Lean portfolio management is a new way that organizations organize projects and resources, and I’ve watched it turn around many struggling businesses to operate more efficiently. So, how exactly can this concept make your operations more efficient, reduce waste, and make the team more productive?
That’s what we’ll discuss next as we go through the details of lean portfolio management and why it’s important to your business’ success.
Core Principles of Optimized Project Portfolios
Lean Portfolio Management (LPM) is a game changer for how organizations manage their project portfolios. It’s a strategic approach to aligning business strategy with execution. LPM emphasizes delivering value quickly and efficiently.
The key LPM principles are:
- Value-based decision making
- Work flow
- Decentralized control
- Empowered teams
The main LPM components are:
- Strategy and investment funding
- Agile portfolio operations
- Lean governance
- Continuous improvement
Traditional portfolio management relies on structured planning and centralized control. LPM, on the other hand, values flexibility and adaptability. It promotes rapid decision making and a culture of innovation.
By implementing LPM, organizations can realize several benefits:
- Faster time to market of products and services
- Better alignment of projects with strategic objectives
- Improved responsiveness to market changes
- Higher stakeholder satisfaction
LPM is one of the seven core competencies organizations need to master to achieve Business Agility. It’s the framework for organizations to thrive in today’s fast moving business landscape.
In my work across different industries, I’ve seen LPM turn struggling businesses into Business Agility success stories. As you begin to incorporate LPM principles, you’ll notice significant improvements in your organization’s project portfolio management.
Three Dimensions of Lean Portfolio Management
Lean Portfolio Management functions within these three dimensions. And each is essential to a balanced, effective portfolio management strategy.
The Strategy and Investment Funding dimension ensures investments are aligned with the business strategy and making the right decisions about investment funding. You’ll prioritize investment funding for initiatives that will bring the most value to the business.
The Agile Portfolio Operations dimension addresses how to manage the portfolio on a daily basis, ensuring projects and programs are executed effectively. The key focus is on ensuring a continuous flow and adapting to change quickly.
The Lean Governance dimension provides just enough oversight without becoming bureaucratic. You’ll strike a balance between flexibility and control. This ensures the Lean Portfolio Management strategy empowers teams while maintaining the necessary controls.
When these three dimensions work together, it’s a potent combination. The strategy informs investment funding decisions. Agile operations execute the strategy. Governance ensures everything stays on track and aligned.
I’ve seen businesses struggle when these dimensions are disjointed, and when they’re well aligned, you’ll see a step function improvement in portfolio performance.
Measuring Success in Lean Portfolio Management
Measuring success in Lean Portfolio Management requires a comprehensive strategy. LPM leverages three primary measurement domains to evaluate performance and inform decision making.
Outcome based measurements assess the actual value delivered. This is typically done through Objectives and Key Results (OKRs) and Value Stream Key Performance Indicators (KPIs). These measurements help you determine if your portfolio is meeting its strategic intent.
Flow metrics evaluate how efficiently your portfolio operates. You can measure this with:
- Distribution of work
- Delivery velocity
- Time in process
- Work in progress
- Efficiency ratios
- Outcome predictability
Competency assessments evaluate an organization’s capability to successfully execute LPM. To find areas for improvement, organizations often use a self assessment.
Continuous measurement and adaptation are key principles of LPM. You can’t improve what you don’t measure. Performing these measurements on a regular basis will help you identify bottlenecks, optimize strategy, and optimize your portfolio’s performance.
I’ve worked with clients in my consulting business who completely turned around their company’s performance by rigorously measuring these items. Once you start, you’ll find that making data-driven decisions will be second nature.
Key Events in Lean Portfolio Management
Lean Portfolio Management has several key events that drive the portfolio management process. These events ensure alignment, coordination, and efficient resource allocation.
Strategic Portfolio Review is a quarterly event and a critical event where leadership assesses the portfolio’s alignment with the business strategy. During this event, you’ll discuss progress made, assess market changes, and make high-level portfolio decisions.
Portfolio Sync occurs monthly, and it’s an event to align teams and priorities across the portfolio. Use this time to share updates, discuss dependencies, and ensure all teams are working toward common priorities.
Participatory Budgeting occurs typically semi-annually, and it’s a collaborative approach to involve key stakeholders in resource allocation decisions. This promotes transparency and buy-in across the organization.
While the events may occur with a different cadence and timing depending on your organization, the key is to ensure you consistently hold each event to drive effective portfolio management.
I’ve witnessed these events unite previously siloed organizations. You’ll love how they encourage communication and alignment across your portfolio.
Maximizing Value and Preventing Bottlenecks in LPM
The primary goals of Lean Portfolio Management are to maximize the flow of value, eliminate bottlenecks, and practice good servant leadership. These are the keys to portfolio greatness.
Identifying and maximizing value streams is essential. You can use the following techniques:
- Value stream mapping
- Customer journey analysis
- Lean canvas modeling
To prevent and solve bottlenecks, you can use:
- Pull system
- Visualizing workflow
- Work in progress limits
- Capacity planning meetings
Servant leadership is also important in LPM. Therefore, leaders should focus on:
- Empowering teams
- Removing barriers
- Facilitating cross-functional collaboration
- Encouraging a culture of continuous learning
Value stream maximization is one of the most common LPM use cases I see in the real world. For example, a manufacturing company might use LPM to reduce lead times by 40%. A software company might improve LPM to improve customer satisfaction by 25%. A healthcare company might optimize LPM to increase patient outcomes by 15%.
You’ll be surprised by how much better your portfolio will perform and how much more value it will deliver if you focus on these things.
Implementing Lean Portfolio Management
Transitioning to Lean Portfolio Management requires thoughtful planning and execution through the following steps:
- Assess current portfolio management practices.
- Educate leadership and teams on LPM principles.
- Define your LPM framework.
- Implement supporting tools and processes.
- Pilot the LPM framework.
- Scale the LPM framework across the organization.
Common challenges when implementing LPM include resistance to change, lack of leadership buy-in, and difficulty showing value. To address these:
- Clearly communicate the value of LPM.
- Get executive support.
- Invest in training and coaching.
- Establish credibility with small wins.
There are a few portfolio visualization tools, agile project management tools, and analytics platforms to help you implement LPM.
The best change management tips for implementing LPM are:
- Have a clear vision.
- Get stakeholder buy-in at all levels.
- Support stakeholders.
- Celebrate quick wins.
In my experience, the implementation strategy is paramount. You’ll be surprised how much taking extra time to lay a solid foundation will benefit you in the long run.
Agile Principles in Lean Portfolio Management
Lean Portfolio Management is built on agile principles. LPM reorients the focus to delivering incremental value at shorter cadences by leveraging the cadence to receive shorter feedback loops.
Implementing agile practices in portfolio management offers the following benefits:
- Increased agility to market changes
- Teams more closely aligned with business objectives
- More data-driven, timely decision making
Shorter feedback loops are the top mindset shift at LPM. This allows you to quickly adjust course as needed, continuously learn, manage risk more effectively, and get stakeholders more engaged.
Delivering incremental value at shorter cadences ensures your portfolio consistently achieves real results. This keeps stakeholders happy and the portfolio moving forward.
The agile nature of LPM also allows organizations to more quickly adapt to market changes. You’ll find your portfolio is much more resilient to change, which is essential in today’s fast business environment.
By applying these agile principles, I’ve seen organizations completely turn around their market position, and you’ll love how much more agile and adaptable your portfolio management becomes.
Addressing Common Portfolio Management Challenges with LPM
Lean Portfolio Management solves many of the pain points with traditional portfolio management. Here’s how LPM overcomes these challenges.
Large initiatives with long cycle times quickly result in outdated deliverables. LPM overcomes this by breaking initiatives down into smaller increments, prioritizing based on value, and advocating rapid prototyping and iteration.
Work is completed, but it doesn’t move the needle on key performance indicators. LPM solves this by ensuring all work is aligned directly to a strategic objective, implementing continuous measurement and feedback, and encouraging teams to focus on outcomes, not outputs.
Inability to change budgets based on new information makes a portfolio less agile. LPM solves this by implementing funding models that are flexible, reviewing the portfolio frequently, and pushing decision making down to teams.
Specific examples of LPM addressing portfolio management challenges include a retail company that reduced their time to market by 50%, a financial services company that increased the ROI of their projects by 30%, and a technology company that increased resource utilization by 25%.
As you can see, LPM offers concrete solutions to these pain points, making your portfolio more effective and agile.
Periodic Reviews and Continuous Improvement in LPM
Periodic reviews are critical to Lean Portfolio Management as they help ensure alignment, continuous improvement, and optimized resource allocation.
The periodic reviews in LPM are:
- Strategy alignment review (quarterly)
- Portfolio budget review (quarterly)
- Portfolio team retrospective (quarterly)
- Portfolio financials review (monthly)
- Portfolio roadmap review (monthly)
- Investment opportunity review (weekly)
Assessing and adjusting frequently is an underlying principle of LPM because it allows you to:
- Catch and fix problems early.
- Take advantage of emerging opportunities.
- Verify continued alignment with business strategy.
- Instill a culture of continuous improvement.
To conduct effective portfolio reviews, come prepared with the right data and metrics, invite the right stakeholders, keep the discussion focused on outcomes and value, make decisions, and assign clear actions.
Use the insights from your reviews to drive continuous improvement by documenting lessons learned, adapting and improving processes, sharing best practices, and setting improvement objectives for the next period.
In my opinion, these reviews are the key to portfolio success, and you’ll surely find them to be the most valuable input to steering your portfolio in the right direction.
Future Trends and Innovations in Lean Portfolio Management
Lean Portfolio Management is constantly changing to meet new challenges and opportunities, making it one of the best ways for businesses to effectively define and execute strategy in today’s uncertain business climate.
The LPM ecosystem is still evolving, as we see more tools designed to work with LPM. These tools allow multimillion dollar organizations to do LPM more effectively. Currently, emerging technologies that are impacting LPM are:
- Artificial Intelligence for predictive analytics
- Machine Learning for optimizing resource allocation
- Blockchain for improved transparency and traceability
- Advanced data visualization tools for portfolio insights
Predictions about how portfolio management practices will evolve in the future are:
- More focus on sustainability and social impact
- Greater integration with customer feedback loops
- More emphasis on cross-functional collaboration
- An eventual move to fully digital portfolio management
To prepare for the future challenges of LPM:
- Invest in ongoing learning and skill development
- Build a culture of innovation and experimentation
- Stay current on industry trends and best practices
- Design your portfolio processes for flexibility and resilience
There are still some unanswered questions about LPM that require further research. These are:
- How to quantify the long-term impact of LPM on business results
- What other technologies will eventually intersect with LPM
- What are the standardized metrics for LPM effectiveness
Staying on top of these trends will ensure your organization has a leg up on the competition, as the future of LPM is bright and offers limitless opportunities to move the business forward.
Signing Off
The Lean Portfolio Management model is a transformational way for organizations to manage projects and resources, making it a game changer for businesses that want more agility and efficiency. I’ve witnessed the LPM emphasis on value, flow, and competency change how businesses operate.
You have the tools you need to adopt this effective framework. Just keep in mind that the key to succeeding with LPM is to continuously improve and adjust. Apply these principles, and you’ll steer your organization to more success and innovation.
