What is Lean Porfolio Management and why should you care?

We are in the digital age.  As Microsoft CEO, Satya Nadella noted, “Every company is now a software company.”  And we’re past debating the value of lean-agile methods in software development and business execution.  Even as we continue to learn better ways of working using modern tools, the dominant question has become how to successfully scale these approaches to large systems and whole organizations.  Mik Kersten[1] asserts that, “Those who master large-scale software delivery will define the economic landscape of the 21st century.”  Evidence of this bold prophecy is not hard to find; consider Amazon, Microsoft, Apple, Google, and Netflix.

This problem of digital systems at scale and the organizational metamorphosis that it engenders is, then, a problem that is front-and-center for the vast majority of large organizations today.  With this problem lying directly In the path of most organizations’ survival in the not-distant future, it would be invaluable to find a few anchoring principles to guide us amid the stream of new methods that are emerging daily.

Those principles exist, and if you look closely at most new approaches to software delivery at scale and portfolio management, you will find them present.  They are the key principles of Lean dating back to Toyota’s early ascendance, reinforced with Agile principles from the last several decades.  This is what the phrase Lean Portfolio Management (LPM) refers to.

But let’s step back for a moment and focus on the goal, the why. We (the organization) need to find and stay close to our customers.  We need to understand, respond to, and even anticipate or create demand faster than our competitors; and we need to do that in a way that is sustainable for the organization.  Finally, we need to do that at the pace and scale of today’s global economy.  What framework developers, practitioners, and leading organizations have consistently concluded is that it starts with Lean principles.

We must manage flow.  That means we must limit our work-in-progress, work with small batches sizes, and establish pull-driven value streams.  We must do this from the portfolio all the way down to the individual team.

What Agile principles add to this picture are collaborative approaches to improve, accelerate, and de-centralize decision making; and acceleration of feedback loops to create fast learning cycles.

What both bring are the importance of making work visible, of continuous improvement, of dedication to the customer, and of leadership and respect.

Ultimately, success factors for LPM radiate all the way from strategy down to team practices.

Change at the portfolio level itself can be visualized as going from this:

To this:

This may be over-simplified; and while there are significant mechanics involved in turning an organizational ship to operate in this fashion – and enablers like DevOps and Design Thinking that play in the picture – it remains that if you’ve followed what we’ve described so far then you understand the essence of LPM and why it is key to enabling sustainable value delivery at scale.

The question is where to begin.  A distillation of what has worked out of a decade of industry struggles and bright spots in scaling, suggests these steps:

  • Identify value streams
  • Identify a vertical slice
  • Invite participation
  • Focus in parallel on team-level execution
  • Lean and improve
  • Scale out

But for your very first steps, look to the works of John Kotter[2], and to Peter Senge:

[Creating a learning organization] This is a sport that you play as a team.  So you have to start to find your local team… So the ultimate advice is very simple.  Get started… and find your partners.  Because without partners, you won’ go too far.”  (Peter Senge, The Fifth Discipline)

[1] Project to Product, Mik Kersten, 2018

[2] Leading Change (2012) and Accelerate (2014), Dr. John Kotter

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