What Is Lean Portfolio Management?

Lean portfolio management (LPM) is a strategy you can use to make sure that all of your company projects, programs, and processes align with the goals of increased efficiency and greater customer satisfaction. Lean portfolio management is inspired by Lean project management principles, which focus on eliminating waste at every stage of development and delivering a continuous stream of value to your end client. You can use these principles, along with the Scaled Agile Framework (SAFe), to remove waste and deliver continuous value through every component of your company. 

Explore how Lean portfolio management can help you remove waste, improve your processes, and deliver value to your customers or shareholders.

What is strategic portfolio management?

Strategic portfolio management is a tool that companies use to ensure that all company resources focus on the outcomes that drive progress toward company goals. This can include projects, assets, and programs that represent an investment of company resources in the pursuit of value. You can use different kinds of strategic portfolio management as an overriding philosophy that helps you structure your workflow and business processes, such as capital planning and prioritizing investment requests. You can also utilize strategic portfolio management when it comes to dynamic planning, allowing your company to pivot and remain flexible in your market quickly. 

In terms of strategic planning, Lean portfolio management is a type of strategy for making sure that all company processes, projects, and programs apply Lean principles to increase efficiency and deliver a constant stream of value aligned with company objectives. 

Lean portfolio management vs. Lean project management

Lean portfolio management is a strategy of applying Lean project management principles into overarching business strategy and determining that everything within a portfolio, including every project and program the company invests in, aligns with those Lean principles. Lean principles are: 

1. Identify value: If you were using Lean principles to develop a piece of software, you would identify the value your customers would get from using your software. In portfolio management, you’ll need to identify the value of each business process or project to identify where it adds value and what value it adds. 

2. Map value streams: You can map the process of adding value in a value stream. This includes every step required to deliver value. In the software development example, this could include everything required to actually deliver the program to the end user, like development, testing, quality assurance, and so on. This step in Lean portfolio management is important to consider when determining whether every step of the process directly contributes to the value stream or whether you can cut some components out. 

3. Create flow: If you carefully remove all the wasteful steps while mapping the value stream, you’ll next need to consider whether the remaining steps flow smoothly or whether bottlenecks and other interruptions make it difficult to proceed. When you encounter problems, you can use cross-silo collaboration to find efficient solutions across all of your resources. 

4. Establish pull: After you have a smooth process where value is flowing, you or your customer can start pulling the product sooner, which allows you to maintain a streamlined inventory of your equipment while avoiding a stockpile of materials. If you are developing software, this helps move items through the development cycle, delivers value, and eliminates a buildup of inventory. 

5. Seek perfection: Lean is a continuous improvement process. The goal is not to deliver a perfect process the first time around but to make improvements, stay flexible, and continuously change as new information becomes available. You will repeat this process over and over while making changes to advance toward the most perfect system you can create. 

What are the three dimensions of Lean portfolio management?

To successfully implement Lean portfolio management, you want to align leadership with the strategy of the organization by utilizing three important domains: Agile portfolio operations, strategy and investment funding, and Lean governance. By collaborating among these three domains, you can increase transparency regarding crucial decisions, providing your endeavors with a greater chance of success. Take a closer look at the three domains:

• Agile portfolio operations: You will need to provide your teams with the resources and freedom they need to operate within an Agile mindset so that they can focus on customers, collaboration, and adaptability. 

• Strategy and investment funding: You will consider your company goals and value streams to make sure that your investments align with your goals and that all of your financial investing ties back to your central strategy.

• Lean governance: You will implement a system of guardrails to ensure that spending and forecasting continue to align with company goals and provide oversight for compliance and reporting. Essentially, you want to ensure that the work you're doing aligns with the established strategy. 

Is Scaled Agile Framework (SAFe) the same as Lean portfolio management?

The Scaled Agile Framework (SAFe) is a method for implementing Agile principles into business processes at scale, and Lean portfolio management is an important component of SAFe portfolio management. SAFe considers three levels of strategic leadership to apply Agile and Lean principles, including the portfolio level which encompasses all of the company projects and portfolio, the large solution level produces solutions that span multiple projects or departments, and the essentials level provides the fundamental actions and guidelines implemented throughout all SAFe levels. 

At the portfolio level, you will implement the Lean portfolio management principles of investment funding, Agile portfolio operations, and Lean governance, which can lead to continuous improvement. Furthermore, by employing these Lean portfolio management approaches, you can maximize value, decrease the time it takes for your product to go to market, and pivot quickly to changing market needs. 

How to implement Lean portfolio management

To implement Lean portfolio management, reflect on how your portfolio aligns with Lean principles. You may need to shift your organization’s culture and thought process to reflect Lean values like focusing on outcomes, delivering continuous improvement, and developing a workflow that allows your team more autonomy. 

You can use five steps to implement Lean portfolio management: 

• Assign roles and establish priorities: When implementing Lean portfolio management, it is important to identify company objectives, your company’s strategic priorities, and who will play what role in the process. You should have clear objectives with metrics and specific analytics that will help you determine when you’ve reached your goal. Once your strategies are on paper, you can map your organization’s goals into investments that will drive results. 

• Determine funding: Once you have a roadmap for how your strategic goals align with company priorities, you’ll need to fund these investments appropriately. You will need to consider the return you anticipate for these investments and locate funding for these projects in proportion to the value they will deliver. By focusing on how the projects will improve your end goal and the amount of value that the project will ultimately deliver, you can have confidence in setting a budget that both allows you to achieve your goal and compliments the rest of your portfolio. 

• Create an operational plan and manage demand: The next step is to build an organizational structure that can support your goals, building from the decisions you made in the first two steps. You want to work towards a cycle of delivering continuous value and planning, which means you need to include the ability to adapt your plan when necessary. You’ll need to think about how each value stream contributes to your company goals and adopt continuous planning to adjust and shift strategies as you gain the analytics and metrics that provide feedback on how well your strategy is working. 

• Implement Lean workflow and continuous improvement: Now that you have an initial plan, you can implement a Lean workflow. You can look for waste in your processes, such as removing unnecessary work that doesn’t add value and looking for new ways to use your existing resources more effectively. Using your operational plan, you can iterate changes to your workflow and process to continually seek a more effective and efficient way to reach your company goals. 

• Demonstrate value and measure performance: Lean encourages you to look for the value of your process at every step. You will need to track the metrics that will help you understand whether your strategy is successful, which can help you course correct as needed according to the market and client feedback. In this way, Lean portfolio management encourages you to stay agile and able to pivot away from areas of your workflow that are not delivering value while focusing on those that are. 

Learn about Lean portfolio management on Coursera

Lean portfolio management is a strategy you can use to improve your business processes, projects, programs, or investment portfolio using Lean project management principles. If you're ready to take your knowledge further, consider the Google Project Management Professional Certificate, where you’ll learn in-demand skills, and get AI training from Google experts. 

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