A strategic inflection point is that moment when some combination of technological innovation, market evolution, and customer perception requires the company to make a radical shift or die. —Andy Grove, Only the Paranoid Survive
Each SAFe portfolio contains a set of Value Streams and the additional constructs necessary to provide funding and governance for the products, services, and Solutions that the Enterprise needs to fulfill some element of the business strategy. In the small to midsize enterprise, one SAFe portfolio can typically be used to govern the entire technical solution set. In the larger enterprise (typically those with more than 500 – 1,000 technical practitioners), there can be multiple SAFe portfolios, one for each line of business:
In either case, the portfolio is not the entire business, and it is important to ensure that the portfolio solution set evolves to meet the needs of the enterprise. SAFe provides three primary constructs for connecting the enterprise strategy to a portfolio. The first is Budget, i.e., the total funding provided to the portfolio for operating and capital expense. That provides the investment envelope in which the portfolio must operate. The second is a set of Strategic Themes that communicate certain aspects of strategic intent from the enterprise to the portfolio. The third is the constant feedback of portfolio context (described below), which provides governance and informs ongoing strategy formulation.
This article provides some general guidance by which the enterprise can define and communicate this critical information.
The SAFe Portfolio Level represents the highest level of concerns articulated in SAFe. Each program portfolio consists primarily of a set of Value Streams that deliver value. The portfolio level describes the constructs necessary—Lean-Agile budgeting, Program Portfolio Management (PPM), Portfolio Kanban system, Portfolio Backlog, Epics, and more—to govern portfolio investments and to guide the portfolio to the business objectives.
However, each portfolio exists for a single reason—that is, to fulfill its contribution toward realizing the overall Enterprise strategy. This is accomplished by aligning each portfolio’s vision to the enterprise strategy. The primary mechanisms for doing this are the value streams themselves, the overall portfolio Budget (the total “pie” illustrated in the budget pie chart), the Strategic Themes that communicate evolving strategic intent, and the constant feedback via portfolio context. Guidance for defining the enterprise Value Streams, and then realizing this value via Agile Release Trains, is provided in their respective articles. This article addresses the development and communication of the budgets, strategic themes, and portfolio context.
A View of a Single Enterprise SAFe Portfolio
First, it’s important to understand the larger context for this element of the process. In enterprises with fewer than a thousand or so practitioners, working together to deliver a holistic Solution set, a single portfolio (a single instance of SAFe) may be all that is required. In this case, there is only one portfolio and overall budget that is allocated to its value streams by the PPM authorities. The portfolio is connected to the business strategy by strategic themes and the budget, and it provides feedback to the enterprise via portfolio context, as Figure 1 illustrates.
Large Enterprises Will Have Multiple Instances of SAFe
However, SAFe is being successfully applied by many of the world’s largest system and software builders. Many of these enterprises have thousands, and even tens of thousands, of IT, system, application, and solution development practitioners. (Some have more than 100,000.)
Of course, these practitioners are not all working on the same solutions, nor within the same value streams. More typically, IT and development are organized in support of the various lines of business, internal departments, customer segments, or other business purposes. Most commonly, these business units have fewer than one thousand practitioners (though some have far more), each responsible for one SAFe portfolio.
To achieve the larger purpose, the enterprise will have multiple SAFe portfolios, each with its own budget and strategic themes, which reflect that unit’s portion of the business strategy, as Figure 2 illustrates.
Each SAFe portfolio exists in this broader enterprise context. That is the source of the business strategy that the portfolio must address, and it also provides the more general funding and governance model for all portfolios.
Enterprise Strategy Drives Portfolio Strategy
Development of the enterprise business strategy, and the investment in solutions that enable it, is a somewhat centralized concern, as it is the primary responsibility of the executives and fiduciaries who have direct accountability for overall business performance. After all, portfolios don’t form themselves or fund themselves; they exist solely to fulfill the larger enterprise purpose.
Portfolio Context Informs Enterprise Strategy
However, strategy has emergent properties. It must also be based on the current business context, which, in turn, depends on the challenges and opportunities that exist in the current solution set, and in the local market conditions they address. To that end, development of strategy requires continuous collaboration, communication, and alignment—with and from—the downstream portfolios. In other words, it requires full and complete awareness of the portfolio context, which can include:
Key Performance Indicators (KPIs). It’s incumbent on the portfolio to provide appropriate feedback on the allocated investment spend. This can include quantitative and financial measures, such as ROI, market share, customer net promoter score, innovation accounting , and more.
Qualitative data. Qualitative data can include Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis; and, most important, the accumulated solution, market, and business knowledge of the portfolio stakeholders. Any strategy that does not take this into account will be suboptimal.
Defining the portfolio budget and strategic themes is an exercise in strategy formulation (see Strategic Themes). Extensive collaboration is required. Philosophies of approach to strategy formulation are very broad. Current trends and influences in the tech sector include Geoffrey Moore’s series of books  and The Lean Startup . There are a variety of more specific strategy formulation approaches in vogue as well, including the Business Model Canvas, Lean Canvas , and more.
One such effective formulation is described in Beyond Entrepreneurship , by Jim Collins. The output of this process is a set of strategic themes that provide an ongoing “snapshot” of the enterprise strategy that communicates evolving strategic intent, as well as a budget, to the portfolio. Figure 3 highlights the main aspects of that approach when adapted to the SAFe context; each aspect is discussed briefly in the sections below.
Total Enterprise Budget and Investment in Program Portfolio. Within the scope of the total operating budget (or allocation of people and other resources), a budgetary allocation is established for all technical solutions across all SAFe portfolios. In some cases, it may also provide guidelines for capital and operating expenses (see CapEx and OpEx article).
Enterprise Business Drivers. Enterprise business drivers reflect the evolving enterprise strategy. Since the current business and solution portfolio context is largely understood, there is no need to repeat the obvious; these should reflect changes from current strategy. For example, business drivers such as “integrate the capabilities of the new acquisition into the suite” (a security company) and “move applications to the cloud” have been observed.
Financial Goals. The financial performance goals for the business should be clear, whether measured in revenue, profitability, market share, or other measures. Some of those financial elements will also be communicated to the portfolio.
Mission, Vision, Core Values. A clear and unifying mission, vision, and set of core values provide constancy of purpose and act as boundaries for strategy formulation.
Competitive Environment. Competitive analysis will help identify the largest threats and areas of opportunity.
Portfolio Context and Distinctive Competence. The best strategies are formed in the midst of full and complete portfolio context. This can be provided by the KPIs, SWOT analysis, and more. But strategic differentiation emphasizes what the enterprise is really good at, the business and technical DNA that brought the enterprise to its current place of success.
In accordance with Figure 3, portfolio budgets and strategic themes are an output of a process, one whereby the business fiduciaries and other stakeholders systematically analyze a set of inputs before arriving at conclusions, which in this case are the respective portfolio budgets and the strategic themes for each.
In accordance with SAFe Principle #9 – Decentralize Decision-Making, the formulation of business strategy is largely a centralized but collaborative concern, in which the business fiduciaries and key portfolio stakeholders play a central role. Execution of solution strategy, however, is decentralized to the portfolio and is supported by transparency, constant feedback, KPIs, and appropriate portfolio Metrics. Only these people have the local knowledge necessary to define, evolve, and budget for value streams and ARTs, to apply the Economic Framework, and to manage the development of the solutions necessary to address changing Customer needs and new market opportunities.
Learn More Moore, Geoffrey. Crossing the Chasm (1991, 2014), Inside the Tornado (1995 and 2004), and Escape Velocity (2011). Harper Business Essentials.  Ries, Eric. The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. Random House, 2011.  Collins, Jim and William Lazier. Beyond Entrepreneurship: Turning Your Business into a Great and Enduring Company. Prentice Hall, 1992.  Maurya, Ash. Running Lean: Iterate from Plan A to a Plan That Works. O’Reilly Media, 2012.
Last update: 7 December 2015