Lean-Agile Portfolio Management for a Modern Strategic Planning

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Lean Budget Guardrails

Content Page. Lean Budget Guardrails describe the policies and practices for budgeting, spending, and governance for a specific portfolio.

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We are all familiar with guardrails on highways. They are put there to keep a simple mishap from turning into a full-blown catastrophe. If you go a little off course, the rails help you regain the path towards your destination.

—Anonymous

Lean Budget Guardrails

SAFe provides strategies for Lean budgeting that eliminates the overhead of traditional project-based funding and cost accounting. In this model, LPM maintains appropriate levels of oversight through the allocation of value stream budgets and by applying Lean budget guardrails. This way, enterprises can have the best of both worlds: a development process that is far more responsive to market needs, along with professional and accountable management of spending.

Details

Every SAFe portfolio operates within an approved budget for the development and deployment of systems and

Solutions⁠

that the Enterprise needs to meet its strategic objectives. As described in the

Lean Budgets⁠

article, the portfolio’s total budget is allocated to individual value streams by

Lean Portfolio Management⁠

(LPM) and portfolio stakeholders. The value stream’s budget funds the people and resources that will help achieve the current

Portfolio Vision⁠

and

Roadmap⁠

Establishing guardrails help ensure that the mix of investments addresses both near-term opportunities and long-term strategy, that investments in technology, infrastructure, and maintenance aren’t routinely ignored, and that large investments are approved appropriately. Figure 1 illustrates four Lean budget guardrails:

Guiding investments by horizon

Applying capacity allocation to optimize value and solution integrity

Approving significant initiatives

Continuous Business Owner engagement

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Figure 1. SAFe Lean budget guardrails

The first two guardrails are quantitative, guiding the allocation of investments within the approved budgets. The last two are process-related and are mainly qualitative, establishing how the budgets are governed. These guardrails are described in the sections that follow.

Guardrail 1: Guiding Investments by Horizon

As described in Lean Budgets, portfolio investments are organized in accordance with investment horizons that reflect four time horizons. The amount of budget that a given value stream allocates to solutions in these horizons determines the near- and long-term health of both the value streams and portfolio.

For example, a value stream solely focused on a Horizon 1 solution may be under-investing in future solution innovations, creating long-term risk. This may be balanced by the portfolio’s intention to move the solution into Horizon 0 for subsequent decommissioning to enable the value stream to focus on other, more promising solutions. Accordingly, LPM establishes portfolio-level guidance for investments to optimize the whole, while promoting decentralization so that individual value streams can optimize their solutions, as Figure 2 illustrates.

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Figure 2. Investment horizon budget guardrail

The example in Figure 2 shows that LPM has established different allocations for investments in solutions for each investment horizon. While this may be a healthy mix for a technology business, every portfolio and value stream has to consider its current context in determining their investment allocations for each horizon. A newly created value stream might allocate significantly more of their budget to Horizon 2 because it simply doesn’t have any solutions in Horizon 1; an established value stream that is retiring legacy solutions with substantial technical obsolescence might allocate more budget to Horizon 0. For more guidance on allocations for various industries see [2].

Guardrail 2: Apply Capacity Allocation

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Lean Budgeting⁠

enables decentralized decision-making and more efficient execution. However, one of the challenges every ART and Solution Train faces is how to balance the backlog of new business Features with the need to continuously invest in the Architectural Runway, and in maintaining current systems, avoiding velocity reduction and the need for wholesale replacement of components or solutions due to technological obsolescence.

Balancing business features and enablers complicates the challenge of prioritizing work, since different forces can pull the teams in different directions, as Figure 3 shows.

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Figure 3. Balancing business features and enablers

One solution to this challenge is that value streams (and ARTs) apply capacity allocation as a quantitative guardrail to determine how much of the total effort can be allocated for each type of activity for an upcoming Program Increment (PI), as shown in Figure 4. Each value stream should adapt the capacity allocation categories or add new ones as needed.

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Figure 4. Balancing the forces on the program backlog

Capacity Allocation Example Policies

Each value stream should develop explicit policies for managing capacity allocation. Following are example policy statements that many ARTs and Solution Trains have found useful:

At each PI boundary, we agree on the percentage of capacity to be devoted to new features (or capabilities) versus enablers, and tech debt and maintenance. Other capacity types may apply as well such as the percentage of capacity allocated to a specific epic.

We agree that Product and Solution Management have the authority to prioritize program and solution backlog items.

We agree to prioritize the business and enabler features and capabilities based on economics and in collaboration with architects.

We agree to collaborate on sequencing work in a way that maximizes customer value and minimizes technical debt.

While the agreed-to policies can persist for some time, the amount of capacity allocated will change periodically based on the context. In the context of an ART, the capacity allocation decision can be revisited as part of backlog refinement in preparation for PI planning, while Solution Management and Solution Architect/Engineering make similar choices ahead of pre-PI planning.

Guardrail 3: Approving Significant Initiatives

While each value stream is funded in an effort to promote empowerment and local decision-making authority, it is reasonable to ensure that significant investments are responsibly governed.

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Figure 5. Epics that exceed the portfolio threshold require LPM approval

Figure 5. shows that a significant initiative has been identified. It then goes through a decision filter to determine whether or not it exceeds the portfolio epic threshold, which is established by LPM.

Below threshold: If the epic estimate is below the portfolio epic threshold, approval is managed through the Program or Solution Kanban systems.

Above threshold: If the epic estimate exceeds the portfolio epic threshold, it requires review and approval through the

Portfolio Kanban⁠

system, regardless of which level the initiative originates. The Portfolio Epic threshold is defined by LPM to determine which Epics are a portfolio concern. Example thresholds include: Forecasted epic cost, forecasted number of PIs to implement an epic, strategic importance of the epic or a combination of these factors.

Guardrail 4: Continuous Business Owner Engagement

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Business Owners⁠

are uniquely qualified to ensure that the funding allocated to value streams is going toward the right things. Therefore, they serve as a critical guardrail that ensures that the priorities of the ARTs and Solution Trains are in alignment with LPM, customers and Product and Solution Management, as illustrated in Figure 6.

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Figure 6. Continuous Business Owner engagement

Figure 6 shows the minimum activities that Business Owners should actively participate in before, during and after PI execution. They are briefly described next and covered in more detail in the

Business Owners⁠

article.

Preparing for the upcoming PI – Business Owners ensure that ARTs and Solution Trains are allocating sufficient capacity for features, enablers and technical debt and maintenance, as well as providing input on prioritization of Features and Capabilities using

Weighted Shortest Job First (WSJF)⁠

. Business Owners also collaborate with Product and Solution Management to assure that the work planned for the PI contains the right mix of investments that address near-term opportunities (horizon 1), long-term strategy (horizon 2 and 3) and that sufficient capacity is allocated for decommissioning solutions (horizon 0).

PI Planning – During PI planning

Business Owners⁠

actively participate in key activities, including the presentation of the vision, draft plan review, assigning business value to team PI objectives, and approving final plans.

Inspect & Adapt (I&A) Workshop – During the I&A workshop,

Business Owners⁠

provide feedback on the solution’s ‘fitness for purpose’ during the System Demo (or Solution Demo). The Business Owner’s feedback is critical, as only they can give the guidance the train needs to stay on course or take corrective action. Additionally, they help assess actual value achieved versus plan, and they participate in the problem-solving workshop that follows.

Learn More

[1] Ries, Eric. The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. Crown Business, 2011.

[2] The example allocations shown in this figure were suggested in the Harvard Business Review article located at https://hbr.org/2012/05/managing-your-innovation-portfolio

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Lean Budgets Content Page. Lean Budgets is a Lean-Agile approach to financial governance which increases throughput and productivity by reducing the overhead and costs associated with project cost accounting.⁠

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Scaled Agile Framework - SAFe 5 Header Page. Here you may find a list of contents with all the Knowledge associated to the Portfolio Level of the Scaled Agile Framework (SAFe 5)⁠

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Portfolio Kanban Content Page. The Portfolio Kanban system is a method to visualize and manage the flow of portfolio Epics, from ideation through analysis, implementation, and completion.⁠

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Lean Budget Guardrails

Details

Guardrail 1: Guiding Investments by Horizon

Guardrail 2: Apply Capacity Allocation