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

The Question
Are portfolio value-risk trade-offs compatible with agile management practices such as:
Dynamic backlogs Evolutionary scope Persistent teams Incremental plans

Copyright 2011 John Goodpasture and Alex Walton

The Answer

Perhaps
These are among the issues well address in this presentation.

Copyright 2011 John Goodpasture and Alex Walton

The Tension

Portfolio value is planned Plans - Actions & behavior are systematically sequenced and related

Agile effects emerge Emergence - Unplanned patterns of interaction, actions, and behavior

Planning Horizon - A few months to a year or more

Copyright 2011 John Goodpasture and Alex Walton

Planning horizon - A few weeks to several months

Portfolio: The Idea

Projects of common affinity are grouped Project Office Portfolio 1 Portfolio 2 Portfolio N

Copyright 2010 John Goodpasture and Alex Walton

Portfolio Management

Leadership
Business Value

Management
Resource Management

Risk Management
Strategic Alignment

Cross-project Coordination
Project Governance

Copyright 2011 John Goodpasture and Alex Walton

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

Copyright 2011 John Goodpasture and Alex Walton

Systems and Networks

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).

Copyright 2011 John Goodpasture and Alex Walton

Portfolio as a Network
Strategic plans couple relationships between projects Governance manages project-toproject 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
Copyright 2011 John Goodpasture and Alex Walton

Portfolio as a System Three Cs and a D

Portfolio Coupling Value Triggers, drivers, data, and control interconnected Teamwork effects and behaviors interconnected Disparate effects harmonized for the greater good Noise becomes song Teams stick together Systems bend but dont break Value more predictable Value depends less on any one project success Risk Loose coupling dissipates or blocks bad effects Less energy goes into disharmony All for one; one for all Risk spread among many project outcomes

Coherence Cohesion Diversification

Copyright 2011 John Goodpasture and Alex Walton

Three Cs and a D
from a Portfolio View
Portfolio Management Co-located teams are tightly coupled Virtual teams are loosely coupled Tight coupling fosters accurate and timely communication Loose coupling fosters innovation

Coupling

Coherence

Goal alignment promotes the greater good Strategy aligns allocation of resources Sequencing logic phases deliverables and adoption Team coupling drives teams cohesion Interconnections promote cohesion Risk events impacts are diluted Process and practices are situationally adapted

Cohesion

Diversification

Copyright 2011 John Goodpasture and Alex Walton

Portfolio Management

Plan, Allocate, Measure

Plan Envision Strategize Risk adjust

Allocate Apportion Sequence Reserve

Measure Analyze Act Adjust

Copyright 2011 John Goodpasture and Alex Walton

Portfolio Management

Plan, Allocate, Measure

Measure
Analyze Act Adjust

Plan
Envision Strategize Risk adjust

Allocate
Apportion Sequence Reserve
Copyright 2011 John Goodpasture and Alex Walton

Does Agile fit into portfolios?

Copyright 2011 John Goodpasture and Alex Walton

Agile does fit, but

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

Alistair Cockburn

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

Copyright 2011 John Goodpasture and Alex Walton

Agile in a Larger Context

Agile Horizon cycles Multi-year strategic plan

Agile Iterations

Annual business portfolio

1-3 Copyright 2011 John Goodpasture and Alex Walton

Agile - Plan, Do, Measure

Plan Envision Sequence Prioritize

Do Slice Develop Deliver

Measure Reflect Adjust Act

Copyright 2011 John Goodpasture and Alex Walton

Tensions of Accountability

Project centric
Earned valuethe project metric Measures of effective use of assigned resources Measures for benchmarking and historical reference

Business centric
Value earnedthe business metric Measures of business success Measures of customer satisfaction

Copyright 2011 John Goodpasture and Alex Walton

Its about Requirements!

The Requirements Paradox Requirements must be stable for successful development; but user requirements are never stable We dont want requirements to change, but because changing requirements are a known risk, we should provoke change now.

Niels Malotaux

Dynamic Backlog Cycles

Must Do Should Do Deliverables

Backlog cycle Reflect

Replan

Copyright 2011 John Goodpasture, All Rights Reserved

21

Portfolio Elasticity
Portfolio plan and value proposition
Portfolio 1

Agile emergent pattern and Value Proposition

Copyright 2011 John Goodpasture and Alex Walton

The Portfolio Horizon

Patterns emerge, and value is in the eye.

Throughput is Value

Customers Stakeholders Project Business

Throughput is what customers buy and use Throughput improves the business scorecard Each agile iteration produces throughput Each iteration consumes resources, and Depletes the business balance sheet Throughput restores balance sheet over time

Copyright 2011 John Goodpasture and Alex Walton

Throughput Builds Value

Business value $
Resource consumption
Value Earned Resource consumption Value Earned

Time
Project

Project

Copyright 2011 John Goodpasture and Alex Walton

Agile: Three Cs and a D

Agile Management Co-location tightens coupling War rooms tighten coupling Stand-up meetings tighten coupling Iterations or sprints loosen coupling Object practices loosen coupling Embedding product managers challenges coherence Sprint sequencing enables coherence Re-useable objects reinforce consistency Emergence weakens coherence

Coupling

Coherence

Copyright 2011 John Goodpasture and Alex Walton

Agile: Three Cs and a D

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

Cohesion

Diversification

Copyright 2011 John Goodpasture and Alex Walton

The ultimate test

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
Copyright 2011 John Goodpasture and Alex Walton

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

Copyright 2011 John Goodpasture and Alex Walton

More in the books

Square Peg Consulting, LLC

PUBLISHED BY J. ROSS PUBLISHING

Thanks for the opportunity to speak to the Central Florida Chapter

John Goodpasture

Alex Walton

Contact us

Square Peg Consulting, LLC

info@sqpegconsulting.com john.g@sqpegconsulting.com

3PM, LLC
alex@3pmllc.com alexanderwalton@gmail.com

Copyright 2011 John Goodpasture and Alex Walton

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

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

Copyright 2011 John Goodpasture and Alex Walton