This article has been sitting partly in draft and partly in my head for a number of weeks. The inspiration to get the job done was when my friend and esteemed colleague – Stuart Rance – had his September 2017 blog on Portfolio Management and Continual Improvement published over at Sysaid.com.
It is a great article containing great advice and I highly recommend that you read it.
My article explores how I believe portfolio management needs to evolve to operate in a VUCA world. The VUCA acronym is not new. It gained common usage in the American military in the 1990s to describe military conditions. The acronym has now been adopted in the business world to describe the world in which every business now operates and to inform organisations about how they need to evolve in order to survive.
VUCA stands for:
- Volatility. The nature and dynamics of change, and the nature and speed of change forces and change catalysts.
- Uncertainty. The lack of predictability, the prospects for surprise, and the sense of awareness and understanding of issues and events.
- Complexity. The multiplex of forces, the confounding of issues, no cause-and-effect chain and confusion that surrounds organization.
- Ambiguity. The haziness of reality, the potential for misreads, and the mixed meanings of conditions; cause-and-effect confusion.
An excellent guide to VUCA and how to address the challenges appeared in Harvard Business Review back in 2014.
Harvard Business Review 2014
So what does this mean for portfolio management?
Adaptive Portfolio Management
Traditional portfolio management has been driven by top-down planning with portfolio activities planned and spread over lengthy periods of time. It has been run as a multi-year portfolio flow of projects, which are completed in a linear fashion and without the ability to change direction and adapt to the realities of VUCA.
A PMI article sums up the situation. Portfolio management has to….
“….focus on the idea that project outcomes cannot be sufficiently known in advance and the planning and process overhead associated with traditional approaches is waste when uncertainly and change are the normal state of affairs. Furthermore, when markets, technology, and customers frequently change the competitive landscape, long-term planning discourages change, and limits the ability to respond to change and adapt the organisation for survival.”
When reading about service portfolio management in ITIL® V3, it infers (albeit did not intend) the existence of a single portfolio of products and services and a linear process. In regards to portfolio updates it does say:
“This requires a regular, formal review of the portfolio that compares the services and investments with the IT strategy and the overall organizational strategy. The frequency of these reviews should be at a minimum of quarterly, and not just when the strategy is being produced. These reviews can be done as part of regular CSI activities”.
Although this statement clearly recommends regular reviews (at least on a quarterly basis), I do not believe that reviews can be scheduled – but have to be iterative. Also, experience has shown that a large proportion of the ITIL readership has ignored the core premise to ‘adopt and adapt’ the guidance and therefore it is likely that many organisations are only reviewing their portfolio four times a year or less.
It is my opinion that in a VUCA world, the entire portfolio has to be iterative. This is borrowing from the agile world and the concept of build-measure-learn cycles used by individual teams and applying it across the enterprise. This involves constant feedback loops and a state of experimentation that ensures a thriving and adaptive portfolio exists.
Portfolio management needs to be able to change direction easily across the whole of the portfolio of work being undertaken in the organisation. It needs to be able to quickly respond to the constant changes taking place in the marketplace.
Now this is where I could land myself in a lot of hot water! I am going to delve into the world of SAFe® (Scaled Agile Framework). I am not an Agile or SAFe expert by any stretch of the imagination. However, maybe my naivety can simply explain how we can borrow from the agile development world and scale it to a portfolio level.
In its simplest form, agile development has a list of prioritised tasks to deliver business value, and the priority drives the order in which tasks are addressed. This is called a “backlog” and work flows through – one item at a time – with each item being completed and the next one then started.
The “backlog” is reviewed and reprioritised frequently based on information from many sources e.g. customers, product owners, business analysts, frontline staff, development teams, business line owners, marketing etc.
The reprioritisation could be as frequent as daily in a highly volatile environment.
Agile development works at the individual team and product level. Where there is increased complexity and teams must work collaboratively on a program of work, Agile has scaling approaches moving from the team level, to program level and to portfolio level.
A SoftEd article entitled “What it Means to Have an Adaptive Portfolio” says:
“By taking the idea of a prioritised backlog and extrapolating it to the level of the whole organisation we can have an adaptive portfolio. One where the work being done at any time across all the teams is always the most important set of work that we should be doing. The rate of reprioritisation is different to that used at the individual team level, and there needs to be good feedback mechanisms so the delivery of value can be made clearly visible from the teams up to the portfolio governance level.
At the portfolio level it is important to be able to stop one initiative and switch the team(s) to work on something that is more important, once sufficient value has been delivered. This may be sooner than was planned in the first place or it may be later – the metric of success is not meeting an arbitrary date or even a fixed budget, rather it is maximising the value to the organisation from the work done on an initiative.”
An organisation that constantly listens and responds to the voice of the customer is a learning organisation and an adaptive portfolio is critical to survival. Teams must be working on the most important items of work that are within the organisational level backlog.
Organisations wishing to operate effectively in a VUCA world and have a truly adaptive portfolio, will need to make a significant cultural and mindset shift. Getting ahead of the game in a volatile, uncertain, complex and ambiguous environment is not a shift every organisation can make overnight.
The cultural shift that is needed to establish a truly adaptive and agile way of working warrants an article, if not a book, in its own right. However some of the cultural characteristics required include, but are not limited to:
- Communication across the portfolio – breakdown of silos
- Sharing information and context on a regular basis
- Mutual respect regardless of role
- Interactions rooted in empathy and understanding
- Transparency without fear of retaliation
- Easy to change direction
- Fast feedback
- Extensive collaboration – up, down and across the organisation
This can be summed up by the Netflix phrase that describes adaptive portfolio management across an organisation.
“highly aligned, loosely coupled”
Visibility – Kanban
ITIL illustrates the service portfolio as follows:
ITIL® Service Strategy 2011 edition
I don’t think that this illustration sufficiently reflects the service portfolio in a VUCA world.
In a world where the portfolio is subject to constant change and reprioritisation, I suggest adoption of a Kanban approach to visualize, manage and analyse the prioritization and flow of portfolio Epics from ideation to implementation and completion.
An Epic is a container for a solution development initiative large enough to require analysis, definition of a Minimum Viable Product (MVP), and financial approval prior to implementation
As Scaled Agile states:
“Implementing the Kanban system requires an understanding of Lean and Agile development as it applies to Portfolio-Level practices. It also requires understanding the capacity for each Agile Release Train (ART), and how much is available for new development, business-as-usual maintenance, and support activities. When these are understood, the Enterprise can then evaluate portfolio-level initiatives in a logical and pragmatic way, knowing the initial feasibility and forecasted timing for implementation. The portfolio Kanban system is designed specifically for this purpose.”
As already mentioned, I am not an Agile or Lean expert but wanted to introduce this concept for consideration as a better way of visualising a portfolio of work in a VUCA world.
The following diagram – Portfolio Kanban System – has been extracted from the Scaled Agile Framework body of work.
Note: WSJF = weighted shortest job first
WIP = work in progress
MVP = minimal viable product
LPM = lean portfolio management
The portfolio Kanban is designed to capture, analyse, approve, and track epics.
It is not my intent to walk you though each of the stages that an Epic passes through within the Kanban Portfolio System but rather direct you to the Scaled Agile Framework page that describes the diagram in detail.
Portfolio of Portfolios
Finally, I would like to introduce the concept of a portfolio of portfolios. In a small-to-medium size organisation, a single portfolio may suffice to govern what is being funded and delivered.
In larger organisations, multiple portfolios may exist – e.g. one for each line of business.
In order to understand how the portfolio of portfolios works, we again need to revert of the world of SAFe.
SAFe uses the concept of Themes.
“Strategic Themes are differentiating, specific, and itemized business objectives that connect a portfolio to the strategy of the enterprise. They provide business context for decision-making, and serve as inputs to the vision, budget, and backlogs for the Portfolio, Large Solution, and Program levels. The primary purpose of strategic themes is to drive portfolio innovation and differentiation”. © Scaled Agile Inc.
In a small-to-medium organisation, where one portfolio exits, the portfolio is connected to the business strategy by strategic themes and the budget, and it provides feedback to the enterprise via portfolio context,
In larger and more complex organisations with maybe thousands or tens-of-thousands of people developing solutions, the organisation will have to have multiple portfolios each with its own budget and strategic themes reflecting that unit’s portion of the business strategy.
The business strategy, and investing in solutions that enable it, is a mostly centralized concern. However, Scaled Agile calls out that strategy has emergent properties:
“Some elements simply, can’t be known just centrally, or up-front. And that depends on the challenges and opportunities that exist in the current solution set, and in the local market conditions they address. To that end, strategy development requires continuous collaboration, communication, and alignment with downstream portfolios. In other words, it demands full and complete awareness of the portfolio context.”
Enterprise Strategy Drives Portfolio Strategy Portfolio Context Informs Enterprise Strategy
The world in which we live and operate has changed. It’s been changing for some time but I think that it is only recently that many organisations are waking up to the fact that they are going to have to make a significant shift from the traditional view of the organisation and step into a new world.
Organisations need to stop talking about ‘transformation’ as a headline in the morning newspaper but rather eat it for breakfast!
Changing the way we look at portfolio management is one aspect that will be critical to organisational survival.
Today’s portfolio has to be adaptive, fluid, flexible, and rapidly changeable. It has to be visible, transparent and shared.
It is only in this way that true business value needed at a particular point in time can be delivered.