Author : ranay K Chanda, Cognizant Agile ractice
Agenda 1 Traditional ortfolio Management 2 Lean-Agile Budgeting Operating Model 3 Lean-Agile Budgeting Best ractices 4 Q & A 2
Traditional ortfolio Management
Traditional ortfolio Management: Fails to adapt to new needs quickly If your organization is getting incremental outcomes in a world of exponential opportunities, or your expansive digital strategies failing to connect to your delivery capabilities. Maybe the disconnect is in the approach to portfolio management Building Wrong roduct Too much time to Deliver Treated at Tactical Level rocess Heavy Large Chunks of Work Too much In- Flight rojects First-come first serve basis Ineffective Opportunities rioritization Output based Funding Silo Mentality 4
Traditional ortfolio Management ractices lead to chronic pain points Maximize Utilization Key resources dedicated to multiple projects No flexibility to changing priorities Widget Engineering Order Taker Mentality Control through Data Control Through Milestones Annual level plan for projects ractices roblems Big Up Front Design, Analysis aralysis Fixed Schedule & Functionality lanning, Hard to Change False Agreement, No Buy-in Misses IT Innovation Contribution No Empowerment, Lower Motivation Fine grain reporting slows value delivery Metrics really does not reflect actual progress Milestone reporting on intermediate artifacts Milestones do not reflect actual progress rojects impossible once it is started Long Term program commitments to justify team member a year out Source: Agile M in SAFe Eight Transformational atterns, by Dean Leffingwell 5
Lean-Agile Traditional Traditional vs Agile ortfolio Management Value Streams Opportunity Search Opportunity Validation Opportunity Selection Opportunity rioritization Business Case/roject Charter Opportunity identification, categorization and elaboration using enterprise M tool Evaluation of current opportunities based on strategic alignment Opportunity selection based on feasibility studies and traditional evaluation process and models rioritization based on the long term horizon plans, capacity and available funding repare detailed business case with cost, output and milestones commitments for sponsor approval Strategic Theme Review What are the Strategic Theme Epics out there? ortfolio Backlog Risk and Issues reported to M Leadership Quarterly Cycles 1 rogram Epics Approval Engagement Review Revert to M Leadership for approval 2 MV Definition How should we deliver it? Epics Grouped By MV 3 rogram Epics Review When will we deliver it? Global Epic rioritization Cross-rogram Epics rioritized 5 6 4 1 3 2 Kanban ortfolio ull 6
Lean-Agile ortfolio Management
Lean Agile ortfolio Management Manifesto ortfolio Management is disciplined approach to translating strategic aspirational goals into realistic execution plans Creating smaller, good enough plans frequently Value delivery through stable and predictable teams over over Creating large and overly precise plans upfront Focus on resource utilization and efficiency Rationale It helps you keep pace with speed of business, adapt to internal and external changes It helps you prioritize the work with the biggest impact, allocates the right resources to it Dynamic budgeting and fiscal governance over Funding projects over longer periods of time It helps direct incremental funds where they have the most impact, with frequent re-balancing across the portfolios Deliver customer value fast and frequently over On time and on budget delivery It helps you coordinates the fast delivery of prioritized work, with value reprioritization with changing portfolio context Frequent incremental value delivery over Minimizing risks and forecasting returns It helps you deliver incremental value in timeboxes with features allocated to teams for delivery 8
Lean Agile ortfolio Management connects business strategy and delivery ortfolio Management enhances ability to optimize investments, execute big change and deliver value. ortfolio Optimize Business Value M drives program management and governance Define and prioritize portfolio epics Measure and report progress on investment spend Manage WI using ortfolio Kanban System Enabling Continuous improvements Business Sense and Respond to Change M leaders provides portfolio context during portfolio strategy formulation Define strategic themes aligned with enterprise strategy, technology and financial constraints Determine value streams and allocate budgets to them Delivery Deliver Value Faster M function supports and guides successful strategy execution using program and teams Decentralized, Rolling Wave lanning Self Managed Agile Release Trains Cross rogram Epic rioritization Lifecycle Governance * Gartner rogram and ortfolio Management Summit 2017 9
ortfolio B..N ortfolio A Enterprise Lean Agile M Framework connects Enterprise Strategy to Strategic Themes Formulate Business Strategy (Rolling Forecast - Quarterly) ortfolio Strategy lanning (Should we work on it?) Execute Business Strategy (rogram Increments 10 weeks) Return on Investment Market Share Net romoter Score Enterprise Strategy What Opportunities are out there? Constant Feedback Customer Satisfaction rofit and Cost 1 Revenue vs Target Enterprise ortfolio Context 1 Financial Goals Enterprise Budget 3 Enterprise Business Drivers Strategic Intent ortfolio A Budget 2 Strategic Themes Competitive Environment Mission and Vision rioritize Epic Strategic Theme A New roducts B C D Strategic Theme Epics Fiscal Governance and Dynamic Budgeting Need to adjust portfolio budgets? Investment Tracking and Reporting 4 ortfolio A Strategic Theme Enhancements E G F H 5 Strategic Theme Epics Solution Demo ortfolio Context Strategic Theme Maintenance I K J L Strategic Theme Epics Return on Investment Market Share Net romoter Score Constant Feedback Customer Satisfaction rofit and Cost Revenue vs Target ortfolio Context 1 3 ortfolio B Budget 3 Strategic Themes Strategic Theme New roducts A C B D Strategic Theme Epics 4 ortfolio B Strategic Theme Enhancements E F G H Strategic Theme Epics Strategic Theme Maintenance I J K L Strategic Theme Epics Source: SAFe 4.0 Level 4 ortfolio Management using Value Streams Gates Review Checkpoint 10
1 : Create Enterprise Strategy - Train that Transforms ortfolios ortfolio Context Inputs Outputs Research Growth Risks Stakeholders Constraints 1.Analysis 2. What is your Goal? 3. Articulate Enterprise Strategy Strategic Intent Enterprise Budget Strategic lans ortfolio riorities KIs Conduct market research and analysis using techniques such as SWOT, ESTEL, Scenario Analysis During Upturn, the focus is Fight Complacency, Sharpen Edge, Keep Momentum, Conquer During Flat, the focus is Innovation, Acquire, rofits and Build Momentum During Downturn, the focus is Sales and Cash Flow Growth Strategy - Thru Expansion Gain scale to compete Integrated Solutions Developing markets New, Low cost entrants Newer Assets Growth Strategy - Thru Transformation New Business Lines Increase roduct Lines New Customers Selling / Spin-off non-core New Technologies and Execution Approach ortfolio Refocus Growth Rate is FAST Market ositioning Maintain market share in strategic segments Share Gain repare for market decline Base Retention Competitor focus on new customers Growth Rate is Flat Base Retention Loose customers slower than competitors Share Gain (Acquisitions) Create scale economies and squeeze costs Invade Adjacent Markets - Leverage cost structures, Competitors, Customers and Critical Capabilities 11
2 : How Strategic Intent drive Strategic Themes and Budgets Strategic Themes are derived from organization s strategic intent or priorities ortfolio stakeholders collaborated with executive leadership decision makers should create a structured, repeatable process to drive strategic themes Workshop Driven Approach Investments Strategic Intent Strategic Theme Description FY FY + 1 Lead market through innovation Technology Debt Reduction Code refactoring to improve software robustness 15% 25% Drive growth through new product streams New roduct Development New features development that drive new sources of revenue 45% 55% Reduce investment in custom projects Customer rojects Required customizations to protect existing customer revenues 25% 5% Maintain share in customer segments Sustaining Bug fixes and features to improve product quality 15% 15% 12
3 : How do we allocate budget to each strategic theme within portfolio? Create budget allocation mechanisms to fund each strategic theme in order to delivery theme s financial and strategic objectives There is no right model to conclude right balance across portfolio investments, however executives can use series of portfolio views to aid effective decision making to fund their strategic initiatives Epic ipeline Status rojected IT Spend by Work Categories Epic risk vs. reward Risk adjusted ROI View the current pipeline of epics and allocated investments segmented by epic complexity View IT spend distribution by new product development vs. enhancements vs. defect fixes vs. technology debt reduction across the strategic themes View risk-reward characteristics for the portfolio of epics under the strategic theme; risk components include market, execution, and technical risk and reward measured in NV View the Net resent Value of each strategic theme based on the time horizon 13
4 : Governance of Value Stream Budgets and ortfolio Epics Lean-Agile Budgeting Epic Funding and Stewardship Enterprise Budget 1. Funnel 2. Review 3. Analysis Epic A Epic B Epic C 4. ortfolio Backlog Fund Value Streams and not rojects roduct Mgmt Split otfolio Epics rioritize Features Initiate development Report progress Agile Teams M D C A B D C A B D C A B Runway Readiness Dynamic Budgeting Across Epics Budget Governance Lead Qtr 1 Qtr 2 Qtr 3 roduct Mgmt Enterprise Architect Epic C Lead Synchronize ortfolio riorities Budget Governance Lead Dynamic Budgeting across ortfolio Enterprise Synchronize Strategic Themes M Source: SAFe 4.0 Level 4 ortfolio Management using Value Streams 14
5 : Budget Decisions and Investment Tracking across value streams Align to latest ortfolio Context Near future value stream planning and investment decisions requires continuous collaboration, communication and alignment with downstream portfolios Latest updates to challenges and opportunities in the local markets KI updates to market share, ROI, customer net promotor score Conduct Solution Demo & Roadshows It is cadence based event where high profile stakeholders come together to view the progress of the solution rimary mitigator of investment risk for the value stream In Roadshow of integrated solutions the portfolio fiduciaries and stakeholders review portfolio progress and make budgetary decisions Fiscal Governance & Dynamic Budgeting ortfolio Fiduciary stakeholders reviews progress and adjust the value stream budgets within the portfolio The budgetary spend is linked closely to performance of epics implemented within the value stream rioritize Epic Level Initiatives Based on current epics completed and accepted, new or existing epics are prioritized and funded by budgetary reserves within the value stream Report ortfolio erformance Compare planned vs actual I business value achieved at team level, rolled up to program and then portfolio level The business value assessment is selfassessed by the teams in consultation with their business owners Adjust ortfolio Strategic Themes M is accountable for portfolio performance and investment decisions Based on KIs achieved, revise or create new strategic themes aligned to enterprise strategy Adjust resource allocations based on prioritization decisions 15
Shared Services Scrum Teams rogram ortfolio Lean Agile M Framework connects Strategic Themes to Value Delivery ortfolio rogram lanning Value Delivery Strategic Theme Review What are the Strategic Theme Epics out there? ortfolio Epics rogram Epics Approval Risk and Issues reported to M Leadership Revert to M Leadership for approval 1 Engagement Review 2 MV Definition How should we deliver it? Epics Grouped By MV Global Epic rioritization When will we deliver it? 3 rogram Epics Review Cross-rogram Epics rioritized Design (As Needed) 4 Sea Level Stories for Scrum Team 5 Cross Team Sprint Dependencies Cross Scrum Sprint lanning Epic Decomposition & User Story Elaboration 6 Scrum of Scrums User Story Review (BR) How will be the work be done? User Story Backlog Impediment Removal Escalated Impediments 7 Delivery Sprints How will we coordinate across teams and resolve impediments? System Demo Day Operational Retrospective How can we improve as an Agile organization? Are we ready to deliver? Operational Review How are we doing as an organization? Are we improving? Gates Review Checkpoint Launch Gate Continuous Integration Testing UAT Release Queue Release Certification 8 Launch Gate Deploy and Launch 16
Conclusion Align ortfolio with Value Streams Base prioritization on capacity, crossorganizational impact and value Derive strategic themes from enterprise strategic intent Articulate ortfolio Epics for each strategic theme as unit of atomic business value Implement portfolio epics to deliver value Define KIs for each level of planning and its relationship to execution KIs to close feedback loop Actively use performance data to make adjustments on an objective, fact driven level Establish scalable enterprise wide M tools standards for decision making and transparency Contextual KIs traceable to Strategy Lean-Agile ortfolio Management Build ortfolio Kanban System To achieve an optimum, sustainable pipeline of value flow apply WI limits and make work in process visible Collaborate with development teams to break down portfolio epics into program level epics and user stories Continuous prioritization of approved Epics using WSJF Executives engage in holistic planning and base their decisions on corporate value Directly link strategy to the plan and provides bi-directional traceability romotes shared responsibility, authority and accountability Define portfolio views by capability or service Integrate Vision and Ownership 17
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Appendix - References [1] Definition per MI Standard for ortfolio Mgmt (3 rd Edition 2013) [2] Strategies for Agile ortfolio Management Agile 2013 by Kenny Rubin [3] ortfolio Agility Rethink ortfolio Management for the Fast aced World CA Technologies [4] Agile + ortfolio Management building gap between Agile Teams & Management Innotas [5] Agile roject ortfolio Management KMG May 2016 [6] Eight Transformational atterns Agile M in Scaled Agile Framework Dean Leffingwell [7] Agile ortfolio Management Microsoft Jochen Krebs [8] Scaled Agile Framework 4.0 [9] Operationalizing ortfolio Management in SAFe Enterprises pwc technical institute Mar 2016 19