another central pillar of Agile portfolio management is achieving alignment between strategy and execution.

As we mentioned at the beginning, the portfolio is the connecting part between those two. Therefore, effective portfolio management requires that you have a way to align the highest business objectives with the project execution.

To do this in practice, the Agile culture preaches frequent feedback loops that can be applied globally (across the company's management) and locally (across teams). The idea is to create a network of these short planning and learning cycles on multiple organizational levels so that you can review strategy, project risk, and delivery capabilities.

This allows you to quickly adapt to high-level changes and shift your operations towards the most critical priority whenever necessary.

How to Manage an Agile Portfolio in Practice?

The ideas discussed above can give you the direction of creating an Agile portfolio management process. However, they lack the details of how to apply them in reality.

For that, you need a complete management system to visualize, prioritize, and align the projects from your portfolio with the company's strategic initiatives, including their execution. This is where the workflow management method Kanban steps in to help you put theory into practice.

Kanban at the Portfolio level

Kanban’s primary focus is on visualization, limiting work in progress, managing flow, and continuous improvement, which can be applied on multiple levels inside the company, including the portfolio. This is done through the concept of Portfolio Kanban, which allows you to track and optimize the flow of different business initiatives, single or multiple projects, or entire products.

Portfolio Kanban SchemeWithout further ado, let's take a closer look at how this can happen in reality.

Connect Strategy, Portfolio, and Project Execution

As mentioned above, one of the main themes in Agile portfolio management is creating visibility inside the portfolio so you can maintain a shared understanding of the status of projects and their progress towards fruition. Ultimately, the idea is to bridge the gap between high-level planning and operations to execute the strategy that your organization has set forward.

In practice, this can happen through the implementation of interconnected Kanban boards. You can use them to visualize initiatives, multiple projects, project deliverables, or individual tasks.

Let's take a quick example with an R&D department inside an organization. To visualize chosen initiatives or multiple projects based on its strategy, portfolio managers can build a dedicated Portfolio Kanban board. Depending on the scale of those projects or initiatives, they can be further broken down into sub-projects within the same board or a different one. To tie this structure together, in Kanbanize, for example, we use parent-child project relationships.Agile Portfolio Board Breakdown

Progressing down to lower levels, you can keep using interconnected Kanban boards to visualize different parts of the department or even the entire organization. Those can be program or project management processes going all the way down to the individual tasks that team members are responsible for. The idea is to create a central hub and keep track of your portfolio without losing sight of its execution across multiple teams.

In Kanbanize, for example, we combine Management and Team Workspaces to visualize and connect project planning and daily operational activities across teams.

Agile Portfolio

This will allow you to achieve unmatched transparency over multiple projects and see who is working on what at every moment.

Managing Portfolio Flow

Once you have your Portfolio Kanban board set up, another important part is to manage the flow of projects from concept to fruition.

In Kanban, we do that by mapping the value stream of all our processes. Through the implementation of different commitment points, for example, you can signify the point in your process where a project has been committed for refinement, execution, or it's ready for customer delivery.

Commitment points on project portfolioIt is essential to note the refinement part before the "Ready to Start" column on the Kanban board. This is essentially an Upstream Kanban process where each project request represents an option that portfolio managers should validate before committing for execution. Here you can engage in running experiments to make better decisions.

As a result, you can decide to defer an option until the "last responsible moment" and gather more details about it. This allows you to retain the flexibility to change your approach based on new data and ensure a continuous flow of validated projects that teams can start working on.

Another best practice for managing portfolio flow is to limit concurrent projects in progress. Doing this will allow you to relieve your teams from overburdening and match the incoming demand with real capabilities. As a result, you will ensure that the team's attention is directed towards the most critical initiatives at any given moment, and this way, focus on improving your global throughput.

Global WIP limit

Review The Portfolio on a Regular Basis

Revisiting your portfolio of projects in a regular cadence is an integral part of Agile portfolio management. To do this, Kanban preaches the use of feedback loops/cadences on a portfolio level.

The idea is to regularly review the status of the projects, products, or services in progress and engage in collaborative discussions with middle managers on things such as identified dependencies or risks, available capacity across the structure, and needs for shared resources. This input should be aggregated by cadences on lower levels spanning multiple teams across a department or the entire organization.

Kanban Cadences

Applying a regular portfolio cadence within management meetings and using Portfolio Kanban boards to visualize what’s important allows managers to prioritize new projects and initiatives and sync whether they conform with the company's strategy. Frequently reviewing what's happening inside the Agile portfolio helps managers adapt to strategic changes of direction and ensures that the right things are done at the right time.

Analyze Metrics for Continuous Improvement

Pretty much like everything else that turns into a success, Agile portfolio management requires continuous improvement too. That's why you need to have a way to collect data and analyze it to make better decisions.

In a Kanban system, you can do that by measuring different lean/agile metrics such as lead and cycle time, throughput, and WIP (Work in Progress). Then, with the help of various charts such as Cycle Time Scatterplots, you can monitor when the projects inside your portfolio get done and with what time probability they are likely to flow through your system on average. This helps you spot outliers and emerging trends so you can take any necessary precautions or discuss improvements in the management process.

Cycle Time Scatter Plot Chart

Furthermore, combining that data with a powerful technique such as Monte Carlo Simulations will allow you to make probabilistic forecasting based on historical data rather than estimations derived from a gut feeling.

As a result, you will have a way to derive possible outcomes for the delivery of multiple projects inside your portfolio based on your team's real capabilities for executing them.

 

Monte Carlo how many

In Summary

Agile portfolio management is a more flexible way of managing a portfolio of projects, programs, initiatives, etc., by focusing on decentralized control, transparency, continuous experimentation, prioritization, and better alignment between strategy and execution. Building an effective Agile portfolio management process requires you to have a complete management system in place so you can:

  • Bridge the gap between strategy, portfolio, and project execution;
  • Manage portfolio flow;
  • Engage in regular cadences/feedback loops (such as Portfolio Reviews) to adapt to changes;
  • Analyze metrics and continuously improve.

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