Lean Portfolio Management Blog Series Part 3: Organizing for Value
Organizing teams to shift from “imitation LPM” to “real LPM.”
In the previous installment of this blog series, we discussed how organizations implementing LPM treat strategy and some of the signs of imitation LPM in the strategic realm.
In this blog, we’ll explore the funding and team organization signs of imitation LPM.
Organizing Value Streams and Portfolios
One of the most significant changes that impacts an organization moving to lean portfolio management is reorganizing the workflows, funding, and governance around value streams rather than skill silos.
Traditional project management
Traditionally, the people who make up an organization are separated by their skill sets and experience — this is IT, this is Business Development, this is Design — and they’re funded, managed, and trained within those silos. However, that’s not how the company produces value for the customer. To build a solution — value for the customer — the company needs to pull together people from many different silos and coordinate their work on a given project. After the project is complete, those people are back in their silos until the next project comes along.
This method of bringing people together for individual projects is inherently non-agile. The temporary teams rarely get the opportunity to work together for enough time to truly become a cross-functional and self-managed team (unless it’s a massive project with a long time horizon). And, pulling different groups together for each project makes it more challenging to predict scheduling and costs effectively. As a result, the only predictable aspect of the project at the outset is scope, which gets set in stone.
The result is a series of tasks this ad hoc group of people need to trudge through regardless of feedback from the customer or any other changes in the market. They may finish late and go over budget, but the project will get done — even if it turns out to be something the customer can’t even use anymore.
This aspect of business agility is covered thoroughly in the white paper, Project to Product: Building the Right Thing in the Right Way, so check that out for more detail.
Organizing teams into streams of value
A value stream is all the input and resources required for your business to produce a given solution, product, or another form of value to the customer. This includes people and their skills, as described above, and the funding necessary to support those people and the resources they need — materials, training, tools, etc. — to do the work.
Organizing the business around value streams rather than business units makes it easier to maintain agility in the workflow.
If you have a value stream set up, it has a clear solution at its end goal based on what the customer wants, not just a series of tasks decided on months earlier when a project was born. So, if and when customer feedback arrives or the market changes in some way, that end goal — what the customer values — will change. With the business organized around value streams, everyone can pivot as needed with their contributions because everyone’s end goal has changed. There’s no need to keep barreling forward to complete a predetermined project that isn’t creating value for the customer any longer.
But let’s face it, moving from functional teams into value streams is very difficult.
The Hardest Part of Real LPM
And here’s the kicker: Real LPM assumes that work is funded by value streams. It assumes that teams of people are organized around the delivery of products to customers. Strategy and Funding then become aligned because the budget is delivered to the teams of people (the value stream) providing the product, not to functional units or huge individual initiatives.
This is perhaps the most challenging part of implementing LPM: the reorganization of your teams around delivering products and services that customers consider valuable. This is hard because fiefdoms of power are built on budgets, and budgets are built on teams. When you reorganize the people, someone is going to lose control. This is also very hard because financial systems are built around the fiefdoms as well. Financial processes and systems will have to shift to stop funding by functional units or by large initiatives within functional units and start funding by value stream.
Many transformations give up at this stage. Don’t let yours be the next.
In our webinar series on LPM, we explore these topics and touch on some real world examples of companies that are shifting from imitation LPM to real LPM. We invite you to take a look and continue to engage with us on this important topic.
Read the next blog in this series: Lean Portfolio Management Tooling – LPM Blog Series Part 4 >>