Adaptive Portfolio Management

From Scrum Coach Retreat Wiki

Contents 1 Definition 2 Adaptive Portfolio Credo 3 Contributors 4 Problems with Traditional Portfolio Management 5 Adaptive Portfolio Management Practices 6 Backlog Reconciliation 7 Value and Allocation 8 Example Approaches 9 Portfolio Management Metric Musings 9.1 In Planning 9.2 Reevaluating 9.3 After project delivery 10 References

Definition

Adaptive Portfolio Management is the discipline of regularly changing the priority of business initiatives and resource commitments to maximize total portfolio return.

This is implemented by:

1. Creating and managing an inventory of strategic initiatives
2. Prioritizing initiatives based on business drivers
3. Allocating budget to initiatives to maximize value
4. Periodically re-evaluating allocations based on changing needs
5. Transparently communicating across the organization

Adaptive Portfolio Credo

We value:

• Optimizing the holistic portfolio over Protecting departmental budgets
• Courage to change over Following a plan
• Ability to evaluate the portfolio on a frequent basis over Infrequent (i.e. annual) planning cycles
• Responding to emerging opportunities over Sticking to the plan
• Maximizing value over Managing cost
• Collaborating on decisions over Centralized authority

We follow these principles:

• Apply a consistent calculation to determine business value
• Apply a common estimation methodology to portfolio initiatives
• Apply a clear definition of enterprise risk
• Limit portfolio work in process (WIP) to optimize ROI, IRR, and organizational liquidity
• Employ smaller projects to reduce risk, shorten time-to-market, minimize budget commitments, and increase portfolio diversity
• Develop a clear portfolio vision to create alignment across business units
• Ensure visibility of portfolio priorities and programs' status across the enterprise
• Generate and prioritize a holistic portfolio through frequent face-to-face communication and collaboration across the organization
• Periodically re-allocate funds from lower value initiatives to higher value initiatives
• Frequently review the portfolio to:
  • Enable rapid course corrections
  • Allow the organization to identify and harness changes that will result in the highest value
  • Maintain flexibility to quickly take advantage of emerging market opportunities

Contributors

The following people contributed to creating the Adaptive Portfolio Credo 12/8/2011 - 12/9/2011

• Larry Cross
• Brad Swanson
• Colin O'Neill
• Mike McGonagle
• Bob Sarni
• Tony Malinowski
• Alston Hodge
• Tammy Henderson
• Dan Greening
• Jade Meskill
• Bryan Stallings
• Chris Ruch

Problems with Traditional Portfolio Management

Adaptive Portfolio Management Practices

The following are practices of Adaptive Portfolio Management:

• Prioritizing Initiatives on Business Value
• Estimation
• Incremental Budgeting
• Executive Orientation
• Allocation of Initiatives to Budget
• Review of Capacity vs. Performance

Backlog Reconciliation

Value and Allocation

Example Approaches

Portfolio Management Metric Musings

In Planning

(capital expenditures)

• Forecasting project value (remember we value small project size). IRR, NPV, ROI, Payback period
• Number of people required
• Capacity
• Total project score (matrix)
• Start-up cost
• Breakdown by project type (image)
• Risk vs. reward (image)
• (image)

Reevaluating

(non capital considerations, stakeholder satisfaction relevant)

• Project performance metrics
• Dollar risk
• Release burn-up (scope, velocity, sprint-by-sprint)
• Quality data (If team has solid practices, we have better trust for time-to-complete, cost, and other metrics. Otherwise, we are doubtful of these metrics and must adjust for risk)
• Cost vs. value of change
• Cost of delay for an initiative pending start
• Exit cost (write off, redirect the team)
• Number of people required
• Current $ / Future $
• Capacity

After project delivery

(stakeholder satisfaction relevant)

• Quality data
• Actual business case results (IRR, Rev, NPV, etc.)
• Customer satisfaction survey results (NPS, etc.)
• Features delivered vs. features planned

References

[1] Daniel Greening. Enterprise Scrum: Scaling Scrum to the Enterprise Level. 2010 43rd Hawaii International Conference on System Sciences (HICSS), Koloa, Kauai, Hawaii January 5-8, ISBN: 978-0-7695-3869-3 (10 pages).

[2] Dean Leffingwell. Agile Software Requirements: Lean Requirements Practices for Team, Programs, and the Enterprise. Addison Wesley, 2011.

[3] Jade Meskill. Agile Portfolio Management Game. Description and downloadable game materials. Blog entry. 9 Dec 2011.

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

[5] John Rudd and Bryan Stallings. SolutionsIQ Webinar: Portfolio Management. Presentation and video (downloading requires registration), 2011.

Summary: As organizations adopt agile practices, they often stumble when it comes to determining how to reconcile their agile projects with their existing portfolio and governance policies. What worked for a traditional project lifecycle may not be appropriate for agile projects. This webinar introduces new methods and techniques for managing agile project portfolios. You will learn how these methods provide companies with the ability to systematically improve expected return by actively responding to market and business changes.

[6] Michele Sliger and Stacia Broderick. The Software Project Manager's Bridge to Agility. Addison-Wesley Professional, 2008.

[7] Portfolio Management Google Group. Email group created at Scrum Coaching Retreat 2011, Boulder Colorado.