A decade ago, the landscape of corporate Portfolio Management was stunningly different from what it is today. Organizations were navigating complex initiatives with traditional project management approaches, often struggling to align their portfolios with strategic goals, allocate resources efficiently, and adapt to rapidly changing business environments. It was a time when the term "Portfolio" primarily referred to a collection of projects, and the agility and responsiveness we now know are needed to succeed in a fast-paced world were often elusive.
However, in the last five years the realm of Portfolio Management has undergone rapid change. The emergence of SAFe Lean Portfolio Management (LPM) stands as a pivotal milestone in the evolution of how large organizations have managed their strategy and investments. LPM, inspired by Lean and Agile principles, revolutionized the world of portfolio management by giving us a way to think about our investments to optimize both long-term planning, and short-term execution. LPM offered organizations a more adaptive and customer-centric approach, enabling them to pivot quickly, respond to market dynamics, and foster a culture of continuous improvement.
The adoption of LPM has empowered organizations to break free from the confines of traditional, rigid portfolio management practices. Yet, even with these remarkable strides, there remain critical gaps and challenges in the Portfolio Management landscape. As organizations began to scale, and spin off larger and larger portfolio transformations, we saw that there was still a big disconnect between the organizational strategy from the Enterprise, and the delivery execution from the agile teams and trains.
In this paper, we will delve into the key innovations that have shaped the field, exploring how LPM has improved alignment with strategic objectives, resource optimization, risk management, and adaptability. However, we will also recognize that despite the progress made, portfolio management is dynamic discipline with ongoing challenges, including the need for more advanced tools, enhanced governance structures, and better integration of agility into strategic portfolio management that we are now calling Enterprise Portfolio Management (EPM).
EPM is a built-for-scale strategic management approach used by organizations to effectively plan, prioritize, execute, and govern a collection of value streams and investments across portfolios in a manner that aligns with the organization's overarching business objectives and maximizes value delivery. It involves the systematic selection and management of cross-portfolio initiatives to ensure that the individual portfolios collectively contribute to the achievement of the organization's strategic goals.
EPM encompasses various activities, including epic prioritization, resource allocation, risk management, performance measurement, and governance. It provides a holistic view of an organization's investment portfolio, enabling informed decision-making, resource optimization, and alignment with the organization's strategic vision.
Here are five reasons why an organization should consider investing in EPM:
Alignment with Business Strategy
Without EPM, you may face Strategic Misalignment. An organization may struggle to ensure that its Agile Release Trains (ARTs), portfolios, and initiatives are aligned with its business strategy, with each portfolio prioritizing locally and with no clear cross-purpose in mind. This can lead to a scattergun approach where resources are invested in initiatives that do not contribute to strategic objectives, wasting time and money.
Without EPM, you may face a Lack of Adaptability. Without an agile approach to strategic alignment, the organization may find it challenging to adapt to changing market conditions or customer preferences. This inability to pivot can result in missed opportunities or inability to respond effectively to competitive threats.
EPM ensures that all ARTs, portfolios, and initiatives within an organization are aligned with its overarching business strategy. By continuously aligning portfolios to the evolving needs of the business, and ensuring that agile principles are driving strategic planning, EPM helps ensure that the organization's resources and efforts are directed toward achieving its most important goals and objectives.
How EPM will help you win: Not only does EPM align all of the portfolios to a common business strategy, with EPM, you can achieve a state of strategic harmony where every significant initiative in the enterprise is aligned and contributing to the overall enterprise strategy. EPM creates a lens for value-driven decision making that empowers the enterprise to invest in the right mix of enterprise initiatives to support the cross-portfolio and enterprise strategy.
Resource Optimization
Without EPM, you may face Resource Overallocation. In the absence of EPM, there may be a lack of visibility into resource allocation across various initiatives and portfolios. This can lead to resource overallocation in some areas and underutilization in others, causing inefficiencies, resource shortages, and delivery of lower-value lower-priority initiatives.
Without EPM, you may face Ineffective Prioritization. Without a lean-agile approach to prioritization, the organization’s struggle to focus on high-impact initiatives can result in spreading resources too thinly across a multitude of low-priority initiatives, hindering overall productivity and value creation.
EPM enables organizations to optimize an agile approach to the allocation of all major resources, including financial, human, and technology resources. By prioritizing portfolios and initiatives based on their strategic importance, EPM helps organizations make more efficient use of their resources towards the most valuable and strategic initiatives at any given time.
How EPM will help you win: Not only does EPM enable agile resource allocation, with EPM providing a clear set of cross-portfolio priorities, EPM creates clear traceability between the locally prioritized initiatives within each portfolio back to the specific enterprise objectives and strategic themes that they support. This traceability enables the Enterprise to ensure that the right people and resources are aligned to the right work at the right time.
Risk Management
Without EPM, you may face Unmitigated Risks. Without EPM's structured approach to risk management, an organization may fail to identify and mitigate risks effectively at the portfolio and cross-portfolio levels. This can result in unanticipated delays, budget overruns, and even ART or portfolio failures.
Without EPM, you may face Limited Resilience. In the absence of agile risk management, the organization may struggle to adapt when unexpected challenges arise, potentially leading to disruptions that impact ART and portfolio performance and delivery.
EPM provides a structured framework for assessing and managing risks associated with various portfolios and initiatives. Iterative development, fast feedback cycles, and dedicated time for evaluation and pivoting give us the necessary information to be more resilient and responsive to changing circumstances. EPM creates a proactive approach to risk management that helps organizations identify potential issues early on and take steps to mitigate them, reducing the likelihood of costly setbacks.
How EPM will help you win: Continuous alignment, flexibility, and adaptability enable the organization to quickly respond to new opportunities and stay in sync with the long-term strategy even as new challenges and risks emerge.
Decision-Making Support
Without EPM, you may face Decision Gaps. Without EPM driving data-driven decision making at the Enterprise and Cross-Portfolio levels, decision-making may rely on anecdotal information or outdated data, leading to suboptimal choices. The lack of real-time insights can hinder the organization's ability to pivot when necessary.
Without EPM, you may face Slow Decision Cycles. Inefficient decision-making processes can slow down portfolio execution and hinder the organization's ability to respond quickly to market changes or competitive pressures.
EPM provides data-driven insights that can inform decision-making at all levels of the organization. By having a clear near real-time view of the status and progress of various initiatives and portfolios, leaders can make informed decisions about resource allocation, portfolio prioritization, and adjustments to the strategic plan.
How EPM will help you win: Data driven decisions with near real-time portfolio performance metrics will support better enterprise outcomes
Improved Accountability and Governance
Without EPM, you may face a Lack of Oversight. In the absence of EPM governance, there may be a lack of oversight and accountability for ART and portfolio performance. This can result in initiatives running off track without corrective actions being taken.
Without EPM, you may face Inconsistent Portfolio Practices. Without agile governance, the organization may struggle to maintain consistent practices across ARTs and portfolios, leading to high variability in the portfolio quality and performance.
EPM establishes clear accountability for ART and portfolio performance. It helps define roles and responsibilities, ensures transparency in ART and portfolio execution, and establishes governance processes that facilitate effective oversight while creating more adaptability. This leads to more disciplined execution and greater confidence in achieving strategic goals.
How EPM will help you win: EPM creates a forum for cross-portfolio communication and accountability that supports Enterprise-driven value creation across all the portfolios. By bringing everyone together into a common language and framework, the organization generates more flexibility and supports both knowledge and resource sharing across organizational boundaries.
Call to Action
Enterprise Portfolio Management is a valuable approach for organizations seeking to connect their strategic vision with the execution of ARTs, portfolios, and initiatives. It helps optimize resource allocation, mitigate risks, inform decision-making, and improve overall organizational performance.
If you recognize some of these challenges in your organization and would like to learn more about EPM, how it works, and how to implement it, please follow up with me as we continue to advance our knowledge and understanding of these emerging practices.