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

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 Tension Portfolio value is planned Agile effects emerge Plans - Actions & behavior Emergence - Unplanned are systematically patterns of interaction, sequenced and related actions, and behavior Planning Horizon - A few Planning horizon - A few months to a year or more weeks to several months© Copyright 2011 John Goodpasture and Alex Walton

Portfolio Management Leadership Management Business Value Resource Management Risk Management Cross-project Coordination Strategic Alignment Project Governance© Copyright 2011 John Goodpasture and Alex Walton

Value and Risk Value Risk The business gets more in return than Portfolios diversify business assets the stake put at risk among projects Constituents are more satisfied and Boundaries between teams and better off than before projects isolate unfavorable effects A system of projects is more effective Redundancy and backup among than a collection of individual projects protects business projects© 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-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 System Three C’s and a D Portfolio Value Risk • Triggers, drivers, data, and • Loose coupling control interconnected Coupling dissipates or blocks bad • Teamwork effects and behaviors effects interconnected • Disparate effects harmonized for Less energy goes into Coherence the greater good disharmony • “Noise becomes song” • Teams stick together Cohesion All for one; one for all • Systems bend but don’t break • Value more predictable Risk spread among many Diversification • Value depends less on any one project outcomes project success© Copyright 2011 John Goodpasture and Alex Walton

Three C’s and a D from a Portfolio View Portfolio Management • Co-located teams are tightly coupled • Virtual teams are loosely coupledCoupling • Tight coupling fosters accurate and timely communication • Loose coupling fosters innovation • Goal alignment promotes the greater goodCoherence • Strategy aligns allocation of resources • Sequencing logic phases deliverables and adoption • Team coupling drives teams cohesionCohesion • Interconnections promote cohesion • Risk events impacts are dilutedDiversification • Process and practices are situationally adapted© Copyright 2011 John Goodpasture and Alex Walton

Portfolio Management – Plan, Allocate, Measure Plan Allocate Measure •Envision •Apportion •Analyze •Strategize •Sequence •Act •Risk adjust •Reserve •Adjust© Copyright 2011 John Goodpasture and Alex Walton

Portfolio Management – Plan, Allocate, Measure Measure Plan • Analyze • Envision • Act • Strategize • Adjust • Risk adjust Allocate • Apportion • Sequence • Reserve© 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

Tensions of Accountability Project centric Business centric  Earned value—the project  Value earned—the business metric metric  Measures of effective use of  Measures of business success assigned resources  Measures of customer  Measures for benchmarking satisfaction and historical reference© Copyright 2011 John Goodpasture and Alex Walton

It’s about Requirements!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 Niels Malotaux known risk, we should provoke change now.

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

Throughput is Value Customers Throughput is what customers buy and use Stakeholders Throughput improves the business scorecard Each agile iteration produces throughput Project Each iteration consumes resources, and … Depletes the business balance sheet Business Throughput restores balance sheet over time© Copyright 2011 John Goodpasture and Alex Walton

Agile: Three C’s and a D Agile Management • Co-location tightens coupling • War rooms tighten couplingCoupling • Stand-up meetings tighten coupling • Iterations or sprints loosen coupling • Object practices loosen coupling • Embedding product managers challenges coherence • Sprint sequencing enables coherenceCoherence • Re-useable objects reinforce consistency • Emergence weakens coherence© Copyright 2011 John Goodpasture and Alex Walton

Agile: Three C’s and a D Agile Management • Humanity of teamwork emphasized • Loyalty, trust, and sharing creates strong team cohesionCohesion • Effective conflict resolution holds things together • Personal accountability and commitment fosters cohesion • Dynamic backlog diversifies risk • Frequent deliveries diversifies early-late adoption riskDiversification • Process and practices situationally adapted • Collaboration in co-located settings enables reduces learning curve effects© 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  Agile focuses on business to the value-risk trade value [throughput]  Tension exists between  The many iterations of agile emergent value and diversify risk portfolio plans  At each iteration, cohesion,  The ultimate test is coupling, and coherence are customer satisfaction … evaluated anew Business Value & Risk© Copyright 2011 John Goodpasture and Alex Walton

More in the booksSquare Peg Consulting, LLCPUBLISHED BY J. ROSS PUBLISHING

Thanks for the opportunity to speak to the Central Florida ChapterJohn Goodpasture 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

Portfolio management and agile: a look at risk and value

by John Goodpasture on Jun 08, 2011

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