For most IT organizations, portfolio management is the process of vetting and prioritizing the myriad programs and projects that make up the organization’s wish list of work to be done. Ideally, the function is formally structured and clearly communicated, but, even if it is not, the basic process helps organizations select, prioritize and approve projects to ensure they allocate their finite resources to initiatives that best support the corporate strategy. Often, these strategies are driven by a desire to introduce enterprise-wide agility into the organization. However, more times than not, the portfolio management process itself is hamstrung by an inability to adapt quickly to new initiatives.
There are many advantages to a formal portfolio management function, from improved cross-functional cooperation to enhanced cost-benefit analysis. But, as with many traditional IT processes, portfolio management is struggling to keep up with the pace of change in the digital economy. In response, vendors and industry associations are developing new forms of portfolio management that are better suited to the agile enterprise. Some, like the Scaled Agile Framework (SAFe) Lean Portfolio Management process, are comprehensive in scope. But these require significant change both in IT and throughout other associated processes of the enterprise. For example, SAFe Lean Portfolio Management embraces a funding model based on continuous value streams rather than annual budgeted outlays, which is an approach many finance departments are slow to accept.
So, how does an IT organization manage its portfolio while moving toward digital transformation and, at the same time, avoid the disruption of completely restructuring multiple deeply ingrained organizational processes?
Follow these five steps to build foundational elements of the agile enterprise and reap dividends down the road:
- Streamline the current portfolio management process with lean management techniques. Lean means eliminating waste. In the portfolio management process, consider updating the current business case form with a light-weight version that eliminates highly speculative, overly detailed measures and focuses more on objective metrics that focus on business value.
- Shorten the portfolio management cycle from annual to quarterly. The IT environment is changing rapidly as advances in technology and agile project methodologies allow the organization to respond more quickly to the market. Frequent adjustments – both small and large – to the portfolio are required to keep up. There is no reason to strictly adhere to the annual budget cycle for portfolio management when business and technical drivers are continually changing.
- Use both top-down and bottom-up project intake. Traditional strategy-driven portfolio management is a top-down process. But infusing the agile mindset with a strong focus on the customer and more frequent portfolio review cycles allows IT to address critical projects that arise from the business units during the year that were not considered at the time of an annual review.
- Include customer and stakeholder impact. Introduce people-oriented measures in the portfolio management process in addition to traditional financial metrics that are used to evaluate the portfolio’s projects. These would be metrics that gauge attitudes, perceptions and satisfaction levels of customers and stakeholders, thus incorporating the often-overlooked human factor to portfolio management just as agile techniques have introduced greater communication and collaboration to software development.
- Be willing to make sacrifices when choosing projects that support digital transformation. Hard trade-offs are often part of portfolio management, and as new digital initiatives come up, projects supporting legacy systems or processes may need to be postponed or cancelled. These “tough love” decisions signal to the organization leadership’s commitment to digital transformation.
The road to enterprise agility takes time and effort. Organizations that introduce agile software development while failing to adapt their portfolio management process are likely to find the portfolio “pipeline” out of step with the downstream work processes. When agile teams are not fed work in the same dynamic fashion in which they operate, it can result in inefficiency and waste. Taking the steps recommended here helps avoid that fate.
ISG helps organizations increase agility in portfolio management and prepare for digital transformation. Contact us to discuss how we can help your organization adapt and get ahead of change.
