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Driving Business Agility With Portfolio Management

Written by: Thomas Martin, CEO, Forward Intelligence Group | Singapore/Philippines/GermanyPortfolio management is an established decision-making practice. Introduced early in an agile transformation it engages executives and managers in an agile strategy definition and execution process that enables realism, learning and adaptation on an organizational level.The recent years have seen an increase of the speed and amount of change often described as VUCA. Organizations have responded in various ways: saving cost, increasing innovation, and digitalizing operations. Sometimes it worked, sometimes it didn’t.The underlying cause for the accelerating change is the fourth industrial revolution (4IR). Through the combination of technologies like AI, robotics, IoT, big data, 3D printing, and blockchain integrated on platforms and exploited by ecosystems the 4IR promises possibilities and automation potentials never seen before.As the speed of change increases further many organizations realize that what they have done so far is not enough. With the 4IR storm gathering strength we realize that we need to do things drastically different and become more flexible, responsive, quick or, in one word: agile.

Embarking on your agile journey

You cannot hide from this. But it will apply to you in varying degrees. The 4IR technologies do affect industries differently and not everybody faces the same speed of and pressure to change. Depending on the speed of change in their sectors and their current (digital) capabilities companies might be able to evolve towards higher levels of agility rather than being forced to leap-frog there like ANZthat replaced its traditional hierarchical organization with an agile organization comprised of 150 teams seemingly over-night.When we discuss with organizations their options to become more agile we first develop a clear understanding about where they stand, where they want to goand where more agility is needed moste.g. when facing customers, making decisions, or allocating resources.Agility comes in all shapes and colours. On a business level it is always individual. It unfolds its power in strategy, processes, systems, people and culture. Achieving it is not a destination but a journey. To get started, you need to identify the first step and take it quickly. The VUCA world does not wait. As you improve in one area, another will emerge that is holding you back. You address this one next. Achieving agility is agile in itself.After identifying the area that requires higher agility you select the appropriate framework, method, or practice to apply depending on the situation and needs of your organization. There are quite a few ones to choose from. Popular ones including Scrum, Kanban, Design Thinking, and SAFe. Most organizations start with introducing Scrum to their software development projects.At this point you will have introduced agile ways of working to a selected part of your organization on a team level. But it never stops there.As more and more teams are successful with it, others take note. The business becomes interested. Adoption increases and moves out of IT into other business areas. So does the visibility creating growing conflict with the traditional ways of working. The days where ‘agile’ could evolve bottom-up and under-cover are over. The need to coordinate top-down emerges.This is the most critical point in an agile journey: Will the organization manage to establish agile ways of working permanently where it is needed most and do so consistently and sustainably? This defines the starting point of an agile transformation: an explicit effort to transform the organization from one that requires big, top-down and ad-hoc change to improve to one that is capable to changing itself evolutionary, bottom-up and continuously.

Starting your agile transformation

An agile transformation creates an agile business covering five agile transformation domains: People, Team and Organization form the execution layers supported by a common and consistent Culture and Leadership.Leadership transformation is the most difficultof the five. Winning over the mindset of the middle managers of an organization is a long-term endeavour. 53% of organizationsare currently in the Scaling phase of the Agility Steps Modelwhere you switch from a bottom-up to a top-down agile transformation approach to address leadership change.Completing the agile leadership transformation takes professional and serious change management efforts and time. Reinforcing and sustaining change of such a magnitude takes many years.Besides change management other pragmatic measures can facilitate and possibly accelerate a leadership transformation. Those include:

  • Creating communities for exchange between agile practitioners to facilitate cross-team learning including managers
  • Introducing team-based incentives and performance management
  • Investing in personal agility
  • Engaging executives and managers in collaborative, agile decision-making using portfolio management
  • In this article I will cover portfolio management in depth and briefly address personal agility at the end. Projects in a world of changeProjects are the traditional vehicles of change. We create them for two reasons: to fix current problems that hold us back and to innovate to achieve our goals. Projects execute our strategy to evolve from where we are to where we want to be.In a world that is highly stable and predictable, we can plot a straight line from where we are and where we want to be. Then we plan the projects to take us there and execute them one after the other. That is the theory.In a VUCA world, things interfere all the time: a new competitor, an economic crisis, a new technology. Project plans are often challenged as soon they are devised. Dealing with those challenges on a project level benefits from superior project management skills and an agile project management approach, for example.But executing in a VUCA world takes more than doing the projects right. We need to do the right projects. Even worse, what is right changes constantly as our environment changes around us as we progress.To manage, we need (project) portfolio management: It enables an organization to do the right projects by reviewing a group or all projects together and to keep them on track.Signs that you may need project portfolio management include:
  • Too many ideas, not enough time
  • Constantly changing priorities
  • Lack of resources
  • Unclarity about the status of projects
  • Project Portfolio management is a permanent organizational function that continuously aligns:
  • Strategic objectives : What an organization wants to achieve?
  • Projects : How an organization executes to achieve its objectives?
  • Resources : How an organization optimally allocates people, money and other assets to maximize project value?
  • Environment : What are the external changes, developments and trends that may have an impact?

The project portfolio management model describe here is called strategic project portfolio managementas it combines the external perspective comprised of the environment and objectives with the internal perspective comprised of projects and resources.Strategic Project Portfolio Management is conducted in portfolio board meetings. They are held regularly (e.g. monthly) on a departmental, functional and/or company-wide level.Portfolio boards meetings are moderated discussions between the business owners of the projects, typically executives or high-level managers. The moderator is the project portfolio manager, typically a member of the PMO.Let’s have a look how those discussions take place from the perspective of the four areas of Strategic Project Portfolio Management. 1. Strategic ObjectivesDefining SMARTobjectives requires a realistic picture on your capabilities, capacity, and situation. As an example, I have seen organizations, that are limited in their ability to execute against their vision not by their imagination but by their access to talent.As part of a portfolio board meeting you will discuss and decide how you need to adjust your strategic objectives in response to the insights you gained during executing your projects, changing resource situations as well as new developments in your external environment. 2. Environment The continuous monitoring of an organizations environment falls in the hands of a strategic foresight functionthat conducts continuous horizon scanning e.g. using a PESTLE approach to identify, assess and priorities trends that are relevant for the organization. It then operationalizes those trends in two ways:

  • Suggest new projects in the area of innovation, risk mitigation or research to understand and exploit the trends.
  • Informs the existing projects about environmental changes that may impact them.
  • As part of a portfolio board meeting you will discuss and decide how to reassign resources, re-prioritize or stop existing projects, or launch new ones as well as how to adjust your strategic objectives and KPIs in response to the environmental changes detected by your strategic foresight activities. 3. ResourcesIn a VUCA world organizations need to change faster and undertake more projects. This not only increases the need for better project management skills on a personal and organizational level but can also lead to burn-out and attrition - often among your best people. At the same time, financial reserves are stretched thinner. Resource shortages are an increasing cause of project challenges with our clients and often the main reason for them to adopt portfolio management.As part of a portfolio board meeting you will identify resource shortages, discuss and decide about how to optimize resource assignments to the most value-adding activities and protect your people by re-assigning staff from one project to another, adding new internal and external staff or avoiding waste by stopping runaway projects that don’t generate sufficient benefits anymore. 4. ProjectsProjects are the primary way to execute strategy. Projects with a clear and significant contribution to the strategy are often labelled “strategic”. Project portfolio management maps the strategic objectives to each project and tracks the contribution of each project to the achievement of the strategic objectives.As part of a portfolio board meeting you will discuss the status of each project and the impact of external changes on the project business cases and decide how their strategic objective mapping has to be adjusted and optimize the resource assignment accordingly. 5. ImplementationImplementing project portfolio management starts with cataloguing all existing projects. It then makes operational decisions about assigning resources to the currently running projects in one part of the business. Then, it moves on to include other project types and launches new projects while it is rolled-out to other parts of the organization and becomes increasingly strategic by considering environmental factors.During its project portfolio management maturity journey one of our customers started to dedicate more and more resources to managing through projects e.g. by using more dedicated, full-time project managers and adopting an agile way of managing the project portfolio that launches new projects as soon as resources become available.As a mature and proven method, portfolio management fits well into established organizations and is easy to implement. It does not have the novelty characteristics of newer agile methods that may make them harder to introduce and accept.Compared to a longer-term and complex culture and leadership transformation portfolio management does not challenge the structure of an organization. It works with the established power structure and facilitates agile decision making. Transparency, trust & alignmentProject portfolio management reports the status of projects objectively to executives. Often for the first time in an organization it creates transparency on the status of projects in the area of responsibility of each executive. On a single page it will be visible whose projects are running well, and which are not. Some project sponsors may feel challenged by this. Blaming and finger-pointing may occur. At least initially.With good moderation this will change into a situation where the executives will trust and support each other to be successful with their projects. At that point in time, you will see productive discussions about how and where to assign resources from across the organization to optimize the overall achievement of the corporate, strategic objectives instead of just the individual sponsors’ objectives.This creates a prosperous environment where executive align on the corporate priorities, collaborate effectively and make decisions jointly in the best interest of the organization. Finding answers to critical questionsPortfolio Management engages the executive leadership team to regularly revisit key questions that are critical for the success of the organization: Realism:
  • Do we have an open mind and are we listening properly?
  • Do we understand what is going on in the external environment?
  • Do we understand what is important and urgent?
  • Do we know our capabilities and capacity?
  • Results:
  • Do we respond quickly and powerfully enough to the challenges we face?
  • Are our projects producing the results we want?
  • Are the results we are producing sustainable in the long term?
  • Strategy
  • What is achievable in the current situation?
  • What is desirable in the current situation?
  • Execution
  • Are we having enough resources in the right quality and quantity for our projects?
  • Are we on track with our projects?
  • Are we achieving our objectives on a project and organization level?
  • An organization that asks and answers these questions regularly should be on a good track and will remain agile and responsive to change. Complementing Portfolio Management with Personal AgilityPeople make decisions. Leaders and managers are people. Those questions above are posed and answered by individuals first before they are discussed in a portfolio board meeting. Investing in the creation of personal capabilities that open minds, establish a growth mindset, and create mental agility improve organizational decision-making quality and create an environment conductive for change.People who understand what ‘agile’ means for them are more likely to support an agile transformation. Investing in people agility is an effective bottom-up measure that complements portfolio management and an agile transformation particularly well. It has a wide organizational reach and can be executed independently.A suitable framework to improve Personal Agility is the Personal Agility Lighthouse Model.Its seven competencies address very similar questions to portfolio management on a personal level:
  • Educational Agility: Do we have an open mind and are we listening properly?
  • Change Agility: Are we realistic about what we can achieve with our current resources in the current situation?
  • Political Agility: Do we understand what is going on in the external environment?
  • Emotional Agility: Are we taking charge of our moods, thoughts, and behaviours?
  • Cerebral Agility: Do we respond quickly and powerfully enough to the challenges we face?
  • Learning Agility: What are our capabilities and resources?
  • Outcomes Agility: Are we producing the results we want and are the results we are producing sustainable in the long term?
  • An organization that asks and answers these questions regularly is on a good track. It will remain agile and be seen as responsive to change. Personal Agility Lighthouse™ (PALHTM) Model created by the founders of AgilityDiscoveries facilitates the speed and change to achieve continuous competitive advantage in serving the organization and its multiple stakeholders. Conclusion Portfolio management, ideally in combination with personal agility, is a great starting point for developing agile business capabilities top-down e.g. as part of an agile transformation. It establishes agile decision-making capabilities on an organizational level. It facilitates openness by considering the external environment. It implements a pragmatic way of continuous executive collaboration over the alignment of external developments, strategic objectives, execution and resources. It enables an organization to assess and adjust its course of action continuously. It instils realism and urgency to act and enables an agile strategy definition and execution process. It facilitates continuous learning and adaptation on an organizational level ensuring success in an VUCA world.Thomas Martin, MBA, PMP, PSM, SPC is the CEO of Forward Intelligence Group, a business agility coach and consultant and the creator of the My Business Agility Framework for business success in VUCA timesa brand of Forward Intelligence Group, a foresight and business agility consultancy in Singapore, the Philippines and Germany. He can be reached at [email protected].

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