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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 the concept of Agile portfolio management entails and how it can be implemented in practice.

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 in order to ensure that the right things are being done at the right time.

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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, you can’t rely on that. 

Furthermore, when too many projects are in progress, teams get overburdened by trying to juggle many priorities at the same time, 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 its principles of “test, learn and adapt” as well as the concept of decentralized control on the portfolio level. 

For example, through rapid feedback loops, portfolio managers aim to regularly review a certain 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 the delivery of a given product or service. 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.

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

Main Pillars of Agile Portfolio Management

In general, the Agile approach to portfolio management differs from the traditional one by putting more emphasis on decentralizing control and setting up flexible plans that embrace uncertainty. To sustain this model and create effective portfolios, Agile organizations focus on maintaining transparency, continuously experimenting to determine whether a project is valuable, as well as aligning 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. Transparency

Creating transparency in the portfolio and overall project management processes is key 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. Through the implementation of connected visual boards, portfolio managers can easily capture ideas for multiple projects, but also create shared understanding between all stakeholders of what’s happening inside the portfolio. The desired outcome is to establish an open environment where all concerned parties can easily check the status of a project and thus reduce the need for preparing extensive reports.

Furthermore, rather than estimating on gut feeling, Agile puts an emphasis on forecasting high-level project plans which are then progressively refined by the teams. The idea is to take actual data into account and retain flexibility to update the plans based on new information.

2. Experimentation & 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 at once can overload teams and result in high inefficiencies especially if you are dealing with limited capacity. That’s why you need to make sure that you 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 in terms of contributing to the organizational strategy. 

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 were to delay project delivery in time. 

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

3. Alignment

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

As we mentioned at the beginning of this article, the portfolio is the connecting part between those two. Therefore, building an effective portfolio requires you to have a way to align the highest business objectives with the projects chosen for execution, as well as the daily operations.

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

As a result, you will be able to quickly adapt to changes coming from the highest company level and thus shift your operations towards the most critical priorities whenever necessary.

How to Manage an Agile Portfolio in Practice?

The ideas discussed above can give you the direction of what you need in order to create an Agile portfolio management process inside your organization. However, we are lacking the details of how to apply them in reality. 

For that, you need to have a complete management system at your disposal 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 the theory in practice. 

Its main focus is on practices such as visualization, limiting work in progress, managing flow, making process policies explicit, 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 even entire products.

Without 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 in order to execute on 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 the company’s 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.

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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 where to keep track of your portfolio without losing sight of its execution across multiple teams.

This will allow you to achieve unmatched transparency over multiple projects and see at a glance who is working on what at every single moment. As a result, you will be able to spot blockages, discuss and resolve issues as well as quickly adapt to emerging changes or priorities.

Manage 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.

Here it is important to take note of the refinement part which happens 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 thus gather more details about it. This allows you to retain 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.

Engage in Portfolio Reviews 

Revisiting your portfolio of projects in a regular cadence is an integral part of Agile portfolio management. To do this, Kanban preaches a special feedback loop (meeting) called a “Portfolio Review” which is usually held monthly. 

The idea here is to review the status of the projects, products or services in progress but also engage in collaborative discussions with middle managers on things such as identified dependencies or risks, available capacity across the structure as well as needs for shared resources. This additional input should be aggregated by dedicated cadences within single and across multiple teams on lower levels. 

Тhis is the time for managers to prioritize new projects and initiatives for development and sync whether they conform with the company’s strategy. Frequently reviewing what’s happening inside the portfolio allows managers to adapt to strategic changes of direction and thus ensure that the right things are being 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 in order 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 different charts such as Cycle Time Scatterplots, for example, 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 as well as emerging trends so you can take any necessary precautions or discuss improvements in the management process.

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 improve the predictability in your portfolio management process but also understand what’s the real capabilities of your teams for completing a product or service. Having this information in mind, you will be better equipped with the tools to make the right decisions and continuously enhance the satisfaction rate among your customers.

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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, and prioritization as well as better aligning strategy with 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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