ArticleNovember 24, 2022 · 4 min read time
Lean Portfolio Management has been a topic of much interest as companies have started to see its benefits. The discussion in the field has shifted from 'What is Lean Portfolio Management' to 'How do we apply it, and what challenges do we usually face?'.In this article, we examine the most common challenges and how to solve them.
A lean portfolio is a collection of development value streams characterised by chosen strategic themes. Why value streams? The answer to this question is an article by itself, but let’s just settle for now with this; by organising development around the flow of value into one or more value streams, it enables focus on providing value to specific customers and creates prerequisites for decentralized decision-making and steering through goal/direction rather than detailed control.
Small enterprises typically have one portfolio, whereas large enterprises might have multiple. It is, however, essential to keep the portfolio as simple as possible.
Strategic Themes might be called something else in a company e.g. business objectives, must-wins, big bets. They should convey company strategy in a way that makes it possible for people within the organisation to act on them. Crafting them is hard work and it requires deep insight into customer needs, company strengths, and competitor weaknesses.
Throughout the years of working to unleash the potential of development organisations within large corporations, we have found a key challenge in that the strategic direction is unclear. The organisation struggles to get out of murky waters without a flashlight to guide them. Below we provide five examples of anti-patterns to Strategic Themes and also advice on what to do instead.
Most common anti-patterns to choosing the portfolio’s strategic themes - with advice
1. There are too many strategic themes to guide your portfolio. A clear hint of this is if you have to talk about prioritising strategic themes, then you probably have too many. You should not have to prioritise strategic themes. Strategy is about choice, and that means deciding also what opportunities not to pursue.
Advice: Focus on the vital few strategic themes that drive your portfolio in a specific direction. ‘Vital’ here means they are focused on winning (not only competing), they are utilising company strengths to win, and they are possible to achieve.
2. A strategic theme is too generic. If a strategic theme is too open for interpretation, it won't make a difference when you choose among options.
Advice: Focus on driving towards a specific outcome. You're already halfway there if you know where you want to go.
3. A point solution disguised as a strategic theme. Sometimes a strategic theme describes a technical solution to a particular challenge. This implies a very early decision on which solution to apply to reach a goal, and it makes it difficult to change if it later turns out that there were better ways to do that.
Advice: A strategic theme should influence the development portfolio, not state exactly what should be built. Instead, create strategic themes that are open to options and still guide decision-making within the portfolio. You want to preserve options until you need to decide. Preserving options increases agility, meaning the ability to change and adapt based on our surroundings and what we have learned.
4. A strategic theme based on reverse engineering of ongoing work. This anti-pattern and the previous are similar in that they both base a strategic theme on the already existing backlog and, therefore, the past. The same advice applies to this as the previous one.
5. Strategic themes become fixed once defined and are not revisited. You spend much time and effort defining the strategic themes, then you fix them and throw away the key.
Advice: We improve our ability to respond to market changes by also having strategic themes that can be changed. A strategic theme should be something you revisit regularly. Be ready to change or even replace some strategic themes if needed.
OKRs describe the chosen strategic themes and connect them with everyday work
OKR is short for Objectives and Key Results and is a tool for making direction clear when market demands change. Objectives can be used to represent the strategic themes that drive the future state of a portfolio. Key results are measurable outcomes that tell you what would have to be true to reach the desired outcome. OKRs allow you to create alignment across the organisation, engage people, and measure progress toward Outcomes.
Recently we held a one-hour webinar on Lean Portfolio Management, and if you’re interested in hearing more, you can download our recent webinar here.
We have also written about Posti’s journey to Lean Portfolio Management and the use of OKRs - you’ll find the interview of Posti’s Sari Hilldén here.