Active Portfolio Management

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When Agile teams begin to deliver products incrementally, new opportunities open up at the portfolio level, delivering strategic business value. However, the traditional approach to portfolio management — which depends upon long-range forecasting and fixed financial controls — breaks down as business environments grow more complex, leaving portfolio managers ill-equipped to reap the potential benefits of their Agile programs.

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  • Roadmap Support Governance is provide by the Portfolio Management Team Resource Planning is conducted by the Resource planning TeamRelease Support Release coordination is conducted by the Deployment Management Team Service Agreements are negotiated with the appropriate teamIteration Support Service Agreements are negotiated with the appropriate teamDaily Support Development Environments are provided by the Infrastructure team Production code Movement is provided by Deployment Management
  • Active Portfolio Management

    1. 1. Copyright © 2014 SolutionsIQ, Inc. All rights reserved. Active Portfolio Management
    2. 2. Why did Mark Zuckerberg pay $19 billion for Whatsapp?
    3. 3. 3 Adoption rate of MySpace through 2008 0 20 40 60 80 100 120 140 160 180 200 2004 2005 2006 2007 2008 MySpace active users (per million) MySpace
    4. 4. 4 Adoption rates: Facebook vs. MySpace 0 20 40 60 80 100 120 140 160 180 200 2004 2005 2006 2007 2008 Active users (per million) Facebook MySpace
    5. 5. 5 Adoption rates: Facebook vs. MySpace 0 100 200 300 400 500 600 2004 2005 2006 2007 2008 2009 2010 2011 Active users (per million) Facebook MySpace
    6. 6. 6 Market uncertainty is killing “return” Should we return money to shareholders??
    7. 7. 7 Shorter lifecycles mean shorter return horizons |--------------------||--------------------------------------------------------------------------| Investment Expected return
    8. 8. 8 Shorter lifecycles mean shorter return horizons |--------------------||--------------------------------------------------------------------------| Investment Expected return |--------------------||--------------------------------------------------------| Investment Return horizon shrinking
    9. 9. 9 Shorter lifecycles mean shorter return horizons |--------------------||--------------------------------------------------------------------------| Investment Expected return |--------------------||--------------------------------------------------------| Investment Return horizon shrinking |-----------|  |-------------------------------| Investment Expected return
    10. 10. 10 Strategy to address increasing market risk Smaller investment size Shorter cycle-time Incremental progress
    11. 11. 11 How does Agile delivery help (or hurt)?
    12. 12. 12 Traditional Approach Discovery Approach A New Paradigm: Project Centric vs Early & Frequent Flow
    13. 13. 13 1 2 3 4 Active Portfolio Management (set of practices)
    14. 14. 14 Budget Sectors Compliance Efficiency Enhancement Innovation
    15. 15. 15 Traditional Budgeting
    16. 16. 16 Annual Budgeting Based on Sectors
    17. 17. 17 Are we investing enough in enhancements? What about innovation?
    18. 18. 18 Feature Flow
    19. 19. 19 What is Feature Flow
    20. 20. 20 MVP
    21. 21. 21 Feature Prioritization
    22. 22. 22 “Avoid being precisely inaccurate.” Business Case Analysis
    23. 23. 23 1 2 3 4 5 Lightweight Approach
    24. 24. 24
    25. 25. 25 Pop Quiz: Which investment would you pick? NPV = $70,000 NPV = $40,000
    26. 26. 26 Which Investment would you pick? NPV = $70,000 Investment = $2.0 mil NPV = $40,000 Investment = $400K
    27. 27. 27 Which Investment would you pick? NPV = $70,000 Investment = $2.0 mil IRR = 12% NPV = $40,000 Investment = $400K IRR = 22%
    28. 28. 28 Extra Credit: Which investment would you pick? IRR 27% IRR 33%
    29. 29. 29 Extra Credit: Which investment would you pick? IRR 27% Confidence +or- 5% IRR 33% Confidence +or- 20%
    30. 30. 30 Model Variables Assumptions Low High Average Price per Unit 5.00$ 9.00$ 7.00$ Total Units per annum 10,000 2,000,000 1,005,000 Cost per Unit 1.50$ 2.75$ 2.13$ Capital Expense 300,000$ 600,000$ 450,000$ Annual Growth Rate 1.00% 7.00% 4.0%
    31. 31. 31 Model Variables Assumptions Low High Average Price per Unit 5.00$ 9.00$ 7.00$ Total Units per annum 10,000 2,000,000 1,005,000 Cost per Unit 1.50$ 2.75$ 2.13$ Capital Expense 300,000$ 600,000$ 450,000$ Annual Growth Rate 1.00% 7.00% 4.0% Unacceptable level of variance (Risk)
    32. 32. 32 Targeting variance (risk)
    33. 33. 33 Iterative Approach to Reducing Risk
    34. 34. 34 Is a concept too risky? Assumption #1 STOP Yes No Assumption #2 Yes No STOP Assumption #3
    35. 35. 35 Open Business case
    36. 36. 36 1. Conduct analysis 2. Make go/no go decision 3. All or nothing commitment 4. What if you could revisit the business case decision? Go/ No Go Stop! Project Charter Big Bang Release Traditional business case decision binary and final
    37. 37. 37 Components of the Open Business Case
    38. 38. 38 Portfolio Optimization
    39. 39. 39 Optimization Concepts
    40. 40. 40 Portfolio Simulation
    41. 41. 41 Traditional Annual Planning Project IRR Duration Standard Clubs 76% 7 Standard Spades 34% 4 Standard Diamonds 49% 7 Deluxe Hearts 50% 5 Deluxe Diamonds 31% 3 Deluxe Spades 46% 5
    42. 42. 42 Traditional Annual Planning Project IRR Duration Standard Clubs 76% 7 Standard Spades 34% 4 Standard Diamonds 49% 7 Deluxe Hearts 50% 5 Deluxe Diamonds 31% 3 Deluxe Spades 46% 5
    43. 43. 43 Portfolio Simulation Assumptions
    44. 44. 44 Breaking value down by features • • • Project Duration to Feature value IRR Duration MVP A 2 3 4 5 6 7 8 Standard Clubs 76% 7 4 73% 73% 73% 73% 145% 71% 24% Standard Spades 34% 4 2 43% 43% 35% 16% Standard Diamonds 49% 7 4 65% 65% 65% 65% 98% 22% -36% 9 10 Jack Queen King Deluxe Hearts 50% 5 3 45% 45% 45% 58% 55% Deluxe Diamonds 31% 3 2 38% 38% 17% Deluxe Spades 46% 5 3 27% 27% 27% 88% 62%
    45. 45. 45 Standish Group Study Reported at XP2002 by Jim Johnson, Chairman Always 7% Often 13% Sometimes 16% Rarely 19% Never 45% Rarely or never used: 64% Often or always used: 20% © 2004 Poppendieck.LLC Delivering the wrong feature reduces value
    46. 46. 46 Prioritizing reduces value of later releases 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% R1 R2 R3 R4 R5 R6 R7 R8 R9 R10
    47. 47. 47 Earlier releases can have high returns -50.0% 0.0% 50.0% 100.0% 150.0% 200.0% 250.0% 15% Hurdle Rate
    48. 48. 48 Eventually the value drops below the hurdle rate -50.0% 0.0% 50.0% 100.0% 150.0% 200.0% 250.0% 15% Hurdle Rate
    49. 49. 49 Project Duration to Feature value IRR Duration MVP A 2 3 4 5 6 7 8 Standard Clubs 76% 7 4 73% 73% 73% 73% 145% 71% 24% Standard Spades 34% 4 2 43% 43% 35% 16% Standard Diamonds 49% 7 4 65% 65% 65% 65% 98% 22% -36% 9 10 Jack Queen King Deluxe Hearts 50% 5 3 45% 45% 45% 58% 55% Deluxe Diamonds 31% 3 2 38% 38% 17% Deluxe Spades 46% 5 3 27% 27% 27% 88% 62% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Expected Return AC 2C 3C 4C 5C 6C 7C 9H 10H JH QH KH 73% 73% 73% 73% 145% 71% 24% 45% 45% 45% 58% 55% 65% Building a 12 month plan
    50. 50. 50 With your team create an annual plan • • • Project Duration to Feature value IRR Duration MVP A 2 3 4 5 6 7 8 Standard Clubs 76% 7 4 73% 73% 73% 73% 145% 71% 24% Standard Spades 34% 4 2 43% 43% 35% 16% Standard Diamonds 49% 7 4 65% 65% 65% 65% 98% 22% -36% 9 10 Jack Queen King Deluxe Hearts 50% 5 3 45% 45% 45% 58% 55% Deluxe Diamonds 31% 3 2 38% 38% 17% Deluxe Spades 46% 5 3 27% 27% 27% 88% 62%
    51. 51. 51 End of First Quarter Project Duration to Feature value IRR Duration MVP A 2 3 4 5 6 7 8 Standard Clubs (1) 32% 7 4 24% 24% 24% 24% 127% 0% 0% Standard Spades 34% 4 2 43% 43% 35% 16% Standard Diamonds 49% 7 4 65% 65% 65% 65% 98% 22% -36% Standard Hearts (2) 57% 4 2 89% 89% 32% 16% 9 10 Jack Queen King Deluxe Hearts 50% 5 3 45% 45% 45% 58% 55% Deluxe Diamonds 31% 3 2 38% 38% 17% Deluxe Spades 46% 5 3 27% 27% 27% 88% 62%
    52. 52. 52 End of Second Quarter Project Duration to Feature value IRR Duration MVP A 2 3 4 5 6 7 8 Standard Clubs 34% 7 4 24% 24% 24% 24% 127% 16% 0% Standard Spades 34% 4 2 43% 43% 35% 16% Standard Diamonds 49% 7 4 65% 65% 65% 65% 98% 22% -36% Standard Hearts (1) 33% 7 5 36% 36% 36% 36% 36% 32% 16% 9 10 Jack Queen King Deluxe Hearts (2) 20% 5 3 22% 22% 22% 33% 2% Deluxe Diamonds 31% 3 2 38% 38% 17% Deluxe Spades 46% 5 3 27% 27% 27% 88% 62%
    53. 53. 53 Sunk Costs “When you have dug yourself into a hole, the best thing you can do is stop digging.”
    54. 54. 54 End of Third Quarter Project Duration to Feature value IRR Duration MVP A 2 3 4 5 6 7 8 Standard Clubs 34% 7 4 24% 24% 24% 24% 127% 16% 0% Standard Spades (1) 62% 4 2 98% 98% 35% 16% Standard Diamonds 49% 7 4 65% 65% 65% 65% 98% 22% -36% Standard Hearts 33% 7 5 36% 36% 36% 36% 36% 32% 16% 9 10 Jack Queen King Deluxe Hearts 20% 5 3 22% 22% 22% 33% 2% Deluxe Diamonds (2) 31% 3 2 38% 38% 17% Deluxe Spades 46% 5 3 27% 27% 27% 88% 62% Deluxe Clubs (3) 189% 3 3 189% 189% 189%
    55. 55. 55 How did our waterfall project fair? Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2C 2C 4C 5C 6C 7C 8C 10H JH QH KH AH 34% 34% 34% 34% 34% 34% 34% 20% 20% 20% 20% 20% 28%
    56. 56. 56 Optimization Concepts
    57. 57. Copyright © 2014 SolutionsIQ, Inc. All rights reserved. Executive Leadership Portfolio Management Team Program A Pod A-5 Product Def. Team Product Def. Team Delivery Team A Delivery Team B Delivery Team C Product Def. Team Product Def. Team Product Def. Team Team A Team A Team A Team C Team BTeamC Team A am C Program B Program C Program D Pod B-5 Pod C-4 Pod C-6 Pod D-5 Pod 1 Pod 2 Pod 3 Pod 1 Pod 2 Pod 2Pod 2 Pod 1Pod 1 Pod 3 Pod 3Pod 3 Pod 6
    58. 58. 58 1 2 3 4 Active Portfolio Management Summary
    59. 59. 59 What if you had a magic box?
    60. 60. Q&A
    61. 61. 61 BlackBerry stock chart
    62. 62. 62 iPhone Sales
    63. 63. 63 Active BlackBerry Subscribers

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