Over the past 18 months, we’ve had the privilege of partnering with an independent public charity in the USA, guiding them through the transformative journey of implementing lean portfolio strategies. From launching multiple agile release trains (ARTs) to conducting comprehensive value stream mapping workshops, we witnessed firsthand the remarkable success that embracing agile practices can bring. As their agility matured, the organisation recognised an opportunity to unlock even greater value by adopting lean portfolio management (LPM) practices. This critical step aimed to enhance value delivery and ensure strategic alignment across the entire business portfolio. The five basic principles of lean management serve as the foundation for lean portfolio management, guiding efficient value creation and waste minimisation.
Implementing lean portfolio management is essential for organisations striving to align their corporate strategy with execution effectively. The transition to lean portfolio management is rooted in the lean production system and lean management, which originated in manufacturing and have since been adapted to improve efficiency and reduce waste across industries. In our experience as agile consultants, many companies face common challenges when adopting lean portfolio practices and tools at the enterprise level. Integrating agile development and agile principles within LPM helps align business strategy with agile workflow, fostering adaptability and efficient resource allocation. Understanding these challenges and how to overcome them is vital for achieving business agility and maximising customer value through lean principles. Many organizations face these challenges, and success requires assembling a team with the right skills and a strong leadership team to guide the transformation.
Introduction to Lean Portfolio
Lean portfolio management is a modern approach to portfolio management that empowers organizations to maximise value delivery while minimising waste. By applying lean principles to the management of business portfolios, organizations can create a direct connection between business strategy and project execution. This alignment enables faster, more effective responses to changing market conditions and evolving customer needs.
Implementing lean portfolio management (LPM) goes beyond traditional portfolio management by focusing on continuous improvement, transparency, and the elimination of non-value-adding activities. Lean methodology encourages organizations to streamline their portfolio management process, ensuring that every initiative contributes to strategic objectives and delivers measurable value. As a result, organizations that implement lean portfolio management experience greater business agility, increased efficiency, and a stronger ability to deliver value to their customers.
By embracing the lean portfolio approach, organizations can break down silos, foster collaboration across teams, and ensure that their entire portfolio is aligned with the organization’s strategy. This not only accelerates value delivery but also positions the organization to thrive in a rapidly changing business environment.
What Are the Typical Challenges in Relation to Lean Portfolio Management?
Many organisations encounter similar obstacles when implementing lean portfolio management. One significant challenge is the lack of reliable data. Gathering data is crucial for portfolio managers, as it enables them to monitor project performance and make informed decisions. Without accurate, real-time data on project performance and portfolio progress, portfolio managers struggle to identify the most impactful improvement opportunities. This hinders the ability to allocate funding effectively and promote efficiency across the lean workflow.
Another common issue is the prolonged strategy development process. Traditional portfolio management often relies on lengthy, linear planning cycles that delay timely decision-making and hypothesis testing. This slow pace is incompatible with the lean agile way, where continuous improvement and rapid feedback loops are essential.
Inconsistent agile adoption across business functions further complicates alignment. When agile teams and cross-functional teams operate with varying practices, miscommunication and bottlenecks arise, undermining value delivery. This inconsistency can stall the creation of a continuous flow of work and dilute the benefits of agile portfolio operations.
Additionally, solutions developed without a clear link to the broader enterprise strategy risk misalignment with strategic goals. Centralised strategy development often limits understanding and buy-in from those responsible for execution, reducing the overall effectiveness of lean portfolio management practices.
Insights from Industry: Learning from Amazon Web Services
The challenges of aligning strategy and execution are not unique to any one organisation. At the 2023 Business Agility Conference, we gained valuable insights from a presentation by Amazon Web Services (AWS) on their approach to lean portfolio management and business agility. AWS reframed their planning function as “APEX” — Analysis, Planning, and Execution — fostering shared ownership across departments and breaking down silos. This operating structure aligns leadership teams and agile release trains to work collaboratively toward strategic objectives.
AWS also emphasized treating strategy as a series of two-way doors rather than a fixed, long-term plan. This lean approach allows organisations to experiment continuously, adapting their strategy incrementally based on customer feedback and evolving business outcomes. This mindset shift aligns perfectly with lean principles and agile portfolio operations, promoting enterprise agility.
Crucially, AWS highlighted the importance of involving customers and stakeholders directly in strategy development. By focusing strategy around customer value and creating a pull system for feedback, organisations can ensure their lean portfolio management efforts remain relevant and impactful.
“We don’t do strategy to our customers. We want to do it with them.”
— Awais Sheikh, Head of Planning and Execution Management, AWS
How to Improve Alignment Between Strategy and Execution
To successfully implement lean portfolio management strategies and improve alignment between strategy and execution, consider the following best practices:
Visualise the Portfolio
One of the first steps in implementing lean portfolio management is to visualise the current state of the portfolio. Using portfolio management software or simple tools like virtual collaboration whiteboards and post-it notes, stakeholders can map ongoing projects by their current status (e.g., not started, in progress, stuck) and their alignment with strategic themes.
This visualisation provides several benefits: it clarifies how work contributes to the organisation’s strategic goals, informs prioritisation discussions, and helps identify whether the organisation is overcommitting resources. Often, organisations find they have too much work in progress, which impedes flow and reduces value creation. Moving toward a Portfolio Kanban system facilitates continuous flow and lean governance, enabling portfolio managers to monitor project performance more effectively. By visualising work and limiting work in progress, these practices help create flow by removing bottlenecks and ensuring smooth progress of work items through the system.
Over-communicate the “Why”
Teams frequently express frustration when they don’t understand how their work aligns with the enterprise strategy. To address this, leadership teams must clearly communicate the vision and the rationale behind strategic initiatives. It is also essential to align leadership to foster collaboration and ensure strategic alignment across the organization. This involves crafting compelling lean business cases that inspire action and highlight the impact on customers and employees.
At every level, work should be framed with clear hypothesis statements and SMART Objectives and Key Results (OKRs). This focus on outcomes over outputs helps maintain alignment with desired business outcomes and ensures that every effort contributes to maximum value delivery.
Take a Cross-Functional Approach to Strategy Development
Inspired by AWS’s APEX model, involving cross-functional teams early in strategy development fosters alignment and buy-in. Bringing together agile teams, portfolio managers, and customers enables the organisation to treat strategy development as an iterative, lean agile process with minimal viable products (MVPs) that validate assumptions continuously.
We have seen success by hosting strategic planning sessions modelled on Program Increment (PI) Planning events, where leaders present their vision and objectives, and cross-functional teams collaborate on execution plans. It is essential to ensure these teams include members with the right skills, such as mechanical knowledge or financial expertise, to develop and execute strategies effectively. This approach empowers teams, aligns leadership, and builds commitment to strategic goals.
Cultivate a Culture That Supports Experimentation
The success of implementing lean portfolio management hinges on empowering people to make decisions that enhance flow and value creation. Organisations must cultivate a culture that encourages experimentation, transparency, and continuous improvement. By putting people before processes, leadership teams enable agile teams to iterate on strategy and delivery, minimising waste and promoting lean workflow.
Transparency about the organisation’s current state and strategic direction fosters trust and engagement, essential ingredients for enterprise agility and sustainable lean initiatives.
Investment Funding Strategies
Investment funding is a cornerstone of effective lean portfolio management. Unlike traditional portfolio management, which often relies on rigid, project-based funding cycles, lean portfolio management practices advocate for continuous investment in value streams. This shift allows organizations to allocate resources dynamically, ensuring that funding is directed toward the most valuable initiatives that align with strategic objectives.
By applying lean principles to investment funding, organizations can minimise waste and reduce unnecessary overhead costs. Lean portfolio management encourages ongoing evaluation of where resources are best spent, enabling portfolio managers to quickly adapt to new opportunities or changing market demands. This approach not only increases the efficiency of the portfolio management process but also ensures that investment decisions are closely tied to value creation and desired business outcomes.
Focusing on value streams rather than individual projects helps organizations maintain a steady flow of value delivery, supporting long-term strategic goals. By continuously funding the initiatives that matter most, organizations can respond rapidly to customer feedback, drive innovation, and achieve maximum impact from their investment funding. This lean approach to portfolio management empowers organizations to make smarter, more agile decisions that support sustainable growth and competitive advantage.
Supercharge Your Portfolio with Lean Portfolio Management
Implementing lean portfolio strategies is a powerful way to bridge the gap between business strategy and execution. By adopting lean portfolio management practices, organisations can enhance their portfolio management process, align investment funding with strategic themes, and promote a pull system that maximises customer value and business outcomes.
If your organisation is ready to embrace the lean methodology and improve alignment across your business portfolio, consider leveraging portfolio management tools designed for lean governance and agile portfolio operations. These tools support monitoring project performance, facilitate lean budgeting, and enable continuous flow across the portfolio.
To learn more about how lean portfolio management can transform your enterprise agility and drive maximum value, get in touch for a free agile consultation today. Together, we can help you implement lean portfolio strategies that deliver measurable results and sustainable business success.
