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Businesses want to get the most value out of the projects they take on while cutting down on waste. This is where lean portfolio management helps – it uses the lean approach to help organizations manage their whole collection of projects and initiatives.

Lean portfolio management takes a holistic view of everything. It focuses on customers, maps how value moves through the process, streamlines workflows, and constantly makes things better across all projects.

Lean techniques can streamline how they manage their portfolios, eliminate work that doesn’t add value, and cultivate a culture of ongoing learning and improvement.

At its core, it aligns a company’s projects with its overall goals. It ensures resources go towards the most worthwhile work, and provides value to customers efficiently and effectively.

It offers a range of tools, methods, and practices. These help organizations visualize their portfolio, identify problem areas, and refine what they’re doing over time.

Key Highlights

• Using lean principles for portfolio management can get organizations the most value out of their projects while cutting down on waste. This “lean portfolio” approach looks to continuously improve the whole batch of initiatives.
• Some key ideas are customer focus, mapping how value moves through processes, optimizing workflows, and always striving to evolve.
• The process involves envisioning where the portfolio is headed, setting up an efficient way to govern it, smartly handling workloads, and optimizing value delivery from start to finish.
• Handy tools include visual boards to track progress, diagrams showing how value flows through each step, charts of work over time, and metrics to check progress.
• Its Implementation takes adjusting norms, buy-in at the top, and gradually spreading it throughout.
• The payoffs are alignment with goals, resources matched well with tasks, faster solutions reaching customers, and more satisfied clients.

What is Lean Portfolio Management?

Businesses feel constant pressure to quickly and efficiently give customers real value. That’s why many have adopted agile methods focused on flexibility, teamwork, and constant upgrades.

But scaling those practices beyond individuals can be tough when you’ve got to sync up multiple agile teams with your broader strategic aims. This is where lean portfolio management comes in.

It applies agile and lean principles to how an organization oversees its mix of products, services, and initiatives. Lean portfolio management disciplines invest in worthwhile work by assessing potential efforts based on strategic fit, value delivered, and risk levels.

Core goals include maximizing value by prioritizing ideas with the most benefits to clients and the company. It also minimizes waste by cutting out needless steps like duplicate tasks or delays.

This approach champions ongoing refinement too, encouraging regular portfolio reviews and tweaks based on feedback and a shifting marketplace. Additionally, it empowers those on the frontlines to make informed choices, fostering independence and accountability.

By adopting lean portfolio management practices, organizations can better coordinate investments with strategic targets, optimize how resources are allocated, and swiftly react to evolving customer demands and industry changes.

Lean Portfolio Management Process

The lean portfolio management process is centered around continuously evaluating and optimizing the portfolio of products, projects, and other work to ensure alignment with strategic goals and maximizing value delivery. It involves the following key steps:

1. Portfolio Vision
   The first step is establishing a clear vision for the portfolio that aligns with the overall business strategy and objectives. This vision acts as the guiding light for all portfolio decisions.
   
2. Portfolio Value Stream Mapping
   Value stream mapping visualizes the flow of value from the initial concept to delivery to the customer. It helps identify wastes, bottlenecks, and opportunities for optimization in the portfolio value stream.
   
3. Portfolio Backlog Prioritization
   All proposed products, projects, and other work items are captured in a prioritized portfolio backlog. Lean prioritization criteria like cost of delay, value scores, dependencies, etc. are used to sequence the backlog items.
   
4. Lean Portfolio Construction
   Using set investment boundaries and capacity allocations, the highest priority items are pulled from the portfolio backlog into active execution in a lean fashion – just enough work to utilize available capacity efficiently.
   
5. Portfolio Execution & Visualization
   The execution of the lean portfolio is visualized on portfolio kanban boards or other lean management tools. Workflow is continuously monitored and issues are rapidly escalated.
   
6. Continuous Portfolio Reprioritization
   As new information emerges, the portfolio backlog is continuously re-evaluated and reprioritized to ensure the most valuable work rises to the top for execution.
   
7. Value Delivery & Measurement
   As work is completed and value is delivered, lean metrics like throughput, cycle times, value realization, etc. are captured to measure performance and identify improvement opportunities.

Lean Portfolio Management Tools and Techniques

Effective lean portfolio management requires the right tools and techniques to support the principles and processes involved. Several key tools and techniques are commonly utilized:

Kanban Boards

Kanban boards provide a visual way to manage the flow of work through the portfolio. They allow teams to visualize work in progress, identify bottlenecks, and optimize the flow. Kanban boards can be physical or digital using software tools.

Value Stream Mapping

Value stream mapping helps identify waste and optimize the end-to-end workflow for delivering value to customers. It provides a comprehensive view of the steps involved to spot areas for improvement.

Minimum Viable Product (MVP) and Lean Portfolio Management

The MVP approach focuses on developing a basic version of a product with sufficient features to satisfy early customers and get feedback for future development. It avoids upfront overengineering.

A3 Reports

A3 reports provide a structured way to understand problems, root causes, proposed countermeasures, and expected outcomes on a single sheet of paper. They foster critical thinking and dialogue.

Cost of Delay

Quantifying the cost of delay for initiatives helps prioritize the portfolio based on economic factors like time-to-market, opportunity costs, and changing markets and regulations.

Cumulative Flow Diagrams (CFDs)

CFDs visualize the flow of work overtime to identify bottlenecks, monitor cycle times, and measure the impact of process improvements within the portfolio.

Monte Carlo Simulations

These simulations model the potential costs and schedule impacts of portfolio choices using data ranges and probabilities rather than single values.

Implementing Lean Portfolio Management

Adopting lean portfolio management is not something that can happen overnight. It requires careful planning, training, and a shift in organizational culture and mindset. Here are some key steps involved in its successful implementation:

Gain Executive Buy-In and Support

Executive leadership buy-in is critical for driving a lean transformation across the enterprise portfolio. Lean challenges traditional management approaches, so executives need to understand and be fully committed to the lean mindset and principles.

Establish a Lean Portfolio Management Office

An enterprise lean portfolio management office (PMO) provides guidance, governance, and oversees the implementation. This central team defines processes, manages tooling, provides training, and enables the sharing of lean practices across teams.

Start with a Pilot Portfolio

Rather than attempting to transform the entire enterprise at once, start with a pilot portfolio to experiment with lean approaches in a contained environment. This allows for adjusting based on lessons learned before scaling more broadly.

Train Teams in Lean Thinking

Successful lean adoption requires comprehensive training and coaching for teams in lean principles, practices like value stream mapping, and tools/techniques like kanban boards and visual management.

Implement Lean Portfolio Management Tools and Visualization

Lean relies heavily on transparency and visualization. Implement lean portfolio management tools and Kanban boards to visualize work, dependencies, and flow across portfolios and teams.

Transition Portfolio Governance to Lean-Agile

Traditional annual planning and budgeting processes need to evolve to support leaner, more frequent portfolio prioritization, analysis, and adaptive funding models aligned to lean agile delivery.

Cultivate a Culture of Continuous Improvement

Lean is fundamentally about eliminating waste and enabling continuous process improvement. Foster an environment of blameless problem-solving, retrospectiveness, and encourage people to identify and experiment with ways to improve flow.

Measure and Optimize Using Lean Metrics

Use lean portfolio management metrics like cycle time, throughput, work item age, and cumulative flow to measure the system’s performance. Analyze and run experiments to systematically optimize and improve flow efficiency.

Lean Portfolio Management Best Practices

Implementing lean portfolio management effectively requires following several key best practices. These help organizations maximize the benefits and overcome common challenges.

Align Strategy with Execution

One of the core principles of lean portfolio management is ensuring that the portfolio of initiatives and projects directly aligns with and supports the overarching organizational strategy.

The best practice is to clearly define strategic goals and objectives first, then prioritize portfolio investments based on their potential to drive those goals.

Focus on Value Delivery  

The lean approach emphasizes delivering maximum customer value through the portfolio. The best practice is to evaluate potential investments based on customer/user value rather than outputs or activities. Prioritize initiatives with the highest value-to-cost ratio.

Decentralize Decision-Making with Lean Portfolio Management

Rather than having a centralized portfolio governance body make all decisions, lean portfolio management pushes decision authority out to self-organizing teams as much as possible.

The best practice is to empower teams to make their own prioritization and resourcing choices within defined boundaries.

Limit Work in Progress (WIP)

Just like in lean manufacturing, limiting WIP is crucial for flow efficiency. The best practice is to establish explicit WIP limits for portfolio investments to prevent excessive task switching and resource contention across too many initiatives.

Implement Cadence & Synchronization  

Having a regular cadence of portfolio review, reprioritization, and rebalancing is a best practice. This allows for frequent course corrections based on changing conditions. Synchronizing the cadences of different portfolio levels is also recommended.

Enhance Visibility and Transparency

Lean portfolio management requires full transparency into the status, resource demands, and progress of all investments. Visualizing the portfolio throughput and health is a best practice to enable data-driven decisions.

Cultivate an Experimental Mindset by leveraging Lean Portfolio Management

Since lean emphasizes validated learning over elaborate upfront planning, teams should embrace an experimental approach. The best practice is to fund initiatives with a minimum viable scope, gather feedback, and adapt based on outcomes.

Foster Continuous Improvement

Regularly inspect and adapt processes is essential for sustainable lean transformations. The best practice is to incorporate explicit feedback loops and use retrospectives to identify and implement incremental improvements continuously.

Lean Portfolio Management Case Studies and Examples

To better understand how lean portfolio management works in practice, it’s helpful to look at some case studies and examples.

Many organizations across different industries have adopted these principles and practices to better align execution with strategy and optimize the flow of value.

Case Study: LeanKit and UPMC Health Plan

UPMC Health Plan, the second-largest health insurer in western Pennsylvania, adopted lean portfolio management with the help of LeanKit (now part of Planview’s lean and agile delivery solutions).

They used it to improve visibility across their entire portfolio, prioritize the most valuable work, and increase delivery throughput.

By implementing lean portfolio management, UPMC Health Plan was able to limit work-in-progress, remove bottlenecks, and deliver a 37% increase in throughput in just 6 months. Improved flow metrics allowed them to complete nearly 40% more projects compared to the previous year.

Case Study: Planview and SEFCU

SEFCU, a large credit union in New York, turned to Planview’s lean and agile delivery solutions to help implement these practices. They aimed to increase transparency, enable better decision-making, and align execution across their project portfolio.

With lean portfolio management, SEFCU gained the ability to visualize and actively manage its portfolio flow.

They could quickly identify bottlenecks and risks, make prioritization decisions based on capacity, and empower teams to self-organize and self-manage their work. As a result, SEFCU delivered 50% more projects while maintaining the same resource capacity.

Example: Lean Portfolio Management at Scale

Large enterprises can leverage frameworks like the Scaled Agile Framework (SAFe) to manage their integrated portfolio across the entire organization. SAFe guides how to implement lean portfolio management practices at scale.

For example, SAFe recommends having a lean portfolio management function that oversees the enterprise portfolio vision and roadmap.

This group uses tools like Kanban boards to visualize portfolio flow and continuously prioritize the portfolio backlog based on strategic objectives and budget constraints.

Lean governance processes like PI Planning and Inspect & Adapt help ensure alignment and enable course correction.

Conclusion

Lean portfolio management is a powerful approach for organizations looking to optimize their project portfolios and drive maximum value delivery.

By embracing lean principles like minimizing waste, amplifying learning, deciding late, and empowering teams, companies can make better investment decisions and increase agility.

Implementing this requires a mindset shift and commitment across the organization. It involves new processes, tools, roles, and metrics centered around lean ways of working.

While there can be challenges in adoption, the benefits of increased transparency, faster time-to-market, and better alignment to strategic goals make it a worthwhile transformation.

Leading organizations across industries have successfully applied lean portfolio management principles to become more responsive to changing markets.

As the case studies highlighted, lean PMOs using tools like Kanban boards and value stream mapping deliver an objective portfolio governance process. Mature lean portfolio management enables dynamic investment decisions and continuous value delivery.

For companies struggling with outdated, inefficient approaches, lean offers a path forward. By starting with training, getting leadership buy-in, and incrementally applying lean practices, any enterprise can begin optimizing its investment process.

The key is fostering an organizational culture centered around delighting customers through relentless innovation and elimination of non-value-added activities.

Whether just beginning or optimizing an existing lean portfolio management implementation, the principles provide a north star for maximizing value delivery.