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 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

As shown in Figure 1, every SAFe portfolio has an LPM function with three primary responsibilities: strategy and investment funding, Agile portfolio operations, and Lean governance.

Figure 1. Primary responsibilities of Lean Portfolio Management

Strategy and Investment Funding

Of these three primary responsibilities, strategy and investment funding is arguably the most important. Only by allocating the right investments to building the right things can an enterprise achieve its ultimate business objectives. This requires the focused and continued attention of LPM. As described in the Enterprise article, key stakeholders collaborate, create, and communicate the portfolio strategy. The Value Streams must then receive appropriate funding to develop and maintain portfolio products and services.

This requires extensive cooperation between enterprise executives, Business Owners, and Enterprise Architects. They can provide the longer-term view of the technology necessary to support the evolving business strategy, as described in Figure 2.

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

The responsibilities of this collaboration include:

  • Connect the portfolio to enterprise strategy – It’s critical that the portfolio strategy both supports and informs the enterprise’s broader business objectives. An effective strategy also relies on the existing assets and distinctive competencies of the portfolio’s solutions. They are interdependent. One key output of this collaboration yields the vital 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 broadly within the portfolio.
  • Fund value streams – The primary role of a SAFe portfolio is to identify, fund, and nurture a set of development value streams that deliver end-user value directly or support internal business processes. This is one of the most critical 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 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 the article Identify Value Streams and Agile Release Trains (ARTs).
  • Establishing portfolio flow – To implement the business objectives, the flow of work originating from the portfolio must be balanced with the extensive work that arises as each ART and Solution Train responds to customer needs. Portfolio business and enabler Epics are used to capture, analyze, and approve new business and technology initiatives that require collaboration of multiple value streams, or cause the formation of entirely new ones. The Portfolio Kanban system is designed to visualize and limit Work in Process (WIP), reduce batch sizes of work, and control the length of longer-term development queues. Epic Owners, Enterprise Architects, and—where applicable—Solution Portfolio Management, 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, versus 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 sequence.

Agile Portfolio Operations

Governing investment spend and assuring alignment and consistency across the portfolio is a constant and urgent concern for managers and executives. Historically, much of this work was centralized, along with planning, program management, and solution definition. This ensured that solution development aligned with portfolio strategy to help foster consistent approaches to critical elements like information security, common platforms, and financial and progress reporting. Often, a centralized Program Management Office (PMO) carried these responsibilities.

However, the SAFe Lean-Agile Mindset fosters the decentralization of strategy execution to empowered ARTs and Solution Trains. But even then, systems thinking must be applied to ensure that ARTs and Solution Trains operate within the larger enterprise context. This means that some form of Agile portfolio operations is typically required in the larger enterprise. Figure 3 illustrates the collaboration and responsibilities of this function.

Figure 3. Agile portfolio operations collaboration
  • Support Agile PMO, Lean-Agile Center of Excellence (LACE), and Release Train Engineer (RTE) and Scrum Master Communities of Practice (CoPs) – As we mentioned at the top of this article, centralization and traditional mindsets potentially held by a PMO function may undermine the move to SAFe. In response, some enterprises have abandoned the PMO approach, distributing all the responsibilities to ARTs and Solution Trains, often accompanied by an RTE and a CoP. However, this can be a bridge too far, particularly in the larger enterprise. And some organizations appear to be better served by redesigning the traditional PMO to become an Agile PMO (APMO), one that provides a consistent context for delivering in a more Lean and Agile manner. In general, we recommend supporting an Agile PMO, a LACE, RTEs, Scrum Masters, and CoPs. Moreover, we now see many enterprises in which the APMO drives the new way of working. In this case, the APMO often takes on additional responsibilities as part of the “sufficiently powerful coalition for change.” In this expanded role, they often:
    • Sponsor and communicate the change vision
    • Participate in the rollout (some members may even deliver training)
    • Lead the move to objective milestones and Lean-Agile budgeting
    • Foster more Agile Contracts and leaner Supplier and Customer partnerships
    • Provide consist support for effective program execution

The latter suggestions can be accomplished, in part, by sharing common and consistent enterprise patterns and practices for optimal value delivery. Standardizing such work is one of Lean’s most effective 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 guidance for program execution, often anchoring the Agile PMO in a consistent approach to value delivery.

The APMO may also sponsor or serve as a home for an ongoing CoP for Release Train and Solution Train Engineers and Scrum Masters. Or these may be formed and operated independently. In either case, these CoPs provide a forum for sharing effective Agile program execution practices and other general institutional knowledge.

Also, the APMO can establish and maintain the systems and reporting capabilities that ensure the smooth deployment and operation of the value stream investment. It acts as a communication and advisory link regarding strategy, offers key performance indicators, and provides financial governance. It also supports management and people operations/HR in hiring and staff development.

  • Coordinate value streams – Although in theory value streams could be independent, it’s also true that cooperation among a set of solutions can provide portfolio level 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 use may emerge to respond to expanding end-user needs. In addition, some level of coordination may be necessary to assure that value streams don’t build overlapping solutions that can confuse the market and dilute the return on investment. Similarly, coordinating component strategies may support efficient reuse, minimizing total investment. Value streams may also require coordination when they depend on scarce skill sets and Shared Services (such as security or compliance expertise). Ultimately, this means that the value streams need some level of portfolio coordination, which may be another responsibility of an APMO. In larger portfolios, it may even require additional roles and responsibilities, such as a Solution Portfolio Manager, as well as the need to apply cadence and synchronization across value streams. This is further described in the Value Stream Coordination article.
  • Sustain and improve  LPM—or, by proxy, the APMO—also has a leadership role in helping the organization relentlessly improve and achieve its business goals. This is often accomplished through a persistent Lean-Agile Center for Excellence. As described in that article, the LACE may be a standalone group or part of the APMO. In either case, it’s 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 Lean-Agile Center for Excellence article provides many suggestions on how to integrate SAFe practices. More opportunities for improvement are also described in the Sustain and Improve article.

Lean Governance

Finally, as Figure 4 illustrates, an important SAFe collaboration influences spending, future expense forecasts and milestones, and other Lean governance.

Figure 4. Lean governance collaboration and responsibilities

Its stakeholders include the relevant enterprise executives, the ART and Solution Train Business Owners and other stakeholders, and the APMO. Together they share the following responsibilities:

  • Forecast and budget dynamically – As described in the ‘Lean Budgets’ article, a leaner, more Agile and fluid process 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. And although traditional project cost accounting should not be required, any significant variation of spend versus plan for relatively long-lived value streams must be discussed and understood, as it may reflect a lack of alignment or a level inconsistent with the strategy.
  • Measure Lean portfolio performance – Each portfolio must also establish the minimum Metrics needed to assure that strategy is being implemented, spend aligns with agreed boundaries, and results are constantly improving. The Metrics article describes a set of Lean portfolio metrics that are used to assess internal and external progress for an entire portfolio.
  • Coordinate continuous Compliance – No portfolio is an island unto itself. Each operates in the context of its larger environment, typically containing audit and compliance requirements. These may include internal or external financial audit, industry, and legal and/or regulatory requirements. These obligations impose significant constraints on solution development and operations. Traditional approaches to compliance tend to defer these activities to the end of development, subjecting the enterprise to the risk of late discovery, rework, and even compromising regulatory or legal exposure. A more continuous approach to assure compliance with relevant standards is required, as is described in the Compliance article.

Summary

In summary, the three aspects of Lean portfolio management—strategy and investment funding, Agile portfolio operations, and Lean governance—provide a leaner, more Agile, and yet fully comprehensive governance approach that can help assure each portfolio fulfills its role in helping the enterprise achieve its larger business objectives.


Learn More

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

Last update: 31 October 2017