Most strategy dialogues end up with executives talking at cross-purposes because … nobody knows exactly what is meant by vision and strategy, and no two people ever quite agree on which topics belong where. That is why, when you ask members of an executive team to describe and explain the corporate strategy, you frequently get wildly different answers. We just don’t have a good business discipline for converging on issues this abstract.

—Geoffrey Moore, Escape Velocity

Lean Portfolio Management

The Lean Portfolio Management (LPM) function has the highest level of decision-making and financial accountability for the products and solutions in a Scaled Agile Framework® (SAFe®) portfolio.

An effective LPM function is necessary for SAFe success, but it is typically a function, not an organization. The people who fulfill these responsibilities may have various titles and roles. But this function usually includes the business managers and executives who understand the Enterprise’s financial position and are ultimately responsible for portfolio strategy, operations, and execution.


Note: LPM is significantly different than traditional portfolio management. In many cases, an existing legacy mindset—with annual planning and budgeting cycles and traditional measures of progress—severely inhibits the enterprise’s transition to agility. In response, SAFe recommends seven transformational patterns to move the organization to the leaner, more effective approach described in the article Extend to the Portfolio. With this context in mind, we can move on to describing Lean Portfolio Management.


Details

Every SAFe portfolio has an LPM function that has three primary responsibilities: strategy and investment funding, Agile program guidance, and Lean governance, as shown in Figure 1.

Figure 1. Primary responsibilities of Lean Portfolio Management

Each is described in the sections below.

Strategy and Investment Funding

Strategy and investment funding helps the portfolio meet its ultimate business objectives and requires the focused attention of the LPM. Key stakeholders collaborate, developing and communicating the portfolio strategy. They then provide funding to the Value Streams that develop and maintain the portfolio products and services.

Such an important set of responsibilities requires extensive cooperation between LPM and enterprise executives, Business Owners, and Enterprise Architects. They provide the longer-term view of the technology necessary to support the evolving business strategy, as Figure 2 describes.

Figure 2. The Lean Portfolio Management collaboration and strategy and investment funding responsibilities

The responsibilities of this collaboration include:

  • Connecting the portfolio to enterprise strategy – It’s critical that the portfolio strategy supports the enterprise’s larger business objectives. But the opposite can also be true. After all, an effective strategy relies on the existing assets and the distinctive competencies of the portfolio’s solutions. One key output of this collaboration is the Strategic Themes that provide the differentiation needed to achieve the desired future state. To ensure that the entire portfolio is aligned to the overall business strategy, these themes must be developed and communicated.
  • Implementing Lean budgeting – The primary role of a SAFe portfolio is to fund and nurture a set of development value streams that deliver end-user value directly or support internal business processes. Organizing and funding these value streams is one of the most important activities in SAFe. Once established, Lean Budgets provide value stream funding aligned with the business strategy and current strategic themes. This eliminates the need for traditional, project-based funding and cost accounting. Moving away from these legacy accounting approaches reduces friction, delays, and overhead. However, this is a significant change and often requires some analysis and definition of the enterprise’s value streams, as described in Identify Value Streams and ARTs.
  • Establishing portfolio flow – Implementing the business strategy requires managing and balancing the flow of work originating from two perspectives:

Portfolio business and enabler Epics are used to capture, analyze, and approve new business and technology initiatives that require the collaboration of multiple value streams. The Portfolio Kanban system is designed to visualize and limit Work in Process (WIP), reduce batch sizes of work, and control the length of development queues. The LPM, Epic Owners, and Enterprise Architects support this particular Kanban system. Successful implementation relies on knowing the total capacity for each ART in the portfolio, as well as understanding how much is available for new development work, as opposed to ongoing maintenance and support activities. When this is understood, the enterprise can then evaluate and originate portfolio-level initiatives in a logical, objective, and practical way.

Agile Program Guidance

Governing investment spend is a constant and urgent concern for managers and executives. To ensure solution development aligns with portfolio strategy, the traditional approach often involves centralizing strategy, budgeting, and program management. The alternative, using a Lean-Agile Mindset, is the decentralization of strategy execution to empowered ARTs and solution trains.

However, systems thinking must be applied to ensure that ARTs and solution trains do not lose sight of the bigger strategic picture and instead locally optimize to meet their specific objectives. Further, the enterprise operates more effectively when common, proven Agile practices are adopted in a portfolio. This means that some form of portfolio-level Agile program guidance benefits all stakeholders. Figure 3 illustrates the necessary collaboration and responsibilities.

Figure 3. The Lean Portfolio Management collaboration and Agile program guidance responsibilities

The Agile program guidance collaboration includes the LPM function, along with Release Train Engineers (RTEs), Solution Train Engineers (STEs), the Lean-Agile Center of Excellence (LACE), and often the assistance of an Agile Program Management Office (APMO) as described below. This group’s primary responsibilities include:

  • Focusing on Essential SAFe practices – One of the most important functions of LPM is to ensure successful program execution. This can be accomplished, in part, by sharing common and consistent enterprise patterns and practices for optimal value delivery. This leads to better knowledge sharing, cross-value stream reporting, and a common approach to governance. Standardizing such work is one of the most powerful Lean tools.

“By documenting the current best practice, standardized work forms the baseline for kaizen or continuous improvement. Improving standardized work is a never-ending process.” [1]

Essential SAFe practices provide the most basic, standardized guidance for program execution.

  • Supporting Agile PMO and Communities of Practice (CoPs) – Even though ARTs and solution trains are largely self-organizing and self-managing, many organizations benefit from having an Agile PMO, which collects and communicates practices to be applied throughout the portfolio. But as described in Extend to the Portfolio, this is not a traditional PMO. Rather, it often leads the transformation to agility, and can play an active role in implementing SAFe. Furthermore, the Agile PMO may sponsor or serve as an ongoing community of practice for Scrum Masters and Agile Release Train and Solution Train Engineers. This provides a forum for sharing Agile program execution practices, general knowledge, and strategies for cross-program reporting.
  • Sustain and improve – LPM has a central leadership role in helping the organization relentlessly improve and achieve the desired business goals. This is often accomplished through a persistent Lean-Agile Center for Excellence. As described in that article, the LACE may be a stand-alone group or part of the Agile PMO. In either case, it is a continuous source of energy that can help power the enterprise through the necessary organizational changes. Additionally, since the evolution to becoming a Lean-Agile enterprise is an ongoing journey, not a destination, the LACE often evolves into a longer-term center for continuous improvement. The LACE article provides many suggested practices to advance businesses on their path to integrating SAFe practices. Further opportunities for improvement are also described in the “Sustain and Improve” article.

Lean Governance

Finally, monitoring spending, forecasting future expenses and major milestones, and providing other Lean governance functions is also the result of an important collaboration, as Figure 4 illustrates.

Figure 4. The LPM collaboration and Lean Governance responsibilities
Figure 4. The Lean Program Management collaboration and Lean governance responsibilities

Stakeholders in this collaboration include the relevant enterprise executives, the ART and Solution Train Business Owners and other stakeholders, and the Agile PMO. This group has the following responsibilities:

  • Dynamic forecasting and budgeting – A leaner, more Agile and dynamic process (as described in “Lean Budgets”) replaces the fixed, long-range budget cycles, financial commitments, and fixed scope expectations of a legacy mindset. Agile approaches to estimating, forecasting, and longer-term planning are described in the Roadmap article.
  • Tracking Lean portfolio metrics – Each portfolio must also establish the minimum metrics necessary to assure that the strategy is being implemented, spend is in accordance with agreed boundaries, and results are constantly improving. The Metrics article describes a set of Lean portfolio metrics that can be used to assess internal and external progress for an entire portfolio.
  • Coordinating across value streams – Ideally, value streams are mostly independent. Cooperation among a set of portfolio solutions, however, can provide capabilities and benefits that competitors can’t match. Indeed, in some cases this is the ultimate goal: to offer a set of differentiated solutions where new cross-cutting patterns of usage may emerge to respond to ever-increasing end-user needs.

In other cases, dependencies between components, some of which support efficient reuse, avoid duplication of investment. In still others, value streams may depend on scarce and Shared Services, such as security or compliance expertise.

Ultimately, this means that some level of portfolio coordination is typically required across value streams. This is also a responsibility of LPM, which normally requires additional roles and responsibilities, as well as cadence and synchronization at the portfolio level. This is further described in the Value Stream Coordination article.


Learn More

[1] https://www.lean.org/Workshops/WorkshopDescription.cfm?WorkshopId=20

[2] Leffingwell, Dean. Agile Software Requirements: Lean Requirements Practices for Teams, Programs, and the Enterprise. Addison-Wesley, 2011.

[3] Thomas, Joseph and Steven Baker, DTE Energy. Establishing an Agile Portfolio to Align IT Investments with Business Needs. 2008.

Last update: 21 September, 2017