A six-step approach for Agile portfolio management

Since its rapid ascendancy to the mainstream, Agile has evolved into one of the most commonly applied methods of performance improvement in modern business. While it is now deeply embedded in multiple functions – including IT, software delivery and operational improvement – in other areas it still is in its infancy. One such business line is portfolio management, a key area for organisations which ensures that change initiatives are delivered as planned, as well as being aligned to the overall goals and strategies of a business.

Many organisations are already familiar with some form of project portfolio management (PPM). Traditional portfolio management is the art of organising projects and business initiatives in an efficient and effective way to improve financial performance. It is about making centralised investment decisions, allocating people and resources and managing execution in order to achieve strategic objectives.

According to Eelco Rustenburg, a partner at consultancy BlinkLane Consulting, the rise of the Agile is obliging portfolio managers to change how they operate. He explained; “When an organisation is working towards becoming an Agile organisation, traditional portfolio management starts to “run behind” on the promise of the short-cycled delivery system. The iterative nature of Agile provides an opportunity to steer on actual facts, where traditional portfolio management is aimed at using prediction to nail things down at the start.”

There are a number of fundamental differences as to how Agile-driven portfolio management should operate in comparison to the mainstream approach. When working in an Agile system, each task is about setting a goal and then through day-to-day monitoring, developing a rolling plan, which feeds into continuous prioritisation and action plans. Traditionally, project portfolio management offices are used to working with annual plans, and major milestones which are tracked. While this is to an extent similar to old-school thinking of tracking progress through output control, the difference is that within Agile, it is all about the delivery of actual solutions and outcomes while being able to refine the initial plan and priorities in the case needed.

The way of working internally and with stakeholders is also different. In Agile, continuous communication of vision, objectives and decisions creates transparency and trust. According to Jorden Vogel, a consultant at BlinkLane Consulting, it is essential to embed a cadence of short feedback loops throughout the Agile portfolio management (APFM) system. “Build a structured process with all relevant stakeholders, where feedback is given, gathered and acted upon. This will provide purpose and provide autonomy at the right level.”

Adopting agile portfolio management

Against a backdrop of these developments, it is key for organisations to embrace Agile thinking and working if they are to enhance their portfolio management environment. To that end, BlinkLane’s experts said that based on years of experience in the field, there are six steps which must be considered to make a successful jump to Agile portfolio management.

Step 1: Set the vision and scope for APFM

The first step can be deceptively simple, said Vogel. As with any organisational change, those pursuing an APFM environment must understand why they need it in the first place. To not get lost in the vastness and complexity of a corporate portfolio when organisations begin their transformation, they should determine the scope of the portfolio and the strategic objectives why they would like to implement APFM in the first place.

Rustenburg added that having the right talent as well as an exclusive relationship between the portfolio and the capacity are also important. “As you start, ensure that stable teams spend 80% or more of their effort on this portfolio. Otherwise there may a serious risk of ‘fragmentation’.”

Step 2: Collect and visualise current new initiatives

“A portfolio has many different stakeholders, who in turn have a number of initiatives to guard,” Rustenburg elaborated. “In order to improve collaboration and look at the portfolio more holistically, the first step is to make them see the full picture. Visualise all running initiatives, as well as upcoming initiatives and ideas. Define the hypothesis statement and the intended outcomes (OKR), the accompanying clients and teams involved and major dependencies between them.”

The BlinkLane partner explained that organisations should approach each business initiative as a set of hypotheses with clear-cut decision-making, rather than making large detailed project plans. By doing this and visualising all initiatives, organisations have a ‘live’ overview of their work in progress.

Step 3: Strive for objective, lightweight decision making and start making choices

“When establishing a lightweight and objective decision-making process,” Rustenburg continued, “determine a set of value-based and data-driven criteria and reflect on the expected versus actual results. Criteria examples for prioritisation include; expected increase in revenue, expected cost reduction, increased customer satisfaction, technical and business risk, number of employees affected, and estimated required time for roll-out.”

By doing so, organisations will experience improvements and the new portfolio management process will be more easily adopted. Two key elements in the decision-making step are to incorporate the most important stakeholders in the decision-making discussion and prevent anti-patterns such as spreading all resources evenly over all initiatives which hampers performance improvements.

Step 4: Set up your portfolio kanban and accompanying governance 

Once an organisation has a working prioritisation model with visualisation strategies in place, there is a straightforward step to “make it a habit”, by implementing a lean flow process and clarity on who needs to run this. According to Nickie Levels, a senior consultant at BlinkLane, this requires the adoption of the three main areas of APFM responsibilities.

In terms of strategy and funding, organisations should provide the Agile teams with clear and inspiring strategic objectives to enable decentralised decision making. Then, taking care of portfolio governance, senior management, business owners, product management and Agile process coaches/engineers should set compliancy guidelines, intake process of new initiatives, standards for performance tracking and being ‘in control’. Finally, in order to establish flow, firms should facilitate the process by establishing a Portfolio Coach role. This person can facilitate setting up a portfolio kanban, (a scheduling system originating from lean manufacturing) with clear exit criteria.

Step 5: Create a rhythm for all parties involved

Following this, APFM should be seen as a plan-do-check-act cycle that contains tasks such as prioritise, plan, align, track progress, evaluate and act accordingly. Rustenburg stated that creating a rhythm for APFM will further help embed it among the workforce of an organisation.

He explained; “Cadence provides a heartbeat for the organisation, synchronisation allows different perspectives to be inspected, adapted and integrated at the same time. Applying cadence and synchronisation reduces handovers and the number of meetings. In addition, it enables system thinking and breaks down silos, as you are generating mutual understanding by taking all the steps of the portfolio process collaboratively.”

Step 6: Implement Agile portfolio metrics

Finally, Vogel contends that a successful management by objectives system needs only to answer two questions – “where does the organisation want to go and how will it pace itself to see if it is getting there?” In order to answer these questions, firms need to start measuring performance with a series of metrics. Ideally, these should be derived from clear goals that a firm wants to achieve with APFM, as formulated in the first step. These can include the reduction of average time to market, weighted average cost of capital, cycle time, increased customer satisfaction, employee satisfaction and revenue.

While this process might seem daunting, firms only really need the first step in place before they can take a stab at such a transformation. Levels concluded; “You don’t need to have it all perfectly figured out and have all six steps in place before you can start with APFM. Start with a Minimum Viable Product (MVP), gather feedback and learn and adapt, are among the core values of Agile. Make sure there is a sense of urgency as well as a clear vision and then just start! Experience what works for your organisation and improve along the way.”

Related: Companies that adopt agile working perform financially better.