Portfolio management and agile: a look at risk and value

Portfolio Management and Agile: A look at portfolio risk and value

with the agile paradigm

A presentation to

PMI Central Florida Chapter John Goodpasture, PMP

and

Alex Walton, PMP

© Copyright 2011 John Goodpasture and Alex Walton

Are portfolio value-risk trade-offs compatible with agile management practices such as:

Dynamic backlogs

Evolutionary scope

Persistent teams

Incremental plans


The Question

Perhaps These are among the issues we’ll address in this

presentation.


The Answer…

The Tension


Portfolio value is planned

Plans - Actions & behavior are systematically sequenced and related

Planning Horizon - A few months to a year or more

Agile effects emerge

Emergence - Unplanned patterns of interaction, actions, and behavior

Planning horizon - A few weeks to several months

Portfolio: The Idea


Project Office

Portfolio 1 Portfolio 2 Portfolio N

Projects of common affinity are grouped

Portfolio Management


Leadership

Business Value

Risk Management

Strategic Alignment

Management

Resource Management

Cross-project Coordination

Project Governance

Value and Risk


Value

The business gets more in return than the stake put at risk

Constituents are more satisfied and better off than before

A system of projects is more effective than a collection of individual projects

Risk

Portfolios diversify business assets among projects

Boundaries between teams and projects isolate unfavorable effects

Redundancy and backup among projects protects business

A SYSTEM is a specific set of structures interconnected in such a way so as to produce specific patterns of desired behavior.

A system NETWORK contains nodes (where the work occurs) and relationships (that carry the value between the nodes).


Systems and Networks

Strategic plans couple relationships between projects

Governance manages project-to-project behavior, mitigating conflicts and priorities

Project office protocols assure information exchange among projects

Redundancy mitigates failure to produce business value from one project or another


Portfolio as a Network

Portfolio Value Risk

Coupling

• Triggers, drivers, data, and control interconnected

• Teamwork effects and behaviors interconnected

• Loose coupling dissipates or blocks bad effects

Coherence • Disparate effects harmonized for

the greater good • “Noise becomes song”

Less energy goes into disharmony

Cohesion • Teams stick together • Systems bend but don’t break

All for one; one for all

Diversification • Value more predictable • Value depends less on any one

project success

Risk spread among many project outcomes


Portfolio as a System Three C’s and a D

Portfolio Management

Coupling

• Co-located teams are tightly coupled • Virtual teams are loosely coupled • Tight coupling fosters accurate and timely communication • Loose coupling fosters innovation

Coherence • Goal alignment promotes the greater good • Strategy aligns allocation of resources • Sequencing logic phases deliverables and adoption

Cohesion • Team coupling drives teams cohesion • Interconnections promote cohesion

Diversification • Risk events impacts are diluted • Process and practices are situationally adapted


Three C’s and a D from a Portfolio View

Plan

•Envision

•Strategize

•Risk adjust

Allocate

•Apportion

•Sequence

•Reserve

Measure

•Analyze

•Act

•Adjust


Portfolio Management –

Plan, Allocate, Measure

Plan

• Envision

• Strategize

• Risk adjust

Allocate

• Apportion

• Sequence

• Reserve

Measure

• Analyze

• Act

• Adjust


Portfolio Management –

Plan, Allocate, Measure

Does Agile fit into portfolios?


Almost any methodology can be made to work on some project.

Any methodology can manage to fail on some project.

Agile does fit, but …

Alistair Cockburn


The dynamics of Agile pose special challenges, but also present unique opportunities


Agile in a Larger Context

Multi-year strategic plan

1-3

Agile Horizon cycles

Annual business portfolio

Agile Iterations

Plan

• Envision

• Sequence

• Prioritize

Do

• Slice

• Develop

• Deliver

Measure

•Reflect

•Adjust •Act


Agile - Plan, Do, Measure

Tensions of Accountability

Project centric

Earned value—the project metric

Measures of effective use of assigned resources

Measures for benchmarking and historical reference

Business centric

Value earned—the business metric

Measures of business success

Measures of customer satisfaction


The Requirements Paradox

•Requirements must be stable for successful development; but… user requirements are never stable

•We don’t want requirements to change, but… because changing requirements are a known risk, we should provoke change now.

It’s about Requirements!

Niels Malotaux

21 Copyright 2011 John Goodpasture, All Rights Reserved

Backlog cycle

Deliverables

Must Do Should

Do

Reflect

Replan

Dynamic Backlog Cycles

Portfolio 1


Portfolio Elasticity

Portfolio plan and value proposition

Agile emergent pattern and Value Proposition

The Portfolio Horizon Patterns emerge, and value is in the eye….

Customers Throughput is what customers buy and use

Stakeholders Throughput improves the business scorecard

Project Each agile iteration produces throughput Each iteration consumes resources, and … Depletes the business balance sheet

Business Throughput restores balance sheet over time


Throughput is Value


Throughput Builds Value

Business value $

Time

Resource consumption

Value Earned

Resource consumption

Value Earned

Project Project

Agile Management

Coupling

• Co-location tightens coupling • War rooms tighten coupling • Stand-up meetings tighten coupling • Iterations or sprints loosen coupling • Object practices loosen coupling

Coherence

• Embedding product managers challenges coherence • Sprint sequencing enables coherence • Re-useable objects reinforce consistency • Emergence weakens coherence


Agile: Three C’s and a D

Agile Management

Cohesion

• Humanity of teamwork emphasized • Loyalty, trust, and sharing creates strong team cohesion • Effective conflict resolution holds things together • Personal accountability and commitment fosters cohesion

Diversification

• Dynamic backlog diversifies risk • Frequent deliveries diversifies early-late adoption risk • Process and practices situationally adapted • Collaboration in co-located settings enables reduces learning

curve effects


Agile: Three C’s and a D


“If the customer is not satisfied, he may not want to pay for our efforts.

If he is not successful, he cannot pay.

If he is not more successful than he already was, why should he [pay]?”

Niels Malotaux

The ultimate test

Summing up!


Portfolios constantly attend to the value-risk trade

Tension exists between emergent value and portfolio plans

At each iteration, cohesion, coupling, and coherence are evaluated anew

Agile focuses on business value [throughput]

The many iterations of agile diversify risk

The ultimate test is customer satisfaction … Business Value & Risk

More in the books

PUBLISHED BY J. ROSS PUBLISHING

Square Peg Consulting, LLC

Thanks for the opportunity to speak to the Central Florida Chapter

John Goodpasture Alex Walton

Contact us

Square Peg Consulting, LLC

[email protected]

[email protected]

3PM, LLC

[email protected]

[email protected]


mailto:[email protected]

mailto:[email protected]


How would you explain emergent outcomes to stakeholders with specific expectations?

Should portfolio managers be in the business of allocating by top down planning?