The bottleneck is always at the top of the bottle

The bottleneck is always at the top of the bottle

As Peter Drucker used to say

The bottleneck is always at the top of the bottle.

Often times when we start working with our clients they ask us to work with delivery teams, but customers seldom realize that the real problem is at the top.

The way companies define their strategy and manage their portfolio is the source of many of the problems you can find at delivery teams.Click To Tweet

It’s usually an error to start at team level or delivery level without first taking a loot at strategy and portfolio level where the biggest constraint might be.

The portfolio is an organization of projects, by date and value, that the organization commits to or is planning to commit to.

Portfolio management ensures that an organization can leverage its project selection and execution success. It is a centralized management of several projects to achieve strategic objectives. And it is a way to bridge the gap between strategy and execution.

The Problem

We see two main problems with portfolio management:

  • Absence of management at all
  • Too much centralization, project mentality and wishful thinking

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The problems of managing without a portfolio are multiple and serious, and we can confirm them by hearing at the most popular complaints by executives:

  • We don’t know what is really going on
  • We are too slow in getting to market
  • We are not working on what is most important for our strategy
  • People is not working together and aligned towards a same direction
  • We don’t know what are the problems our delivery organization is facing

However, there are different ways in which you can manage your portfolio that will depend on your organization’s maturity and will bring different benefits.

Below, you can see different levels of evolution of portfolio management, which are not based in theory but in similar patterns identified in many companies.

You can undertake a smooth evolution from managing projects to managing products starting at portfolio level that will bring you all the benefits without any of the disruption caused by conventional approaches that start with delivery organization and show very few tangible business outcomes.

Level 0 – Not managed

We find this situation quite often. Usually in companies that have grown fast in the past 5 to 10 years and there is basically a bunch of people from different parts of the organization asking the delivery organization to do stuff.

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The biggest problem here is that the delivery organization is working with competing priorities. This creates stress, overburdening, excess WIP, multi-tasking and frustration as nothing gets done in time. There are projects from Technology, from Sales, from Marketing, pet-projects from executives, and so on. But, to what extent are those projects important for the business?

Every department has their own budget, usually associated to a cost center. They have a budget to spend and that’s not usually related to organization’s delivery capability. One side effect in this case is the well-known “shadow IT”, where business units and departments look for external companies to solve their stuff instead of relying in their delivery organization unable to satisfy their needs because they are overburdened.

Initial Portfolio Mapping Session - II
Result of initial portfolio mapping session. An image is worth a thousand words.

Adding more people to the delivery organization is not a solution. This will just create more complexity, more technical debt, more expectations and longer time to market.

Another side effect of this situation is that delivery organization assigns individuals or teams to specific departments or projects. This creates silos, fragmentation of knowledge and specialization.

Level 1 – Waste management

What many companies do, instead of trying to understand their organization and seeking real systemic solutions, is to institutionalize the problem by nominating a “problem manager”. This is usually a Portfolio Manager, Program Manager, PMO office or so. This could work slightly better, but we think it is just a way of institutionalizing waste and it goes against one of they key principles of lean, which is “Respect for People”, because putting someone in that position is a torture.

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This, doesn’t solve the overburdening of delivery organization. You just nominate a master of ceremonies which is overburdened too by trying to manage all these without a specific policy or strategy.

Level 2 – Portfolio of Projects

Some companies, evolve and start managing the requests from all those departments and functional units by defining an investment strategy and determining how much investment they will dedicate to each investment theme.

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This is a way of managing and shaping demand, that will allow delivery organization to reduce overburdening and have some clarity on what is going on.

Some still go a step further and define a few strategic goals and make sure all requested projects align to those goals.

Ideally Portfolio Kanban is used for visualizing the status of multiple projects and making relevant decisions.

Level 3 – Portolio of Business Cases

At this level, companies define their strategic goals and/or investment themes company wise and define business cases to achieve those objectives or solve those problems. Some call them Business Epics.

This makes a huge difference and already requires a new way of working, because there are no longer technology projects, marketing projects or financial projects. In fact, there are no longer projects or the amount is drastically reduced. Everything which is important to the organization is managed as a problem to be solved or objective to be achieved and all business units or departments must work together to achieve that.

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There are no more projects, because there is not a start date and end date, and we don’t measure success by delivering on-time, on-budget and on-scope, we measure sucess by achiving a business goal. We move from output to outcome.

Budgets are no longer assigned to cost center, departments or business units, but to strategic initiatives or horizons of growth.

At this point, you start wondering if your delivery organization shouldn’t be organized in products or value streams in order to really help the business achieve those goals.

Warning: here we are talking about Lean business cases, not the usual pile of lies and untested assumptions condensed in a 20-page document that takes several months to create.

Level 4 – Hoshin Kanri

At this level of evolution, we have goals at all levels in the organization. Every division, product manager or delivery manager is responsible for defining the best way to achieve those goals. Tracking is based on key business success metrics.

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In the past few years there has been a lot of hype about OKRs (Objectives and Key Results) although the method was actually developed by Bridgestone Tire in 1965 as their official policy deployment method called Hoshin Kanri.

By 1975, Hoshin Kanri was widely accepted in Japan. Hoshin means direction and Kanri means management, translating into English as policy deployment.

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Hoshin Kanri has two key benefits:

  • Ensures that everyone in the organization has the opportunity to participate in the development of the plan and is therefore aligned and working toward the same end.
  • Is a double-loop learning methodology as it allows the modification of goals and decision-making rules in the light of new evidence.

Hoshin Kanri (or OKRs) is PDCA applied to the whole organization and their key components are:

  1. Statement of purpose (VISION)
  2. Determination of breakthrough objectives (MISSION)
  3. Business fundamental objectives
  4. Development of plans that adequately support the objective
  5. Review of the progress of these plans
  6. Changes to plans as required
  7. Continuous improvement of the key business fundamentals
  8. Organizational learning and alignment

How to start from scratch?

In the beginning you only need one agile team: top management.Click To Tweet
  1. Define your vision for next few years and your strategic goals
  2. Align all work with strategy (and find gaps)
  3. Visualize everything
  4. Limit work in all organization
  5. Institutionalize metrics
  6. Establish portfolio review cadence

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