In the first blog post of this series, we discussed about WHY part of Lean Portfolio management and benefits. It was focused on understanding about Lean Portfolio management now in this post we will discuss more on Strategic alignment and investment funding.
In traditional practices you have to create Portfolio strategic plan to align Portfolio strategy with organization strategies and on funding practices, budgets are allocated based on cost accounting to Portfolio, program and projects. Portfolio Manager usually look at Portfolio road map and make sure components are funded accordingly. Budgets usually decide whether projects should be executed/continued or delayed. If projects approved to start then only resources/team allocated to projects which means we are taking team towards work.
However, when it comes to Lean Agile practices approach is bit different and do not align with traditional budgeting and cost accounting as we wanted to execute and execute and deliver benefits in short intervals as early as possible at the same time making sure that deliver more business value and have higher importance to customers.
What are problems with Project based funding?
Generally, project get funded based on estimates shared at start of project which are mostly for entire duration of project (example 12 to 18 months) then team start working based on project management plan. Project health is measured based on project plan milestones and budget on track.
You will easily find problems like
- Overhead cost & delays
- Lot of resource (team members) movement
- Low collaboration
- Budget issues with forecast Vs actual
- Possibility of delivering which is not that important to customer
- Following a plan instead of business value
- Lot of approvals in every stages
- Any additional work or delay needs more funding as Change request
Easily seen, project with approved budget encounters new challenges in development process and in case of any scope change team need to re-work and PM’s need to re-budget and re-allocate team members in case of changing project management plan.
You must have heard about Agile manifesto Value statements, let’s look at once again as below
- Individuals and Interactions Over Processes and Tools.
- Working Software Over Comprehensive Documentation.
- Customer Collaboration Over Contract Negotiation.
- Responding to Change Over Following a Plan.
These statements clearly show what is missing in traditional approaches and where we should focus more going forward.
Let’s discuss funding Value Streams, Not projects
Term Value stream defines all the steps from concept to cash. Starting from value creating until value delivery to end customer. There can be multiple value streams around a product or solution and can have multiple Agile trains under each value stream.
What is Agile Release Train? It is long lived team of cross functional agile teams which incrementally plan together work together and deliver together on same cadence .
In Lean agile approach, we fund value streams means allocates budget to Value streams, with guardrails to define spending policies, guidelines, and practices for that portfolio.
That means you are eventually funding Agile Release Train ( which means funding teams). Budgets are typically fixed across Program Increment (PI) as we should not make any changes in team size within Program Increment. This also brings more effectiveness and provide better decision making. ART’s can self-organize to optimize resource efficiency. Also ART’s will be focusing on delivering high priority features first also delivering more business value.
What is Program Increment ? A Program Increment (PI) is a timebox during which an Agile Release Train (ART) delivers incremental value in the form of working, tested software and systems. Considering a 2 week iteration, Program Increment is typically 4 to 6 iterations (8 – 12 weeks) long. The most common pattern for a PI is four development Iterations, followed by one Innovation and Planning (IP) Iteration.
Whole focus here is putting right investments in building right things. Strategy & investment funding needs collaboration and engagement between business, portfolio stakeholders, enterprise architects, EPIC Owners and key stakeholders to come-up with effective portfolio strategy.
Portfolio is connected with enterprise strategies by strategic themes and budget.
What are Strategic themes? Strategic Themes are differentiating business objectives that connect a portfolio to the strategy of the Enterprise. They influence portfolio strategy and provide business context for portfolio decision-making. They actually help defining Portfolio Epics and Portfolio Epic backlog.
Hope it will help to understand more on this topic. We still need to discuss on Guiding investment on Horizons and Participatory budgeting which are related topics. I will discuss more on these in upcoming post related to this series. So please stay tuned and wait for next Article..Happy reading !