Why Lean Portfolio Management Made our Decisions Better and Faster

Are you curious about what SAFe and Lean Portfolio Management can bring to your organization? Then this is the right article for you! In this post, Johannes Hinsch, Director Digitalization & Innovation, and Anja Mertens, Project Lead Innovation Management,discuss the advantages of Lean Portfolio Management and share their experiences around Porsche’s agile transformation journey.

Digital disruption has become the norm in today’s global economy. Changing market demands and customer requirements have accelerated the speed in which companies need to innovate and bring new products and solutions to market. As the digital revolution continues to gather pace, traditional approaches to portfolio management are reaching their limits, since they were simply not designed for a digital world.

The complexity of these interconnected challenges puts pressure on companies to explore and apply new ideas and approaches. Many successful enterprises, Porsche included, are already shifting towards new managerial frameworks. In our opinion, organizations that are willing to adopt lean and agile practices and set new standards will gain strategic advantage.

We noticed that our decision making and product development — set up for long and budget-intensive hardware development — were too slow for digital products. That’s why we at Porsche decided to use the Scaled Agile Framework, the world’s leading framework for business agility. As part of our SAFe transformation, we have also decided to introduce Lean Portfolio Management.

Embracing shorter and decentralized planning cycles

But what exactly is the difference between traditional portfolio management and the agile approach? In the traditional approach, product and budget planning is centralized and usually done on a five-to-ten-year horizon, with rigid business strategies that don’t leave much room for short-term flexibility and adaptability. In the Lean Portfolio Management approach, the planning cycles are much shorter and decentralized, with budgets allocated to value streams. By the way, we had started funding product teams rather than projects already before the SAFe implementation, which helped us a lot as we eventually started our SAFe transformation.

Lean management is applied with the major objective to achieve organizational agility

As you may imagine, approving budget with flexible content was a big cultural shift for us at the beginning. But the reason we prefer Lean Portfolio Management is simple. We want to achieve organizational agility. And yet, agility itself is just a means to an end, much like any framework or methodology.

What makes Lean Portfolio Management so effective?

Lean Portfolio Management allows us to make faster and better decisions and deliver excellence to all our customers.

Why Faster?

To begin with, there is no in-depth planning years in advance. Rather than rigidly following a long-term plan for the plan’s sake, we prioritize projects (so called “Epics”) on a quarterly basis, which allows us to react much faster to customer feedback and/or market developments. Don’t get us wrong: although there is no in-dept project planning years in advance, we ensure that the overall portfolio strategy is followed through content and key result guidelines. Every new initiative has to prove its strategic fit and show how it pays into the overall vision. Therefore, we make sure that our teams can align their activities towards the Portfolio vision rather than project milestones.

Furthermore, Lean Portfolio Management gives us a lean approach to budgeting: On the one hand, we allow for dynamic adjustments of what we build. On the other hand, we release budgets to our teams and departments in advance to eliminate uncertainty, instead of approving individual project budgets throughout the year. Linking the success to the product or related outcome KPIs rather than project metrics is the biggest success factor for creating more flexible budgets. It really helps us to drive the right behaviors.

Every three months, we define our joint priorities in a program increment (PI) planning, thereby reducing “planning waste” and keeping everyone focused on the same goals. In other words, we tackle our topics as a team and make sure no project or team gets left behind. Key to this approach is what we call the “Porsche-Takt”: We all follow the same drumbeat — governed by the Lean Portfolio Management, 1.200 people plan at the same time.

Tackling issues together and ensuring that no project or team is left behind are important elements of a successful lean management approach.

How do we decide what to build?

Prioritization plays an important role in Lean Portfolio Management. To better prioritize what needs to be done first, we now use the Weighted Shortest Job First (WSJF) method, which is used extensively in SAFe. It allows us to determine a relative ranking and complete the various projects in the best order (i.e. not simply in chronological order but in the order that generates the highest economic value). Furthermore, we can better react to changes as they occur in the marketplace and deliver the first results after three months.

Early on, we set up the Agile Program Management Office (APMO) with colleagues from different departments and different skills to drive LPM process excellence. APMO collaborates strongly with Lean-Agile Center of Excellence and with the RTE Community.

Why Better?

We measure success: The quality of our end products and their impact (e.g. customer satisfaction) is measured and taken into account in further development. Key to this is hypothesis-based work. Before the heavy-duty development starts, we always hypothesize how the product can solve users’ problems. This allows us to optimize our products in a more targeted manner. In fact, it is important to be able to test these hypotheses as early as possible. That’s why we follow a minimum viable product (MVP) approach, where actual products are developed and tested in incremental steps. If the product or service doesn’t prove the hypothesis, we accept the mistake, move on, and find a better solution. Thus, no products and solutions are developed that do not meet user needs.

Relentless improvement

We are well on our way in our digital transformation journey, and Lean Portfolio Management is one piece of our efforts in this regard. We focus on relentless improvements and have learned and accomplished quite a bit over the past years, but we also know that there is always room for improvement and that there is still much ahead of us. Yet, we are confident to have the right framework at hand to become faster and more customer centric.

Anja Mertens, Project Lead Innovation Management and Johannes Hinsch, Director Digitalization & Innovation

About this publication: Where innovation meets tradition. There’s more to Porsche than sports cars — we are developing new digital products and services — always with our customers in focus. On our Medium blog, we tell these stories. It’s about our #nextvisions, emerging technologies, and the people that drive our digital journey. If you want to know more, follow us on Twitter, Instagram and LinkedIn.

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