What is lean portfolio management (LPM)? 6 steps to start now

Lean portfolio management (LPM) is a new way of managing company portfolios to increase efficiency and boost customer satisfaction. LPM was inspired by the lean methodology, which started small but quickly spread to the masses. 

Lean management began when engineers at Toyota created a system to reduce waste in their manufacturing line. The lean methodology quickly took off, and other industries started to apply these principles to their project workflows. . In this piece, we’ll explain how you can implement lean portfolio management to streamline your processes.

What is lean methodology?

The lean methodology seeks to minimize waste in your organization’s workflow and increase customer value. Japanese engineers first developed the lean methodology at Toyota, but John Krafcik—president and CEO of Hyundai Motor America— introduced lean to project management in his 1988 article titled, “Triumph of the Lean Production System.” 

There are five principles (or steps) that make up the lean methodology:

1. Identify value: Determine the value of your product or service.

2. Map the value stream: Diagram your workflow and compare it to your ideal workflow.

3. Create flow: Remove waste from your workflow to promote efficiency.

4. Establish pull: Pull work from the previous process stage to move it through the project life cycle.

5. Continue to improve: Make continuous improvements to your workflow.

Whether you’re managing a project or a portfolio, you can use these principles to identify weaknesses in your processes and remove anything that doesn’t add value to your project. 

Paired with portfolio management tools, LPM can help you quickly identify waste in your workflow and streamline your systems.  

What is lean portfolio management (LPM)?

Lean portfolio management is an extension of the lean methodology. It uses the five principles of lean to connect business strategy with project execution. As a portfolio manager, you can use lean principles to assess business strategies and allocate appropriate budgets for the execution of those strategies.

There are three dimensions of lean portfolio management:

• Strategy and investment funding: Align and finance the portfolio so that you meet business targets.

• Agile portfolio operations: Enable Agile teams to adapt to change and quickly address issues as they arise.

• Lean governance: Provide guardrails for spending, audit and compliance, and forecasting expenses.

Implementing lean portfolio management will take time, especially if your team is used to a traditional portfolio management system. But once adopted, this new way of managing a portfolio can help you reduce overhead costs and delays. 

Below are the differences between a traditional and lean portfolio to identify which method works best for your team.

The leaner model can also align your investments with your business strategy and increase value for your customers. 

Six steps to lean portfolio management

You can think of lean portfolio management like repairing a car. There are adjustments you must make along the way to get the engine up and running. These six steps can help you implement lean portfolio management for your next project.

1. Assemble your leaders

Repairing a car can take months if you don’t have people with the mechanical knowledge to help you. Similarly, lean portfolio management is easier with a properly assembled team. 

Your first step when managing a portfolio should be to form a group of financially skilled leaders who can help you align business strategy with project execution. 

Tip: To assemble a strong portfolio leadership team, assess the strengths of internal team members or collaborate with your hiring manager to recruit people with the right skills for the job. Portfolio managers must excel at gathering data, monitoring project performance, and influencing those in charge of priority management.

2. Find funding

Even once you have a skilled team ready to repair your car, you can’t get started without the money to buy tools and parts. Lean portfolio management also requires proper funding to turn business strategy into execution. 

Once you know which projects are of highest cost and priority to key stakeholders, assess the company budget so you can confidently allocate resources.

Tip: Finding funding usually means looking within the company’s existing resources and determining where the project can fit into the budget. If the company budget can’t accommodate a project or certain features of a project, communicate that to the project manager and discuss how to restructure the project.

3. Build an operating structure

Now that you have a team of people ready to work on the car and you have the money needed to start your repair, you can develop a game plan for how to fix the car. Will you start with the engine or the carburetor? Will everyone work together or will each person handle a different car part? 

Your company portfolio also needs a game plan. Discuss how you’ll transition to a leaner operational plan with your leadership team. Refer back to the five principles of the lean methodology and identify areas of waste in your original method of portfolio management. 

Tip: Customer satisfaction should be your highest priority when building an operating structure that promotes lean portfolio performance. Use customer feedback to improve your operations and prioritize Agile practices so that your portfolio flow is adaptable.    

4. Implement a lean workflow

Now that you have a game plan, your team can begin the car repairs. If the last car repair you did took a long time because too many people were under the hood, make sure your game plan has everyone working on different areas of the car. While you work under the hood, assign someone to work under the car and someone else to work inside it. This plan will be faster and more efficient.

To create your lean workflow, eliminate unnecessary work or inefficiencies from your portfolio management process. For example, if you were previously delayed in prioritizing projects because you didn’t receive timely notifications from the project manager, you can establish a pull system that notifies you when the previous stage in the process is complete.

Tip: You can establish a pull system with portfolio management software. Kanban tools or Gantt charts can help you visualize the stages of your portfolio management process. Build project dependencies to notify team members when the next stage of the process is ready to begin.

5. Add upgrades and clarity

Once your car repairs are complete, you’ll want to take the finished product for a test drive. This is when you can look out for humming sounds or things that don’t feel quite right. You can then drive the car back to the shop to add any finishing touches so that you’re confident the vehicle is road ready. 

Focusing on lean initiatives should make your portfolio management workflow run smoothly, but because this framework will be an adjustment for your team, you’ll likely need to add clarity and upgrades to polish things out. You can’t achieve operational excellence without flexibility and the constant desire to improve.

Tip: Use change management best practices to roll out the changes between traditional portfolio management and lean portfolio management. By putting a change management process in place, you can make the transition to LPM as painless as possible.

6. Celebrate improvements

Whenever you complete a project, whether it’s a car repair or a product deliverable, it’s important to celebrate your success. It’s rewarding to see a car racing down the road after watching it sit immobile in a junkyard, and it’s also rewarding to see business strategy come to life and satisfy a customer because of your lean budgeting.

Tip: Even if your project doesn’t go as planned, use any mistakes made as lessons to optimize your next project and improve future decision making. If you maintain a portfolio vision that strives to become better, then even projects that don’t end with an increased value will be worth celebrating. 

Improve Agile workflows with lean portfolio management

Transitioning to lean portfolio management requires patience and focus, but when you follow lean principles, you can improve your Agile workflow and increase the value of your delivery. 

With portfolio management software, you’ll have a navigable roadmap to success with all of the features you need including real-time project monitoring, customer communications, and team sharing.