portfolio management and agile: a look at risk and value
DESCRIPTION
A discussion of portfolio management in the context of Agile projects and methodsTRANSCRIPT
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
© Copyright 2011 John Goodpasture and Alex Walton
The Question
Perhaps These are among the issues we’ll address in this
presentation.
© Copyright 2011 John Goodpasture and Alex Walton
The Answer…
The Tension
© Copyright 2011 John Goodpasture and Alex Walton
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
© Copyright 2010 John Goodpasture and Alex Walton
Project Office
Portfolio 1 Portfolio 2 Portfolio N
Projects of common affinity are grouped
Portfolio Management
© Copyright 2011 John Goodpasture and Alex Walton
Leadership
Business Value
Risk Management
Strategic Alignment
Management
Resource Management
Cross-project Coordination
Project Governance
Value and Risk
© Copyright 2011 John Goodpasture and Alex Walton
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).
© Copyright 2011 John Goodpasture and Alex Walton
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
© Copyright 2011 John Goodpasture and Alex Walton
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
© Copyright 2011 John Goodpasture and Alex Walton
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
© Copyright 2011 John Goodpasture and Alex Walton
Three C’s and a D from a Portfolio View
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
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
Does Agile fit into portfolios?
© Copyright 2011 John Goodpasture and Alex Walton
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
© Copyright 2011 John Goodpasture and Alex Walton
The dynamics of Agile pose special challenges, but also present unique opportunities
© Copyright 2011 John Goodpasture and Alex Walton
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
© Copyright 2011 John Goodpasture and Alex Walton
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
© Copyright 2011 John Goodpasture and Alex Walton
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
© Copyright 2011 John Goodpasture and Alex Walton
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
© Copyright 2011 John Goodpasture and Alex Walton
Throughput is Value
© Copyright 2011 John Goodpasture and Alex Walton
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
© Copyright 2011 John Goodpasture and Alex Walton
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
© Copyright 2011 John Goodpasture and Alex Walton
Agile: Three C’s and a D
© Copyright 2011 John Goodpasture and Alex Walton
“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!
© Copyright 2011 John Goodpasture and Alex Walton
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
3PM, LLC
© Copyright 2011 John Goodpasture and Alex Walton
© 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?