Whether you are a growing SaaS company or a large enterprise with several business lines and products, there is core value in establishing good Portfolio Management practices. It puts a foundation in place that fundamentally enables organizations to align products around the business’ strategic initiatives, and bring objective alignment to prioritization, resources and funding. Portfolio Management is growing in importance as the need to scale Agile grows, and it’s bringing positive tangible business benefits to companies large and small. So, I thought it would be valuable to take a look at Portfolio Management and share a few insights from our own knowledge base and experiences. First, the definition I like:
Portfolio Management is a dynamic decision-making process in which a coordinated set of applications, projects, programs, or products is routinely monitored, analyzed and managed to maximize their effectiveness. Evaluation and prioritization of projects and activities associated with the inventory provide the opportunity to prioritize, accelerate, terminate, or “de-prioritize” portfolio components and to allocate or reallocate associated resources. Source: BiZZdesign Blog 2016
Application Portfolio Management or Portfolio Management—What’s the Difference?
I am asked, what’s the difference between Portfolio Management and Application Portfolio Management (APM)? They really are the same concept. I think of APM as really a subset of the same principles, just applied to software applications. In general, software companies with usually one-to-a-few application products talk in terms of Application Portfolio Management (APM). However, in large complex enterprises, we see a broader definition applied to Portfolio Management because the environment includes much more than just “applications.” So, there is a distinction even though the concept is inherently the same.
What Role Does Portfolio Management Play?
For large projects and enterprise environments, Portfolio Management plays an integral role (within any Scaled Agile framework) because it enables stakeholders to have visibility and communication, so there can be alignment between the business’ investment in product development and value creation for customers that lead to financial results.
Portfolio Management Grows in Enterprise Environments and It’s Good for Business
In large enterprises, Portfolio Management is bringing alignment and conformity to what is often described as a complex, siloed environment that struggles to keep pace with market demands for innovation. From pure organic growth, to growth-from-mergers and acquisitions, their landscapes are in a perpetual state of evolution and expansion, compounding the complexity.
The business feels disconnected from the value it’s products and services deliver creating a compelling need to change.
That’s precisely the purpose of Portfolio Management. Larger enterprises with complex business lines, products and infrastructure apply Portfolio Management because their reality includes, not only the customer-facing software applications, but all the assets for a given business line or multiple business lines—such as, all products and services, business capabilities and processes, internal business software, tools, middleware and databases, servers, networks, desktops, devices etc. Portfolio Management provides a framework that enables the business to understand, measure, and evolve intelligently.
Let’s face it, many enterprise organizations may have pockets of Agile functioning in engineering, which Jez Humble characterized as “Water—Scrum—Fall”. But the reality is, in those scenarios, the visibility and communication are usually limited; and if engineers are trying to present the work they are doing up to management, they often fail to gain traction.
It’s very difficult to bring Agile up through the ranks and across the entire organization. Success isn’t defined by the framework you choose. It has more to do with being an organization and culture with the means and impetus to implement. It requires commitment from the top and a plan that embodies the total organization. And to be clear, in some large enterprises, the “top” may really mean starting with the executives of a division or business unit, rather than the senior corporate level.
Starting with the role of Portfolio Management can actually help. It provides executives with the right context to embrace, and it helps translate what engineering does into tangible business metrics. To get there however, consider the following points based on conversations with our clients—I doubt you will be surprised by any of them.
- Buy-In — Senior executive buy-in and champions at the top to facilitate the changes needed.
- Funding — Funding to implement an organization-wide plan.
- Framework — An Agile framework that the organization agrees upon and scales to work for all levels and across the complex landscape for processes and communication.
- Roles — Organizational change. A clear understanding of the existing roles and how they evolve and co-exist with new roles. In other words, a clear definition of roles and responsibilities for all.
- Change — Change management and training to help the culture embrace the changes.
- Begin — The impetus to begin…execute and stick with it even when unforeseen challenges arise—and there will be challenges that come up.
This is a complex move for any company, but it is being successfully deployed and those enterprise organizations are realizing tangible benefits, while—at the same time—establishing a strong bond between the overarching corporate business initiatives and how their products are imagined and developed.
Application Portfolio Management for the SaaS or ISV
If we think about SaaS and ISVs, they may use Application Portfolio Management (APM) practices because it fits within the scope of their environment. Whether a company is managing one or multiple applications, APM looks holistically at the impact of their product development investment, assesses the full lifecycle value of each application asset and ensures its alignment with the company’s growth strategies.
How do they do this? At the most basic level, a company with a single software product may organize their Portfolio around Epics.
It’s a straightforward way of mapping development to resource and funding needs. And, the framework can accommodate the addition of more software products as the company grows. Here are some important takeaways to consider based on experiences from others working through adoption of Portfolio Management principles:
Creating an Epic List — This is the baseline for organizing the workload and establishing Teams. When you create a list of Epics, add some hierarchy to the list so core functionality is the highest level, then progress downward to smaller features. This is best compiled with input from users, the Product Owner and the Dev group and typically it results in about 3 levels to the List. The List drives two things: the Portfolio Kanban Board and the Teams.
Now that the List exists, many apply the Value Stream Mapping process in order to truly assess the business value of each. Others choose to apply Value Streams only to new ideas/features going forward.
Build the Portfolio Kanban Board — If you are familiar with Agile, then you already know that a Kanban system provides a visual board to help manage the flow of work. Many software teams use Kanban boards to manage their development projects. You can use the same concept at the Portfolio level to track the status of your Portfolio items as they move along in the process. Your Portfolio items would logically be comprised of 2 things: the list of features that are actively being developed, and new ideas and features that would trigger incremental work within an existing Epic, or a new feature altogether.
Frequently the Portfolio Board becomes a macro view for stakeholders. It captures the Value Stream Mapping process for new ideas/features, as well as the approved pipeline of work planned for development and the backlog.
To help you visualize, see the examples boards below. One shows how ideas are assessed to Value Streams and the other more generically shows an overall flow. We believe it’s a good practice to take all the new items/ideas/features and apply the Value Stream mapping process to establish a firm business methodology for growing a product’s functionality. After all, truly building the value case before the business invests resources and funds is fundamentally part of the whole Portfolio Management concept.
Build Feature Teams — Spotify is one of the best examples of creative nomenclature to define all the stakeholders in a scaled Agile framework and worth reviewing. But, whatever you call the Teams, they are where the development work happens. Getting it right-sized and staffed correctly is important. As with many others, we believe the ideal Team size maps to the Two-Pizza Team rule, and each Team should be able to handle a feature end-to-end. The List drives Team creation. And, to keep the process honest, the Business (aka senior management) must agree there are no other “special projects” Teams. All work needs to flow through the Teams established based on the Portfolio Board.
Each Team needs to be properly configured with the right skill sets in order to avoid problems that lead to schedule risks. This is a place where we see companies try to shortcut and it’s a big mistake. In particular, we think two things are important. First, each Team should include the right set of functions to support a complete feature release, such as Quality engineers. Second, the more senior roles, Tech Lead and Scrum Master, must be part of each Team to ensure good decision making and communication. They navigate the relationship with the Product Owner(s), as well as other business stakeholders and keep the work flow on track, as well as, manage the Backlog Board.
Managing the Portfolio — Managing the Portfolio can be as simple as holding a review meeting every six to eight weeks with the Product Owner(s), Tech Leads from the Teams and executive stakeholders. The focus of the discussion should cover where things stand now, resolving emerging issues if any and the pipeline of future Epics with Value Streams mapped.
The Product Owner — This role is critical. We think of it as the arrival and departure point for all things related to the product, the internal representative of the “user,” and vital to communication across the organization. In one definition, “the Product Owner (PO) is a member of the Agile Team(s) responsible for defining Stories and prioritizing the Team Backlog to streamline the execution of program priorities while maintaining the conceptual and technical integrity of the Features or components for the team. It is a scrum development role for a person who represents the business or user community and is responsible for working with the user group to determine what features will be in the product release.”
How Can the Monolithic Application Benefit From Portfolio Management?
This bares mentioning because the monolithic application is still prevalent and many companies work to move toward more modern architectures based on containers and microservices, but this will need careful ROI analysis and justification.
In fact, we have seen a lot of companies who need to move to SaaS start by running their monoliths in a hosted environment, but, this model does not allow for flexible scaling.
So, if you are a SaaS company whose software product is basically a monolithic architecture—and you would like to migrate to microservices—then embracing the idea of Portfolio Management can help. You would follow the sequence described above, and begin by listing the features that could ultimately become services. It’s the first step to understanding how best to break apart functionality into appropriate core services. We’ve published a paper on the topic of migrating from a monolith to microservices, which explains the concepts in much more detail. Renovate to Innovate: How Mediated APIs and Microservices are Enabling Technology Companies to Expose IP, and Deliver Faster Innovation Cycles.
Portfolio Management – It’s Time to Begin
There are frameworks, some software tools and consulting/training firms available to help companies adopt Portfolio Management. In our experience, we work closely with our clients to understand where they are in the spectrum and collaborate with them to make the transformation make sense for their environment.
Some clients want help transforming from Waterfall to Agile; and some larger environments want to Scale Agile by deploying one of the existing frameworks (i.e. SAFe, LeSS or DAD), and others have already established Agile practices and are moving into DevOps.
Whatever the requirement, Daitan augments their engineering resources accordingly, is certified appropriately and comfortable adapting to the environment. The important thing is to begin. Portfolio Management/Application Portfolio Management principles add substantial value to how companies scale product development and at the same time truly understand the value they deliver to customers.
If you have questions, feel free to contact Daitan Group, we’re happy help by answering some questions or discussing your scenario in detail.
Citation: Image by Austin Distel on Unsplash