What is Lean Portfolio Management and What Does it Have to do With Decision-making?

Lean software development is a very popular framework that aims to optimize production of software by eliminating waste and delivering features of value to the customer. Lean software development is a methodology adapted from the Toyota Production System, which later became known as lean manufacturing. 

Let’s break down the terminology as it pertains to software development:

• Lean – elimination of wasteful activities. A wasteful activity is any activity that does not add customer value, i.e., something that a customer would not be willing to pay for.
• Portfolio – a set of software solutions.
• Management – the efficient application of resources to produce solutions in alignment with strategy.
  

The three activities in LPM that involve measurement and decision-making are:

• Setting Portfolio Strategy – Formulation and prioritization of strategic themes in alignment with portfolio goals  and the key result indicators for measuring progress.

• Lean budgeting – Allocation of portfolio budgets to development value streams, which consists of all the people, processes, and other resources needed to create value for the customer. 

• Feature backlog prioritization– Prioritization of features to maximize value delivery and minimize cost.

The developers of these LPM activities prioritize minimizing waste over accuracy. This is understandable because it is considered wasteful to spend a lot of time on accuracy amidst constant change. But if the right methodologies are used, accuracy, and other benefits such as explicit linkage of execution to strategy can be gained without adding much overhead, if any at all.

In our next LPM blog posts, we’ll identify how we can meaningfully improve the value of strategic themes, results indicators, value stream budgets, and feature or solution backlogs.

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