LPM, Your Secret Plan to Rule the World

What is LPM (Lean Portfolio Management)?

Before talking about managing a portfolio, let’s talk about what is a portfolio? Once we understand what is your portfolio? It becomes easier to manage a portfolio. The simple way I always explain what a portfolio is like a binder. You ask a musician, what’s your portfolio? They are going to show all their albums. You ask a painter, what’s the portfolio? They’re going to show all that art. Then you ask a designer what’s their portfolio. They are going to show all their websites, right? That’s the idea of a portfolio, showing off something of value, collection of engagements, or value initiatives put together is a portfolio. Now for an enterprise, it is prudent to assume that they can only build one product and only one value. Nowadays, diversification is at the peak of everything you have. You have to cater to a multitude of needs because of that classic example. If you take apple.com as an example, their portfolio is wearables, cellular phones, mobile devices, tablet devices, laptop devices, and desktop devices. Just to stay at a high level, I’m not even going into the finance side of things. Then as a part of this, they can build multiple products.
You have iPad mini, iPad Air, iPad 10 inch, iPad 7-inch, pro version, the non-pro version in tablets. You name it. That’s different; that’s catering to specific user groups or personas. To manage the portfolio of such a massive array of varied stuff, you need some kind of a mechanism. Otherwise, it becomes very hard. How do you know as an entrepreneur? How do you know? If I am the company owner that makes these many products, how do I know what products I should focus on three months down the road, six months down the road a year, five years down the road? It’s hard. That is where you focus on, where there is more value, where there is more market need, and I need to bring it into my organization to manage my portfolio. Now, you may ask the question: But Ramesh, what you’re talking about, how do I do that? By applying lean principles, lean principles that are related to Agile economics. That’s where the whole origin of lean portfolio management came into play. You can call it agile portfolio management, but there is a little bit of a difference. First of all, portfolio management sounds cooler than agile. That geeky word is everywhere. One thing agile is primarily focused on delivering the product, while lean focuses on planning for the product. That was the main idea. Lean is all about reducing wastage while agile is all about experimenting and iteratively delivering the product, two different things. So based on that, agile is excellent at the team level. To deliver the product at the topmost portfolio level, you need to have a lean mindset. How can I think about building this product most practically or manage my portfolio with the least amount of wastage in terms of delay? That’s where that origination of lean portfolio management came in. I hope that helps it.

Frequently, we don’t want to be super experimental iteratively like every week changing our strategy and our direction at the portfolio level. You don’t want to be super agile at the portfolio level. You want to be very lean and look at the whole system and be very customer-centric. Whereat the team level, it’s very much agile. If we screw something up, it’s only two weeks. It was a small little time box. If we didn’t deliver, whatever, but at that portfolio level, there is a lot more at stake. We need to be customer-centric, but we can’t just always be switching gears. Starting with this is our strategy. Then, we got a new approach this week. Strategy just doesn’t change that frequently. It’s really about delivering. Delivering the value, removing the waste, focus on that. The Lean Startup stuff from Eric Ries. We do talk a lot about that. We bring that in as far as the lean UX cycle, validating our assumptions, and there’s a process there. We’re talking about lean portfolio management. We have things that we pull in, like leading indicators and different measurements for the portfolio level.

What is the difference between portfolio management and project management?

Again, I am stepping into the shoes of an entrepreneur. I have a portfolio. We just talked about it. However, let’s start defining. What is a project first to know about project management? A standard PMI definition is that a project is a unique endeavor with a start and an end time or a start and an end date; it’s unique. Unfortunately, the word is often abused. You do something repetitive, and you still call it a project, the same project we did before doing one more project. You see, that is incorrect. It should be a product. A product is the one that’s based upon the flow and a repetitive way of doing work. That’s why product life cycle anything comes. Project management is excellent when working with innovative products that you do it one time and move on.
A classic example is a construction company. You are in a building construction company, you go to Brazil, build two villas, finish. You come to Miami, build one township, finish. You go to Bozeman to build another township. It finishes. That’s a project, not a portfolio. You are a construction company. Everything is unique. The variables are unique; the local context is unique, the housing rates. Everything is unique. That’s what project management is, where you have project managers for every station, Brazil, Miami, Bozeman. You have project managers that manage that start and stop, that initiative. With portfolio management, it’s an ongoing flow-based approach continuously. You’re going to work on building iPads. You’re going to continue to work on building iPhones and watches. Still, there is value that you can retrieve, that ROI you can gain value out of and from the market. The consumer sees value in that product line or a service line. That’s what differentiates between project management, a single endeavor kind of thing, versus lean portfolio management, where it’s an ongoing value-based, economics-based decision making.

Would you say that many organizations confuse the two? We have the value there. They have value. They have a portfolio, look at features as projects, or look at aspects of that product as projects. And so then you get this kind of a muddy gray soupy stuff.

The whole idea is that people are so close to the ideal of a project manager, senior project manager, etc. They do not understand that the project they are working on is an enhancement or an embellishment to an existing product line. They don’t look at it that way. They think it’s a unique endeavor, and they continue that way, and that’s why this confusion comes, where the funding is for something unique. And that’s where SAFe is making great strides. Say you’re building a unique feature called a GPS for the phone, but it’s all a part of the product called a phone. So sponsor the phone, and if the value is in adding GPS functionality, we will work on it. If the value is adding camera functionality, we are going to work on that. Whatever is the priority. That’s the fundamental difference between the project versus the portfolio.

What are the benefits of the LPM Certification?

The benefit is that the course is a three-day course where we talk about agile contracting. How to look into the market, think about the value streams, identify the epics, and prioritize them. There’s a lot of hands-on work that we teach in it. In addition to what SAFe is, especially from AgileFire. We add many embellishments, so they become powerful in dealing with stakeholders, dealing with business owners, and dealing with trains in terms of complexities because that LPM team has an overview across the board. If you really look at it. We teach them the aspects of governance, how to do it. What metrics are used to determine how to fund the value streams, and how to do that funding exercise? It’s good stuff that we teach them, and that’s the precious hands-on experience. It used to be a workshop before, LPM Workshop, two years ago, a year and a half ago. They formed a course around it because the value is as such, and truth be told; not many people can comfortably teach the LPM course. They might read the slides, but I have already seen three people who do that. It’s essential. People need to understand the LPM course; otherwise, the mistake will impact the whole organization downstream.

Ian: Ramesh kills this class. He does an awesome job of it.

Ramesh: I love it.

Ian: I need to watch him teach another maybe a dozen times, and then perhaps I’ll tackle it. He’s been in that role, and one of the super awesome things is his authenticity. It isn’t theoretical for him. He’s got the scars to prove it.

It’s crucial. It’s important because if not done correctly, I’m telling you every organization has that issue. They do not emphasize that; they do not get adequately trained and do not handle their fears regarding transitioning from a project to a portfolio side. That’s a problem. They try just to close their eyes and continue, which is not a healthy thing.

The other thing is seeing the instructor field questions. When it’s theoretical, they can’t field the question. They have no answers, or they’ll answer it by telling them to read the manual or the SAFe website. It’s all right there, and that’s one of the cool things that Ramesh will do. He’ll usually pull like three different scenarios out of his tool chest of answers from the real world. So it isn’t theoretical. At this company, we did this. At this other company, we did that. The different outcomes so that people can see the difference. It’s pretty awesome.

That’s a real benefit to doing a workshop or a class, a live class. You can read about it, but you can’t ask questions of a book and get real experience back.

This is one of the things we’re doing in addition to our classes; for example, like the LPM, we’ll have people in the class, and they have these real deep contextual questions. At company x, what about abc? They have to explain the whole situation. What we’re doing now is we’re offering time, one-on-one time with those people so that it doesn’t derail the entire class for one specific context, but they get the benefit as well. They get the benefit of profoundly having their questions answered and not derailing the class. So that’s one of the things we do. We teach the content, of course. We answer the questions that can apply to everybody, but then there’s sometimes we have to say, “you know what, let’s have a one-on-one with you.” We’re not going to charge you for it. It’s just purely giving back to you. We call them alumni for life, the AgileFire alumni for life. So we definitely want to take care of people like that.

What is the primary role of the SAFe portfolio?

Instead of saying the primary job or position of a safe portfolio, I would rephrase the question: what is the safe portfolio management team’s primary role? The role is associated with the management team. The portfolio is an artifact like asking what the primary function of a story is? You know, it’s not little work like that, right? So assuming that the SAFe portfolio management team’s primary role is the question, their fundamental job is to have checks and balances in place. Not the money checks, but checking and balancing like how you have accounts payable and accounts receivable in the banking sector, the same thing. They need to have governments as well as you know. Funding at the same time balancing it. How do you do that? That’s where if you look at it, SAFe portfolio management is also called LPM in a way; lean portfolio management is a function made up of the three most critical attributes. It has three dimensions to it. The three most essential functions of the LPM role is governance, making sure metrics; things are happening correctly. Portfolio operations, ensuring the work identified in building the portfolio items, are appropriately executed throughout the trains. Most important is strategy and investment, funding to connect your business strategy and investment to fund the actual way of delivering the work. Those three are the very critical things one cannot live without the other. At the same time, you have to be a little bit careful, in my biased opinion.
I want to have three separate groups of people working on each of these roles, not one person. Otherwise, the guy who is doing the funding becomes the super, King Kong, and a slave master for everybody else, controlling what to do. So it has got to be three different things coming to the road, and it’s a collaboration role. It’s not a title. You can never say I am the director of LPM. It’s a function. You might be part of a PMO, but you will perform the role of LPM. You might be part of the strategy and investment funding, but you will do the function of an LPM.

You mentioned the portfolio is an artifact. What is that?

A portfolio is a binder. It just shows you the list of all the value propositions you are delivering as an enterprise, okay? That’s it. A binder, like a musician, has a portfolio. What is it comprised of? All the gadgetry all the songs that he wrote.

Would you say the portfolio is? How would you say that? Would it be the epics? Would it be the value streams? Would it be the strategic themes?

The portfolio is a collection of all the initiatives you have that deliver value. The value stream is the representation of all the steps to provide value. An epic is an artifact that identifies and explains what that value is. That’s the way to look at it. An epic is writable. You can write it in black and white, describing the value. A value stream is a diagram, a picture, a pictorial representation of the flow of work. And a portfolio is a placard that says we are delivering these kinds of values through these epics.

How does lean portfolio management relate to lean enterprise?

Lean enterprise is nothing but a collection of all the human beings within a company, forming an enterprise that follows lean-agile methods. That’s what lean enterprise is. But they might have a brilliant idea, a strategic initiative, and articulate that initiative in black and white. A more tangible form of deliverables, you need somebody to do that work. The transition of ideas into real work, transitioning of that strategy into actual work, is done by your lean portfolio management. They connect your business strategy into that execution. That’s the main difference. Enterprise is their whole organization, every idea. They’re from outside the organization. The LPM is synthesizing or processing, analyzing, and processing.

When we talk about the lean-agile enterprise or business agility, we’re describing the capabilities of being lean-agile, one that can pivot and respond and be innovative. For example, COVID comes along; a lean-agile enterprise can respond and react and adjust their strategy because of the roadblocks in the road. But an old school non-agile enterprise, this totally devastates them; their approach is long-term, five-year plan, seven-year plans whatever. They cannot pivot without mercy or guilt, and lean enterprise has the lean-agile capability, this part of their DNA.

That is why it is critical to understand this new business agility concept. That is breaking a lot of hailstones. Actually, many people do not have that clarity on what this organizational agility, team agility, and supporting business agility is. You know, that might be a different conversation. But yeah, what Ian mentioned, nailed it, very important.

What are the benefits that lean portfolio management provides?

A bunch of stuff. LPM or lean portfolio management helps ensure that everything is organized around a value-based approach, not a traditional project management approach. This is where it changes, and it gives one of the most valuable things. The LPM helps to guide the initiatives to be gauged based on their actual value. That is through what is called an MVP minimum viable product. Eric Ries’ lean startup cycle is heavily used at a portfolio level based on whatever the initiative suggested at the portfolio level. First, it needs to be vetted out and proven that whatever hypothesis stated in the initiative is true based on some leading indicators. You need to do that, but who will help initiate that conversation or help question the head honchos when they posed those. The LPM comes in; they use certain documents such as lean business case, lean hypothesis statement, which is extremely valuable. Also, LPM helps to bring visibility and transparency at the portfolio level by managing the kanban board where all the initiatives are listed. They do a lot of work, and I can go on and on, which becomes a three-day class now. That’s the main thing I would say that they can help with.

What are some LPM anti-patterns to avoid?

One of the things that I mentioned before is when people get into a powerful position at the portfolio level into LPM. They tend to slowly move back into the centralized command and control approach, which is very dangerous. The reason is on one side; we are decentralizing and changing the whole funding model to value streams and lean budgets with some guardrails. And if you go back to centralized command and control methods, there will be extreme friction, and work will get impacted and remember they are the starting point on the top. If that initial flow gets affected, the whole pipeline from top-down gets impacted. It’s going to have its negative impacts immediately down the way. The same thing is an anti-pattern because they’re in charge of governance if they do not understand how LPM should function and start coming up with all these vanity metrics. It’s going to impact the efficiency of everything down below, the trains and teams. It’s a pretty impactful role. So anti-pattern is something I wouldn’t even call it an anti-pattern. It’s like a death squad. Usually, when a mistake is made, it’s done. It’s tough to recuperate from that mistake because the people who are working at LPM are the big shots. These are the managers, VPs, directors, and above and it’s hard. It’s not like a team where you have an option to replace it with somebody else. You cannot do that. So easy and it’s hard, significant impact. That’s why LPM is something that people should be extremely cautious about and do it with complete faith in understanding the knowledge, the first amendment. Otherwise, it’s going to backfire pretty bad.

One of the anti-patterns would also be living in the old world and the new world. So they’re trying to switch to lean portfolio management, but they still behave with the old deadlines and forcing things not based on data and feedback loops but based on significant upfront planning. That’s one of the old school things; I’ve heard them called rack and stack sessions where they try to go into a room for a week and plan out all the work for the next year, which is an anti-pattern because you’ve just created this big one-year-long queue and you don’t know. You’re doing all this finding when you know the least about it. That’s one of the patterns. Pushing work on to the teams instead of driving the funding in the strategy and that they also like. You are driving commitments down to the execution level, you know, pushing that work instead of letting it be a pull-based system. They’re moving everything, getting too much stuff in flight, too much WIP(Work In Progress), and then at the epic level. Because lean portfolio management, they’re managing those initiatives and those epic artifacts. If you can’t control your work in process at that level, think about it if you have three epics versus ten, and an epic gets decomposed in the features. Those features get decomposed into stories; if you’re sober and you are realistic and how many you put right into flight, you’re okay. But if you’re like, oh, we need to start this initiative oh, we need to create that initiative. Those epics soon become this tidal wave of features, which becomes devastating at the story level, the team level. They’re just context switching and flopping and switching back and forth, and it feels like nothing gets done. Well, it all begins at the portfolio level. They can’t control the WIP limits there; it’s just the teams get buried under an avalanche of work. So one of the anti-patterns is we need to start it all. We need resources utilized, and I want to see progress, so let’s begin that project. That’s not what we want in portfolio management.

What else should we know about LPM?

It’s incredible. It’s exceptionally gratifying if done well; it’s hazardous if not done correctly. LPM is not for the faint of the heart. It is not a role you recruit people into, but you grow people into the LPM role. You always want to have people with enough training and knowledge. You know, in different roles, before they join the LPM Role. I will stop there because it becomes another three-day class.

It seems like when people begin their lean agile journey or do something like SAFe. It looks like they do lean portfolio management last. To Ramesh’s point, it’s hard. It’s critical, but they’ll frequently do it later because they’re comfortable with how they’re working, and there are these budgets. These are where the purse strings are, and it’s where the strategy and all that is. So there are a lot more nerves around it. Frequently it’s the last thing to transform. It’s ideal as one of the first, but often it’s last. I know scaled agile is trying to push that awareness and that training upfront more to the beginning of the journey versus where it used to be at the end. So we see more and more interest in It. But yeah, it usually lags in the transformation journey.