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What is portfolio management? A simple explanation and how to apply it

In the Agile world, portfolio management refers to the process of managing a collection of projects and initiatives in a way that supports an organization’s strategic goals. A long but apt definition. The goal is to ensure that the right projects are chosen and that resources are allocated effectively to maximize value. Here’s a simple explanation of what portfolio management entails and how to apply it:

What is portfolio management?

We frequently get the question, “What is portfolio management?” The answer: through portfolio management, you determine what the most important work is so you can prioritize it. With this strategy, you take into account the resources you have available, such as money and capacity. Portfolio management has 3 main pillars:

Alignment: Agile portfolio management aligns an organization’s projects and initiatives with its broader strategic goals. This means looking not only at what is happening now, but also at what the organization wants to achieve in the long term.

Agility: Instead of following a rigid plan, Agile portfolio management focuses on flexibility and adaptability. This means being able to prioritize and adjust projects based on feedback, changing market conditions or new insights.

Value creation: The goal is to create value for the organization and its customers. This includes continuously evaluating the results of projects and ensuring that the most valuable initiatives receive the most attention and resources.

How do you apply portfolio management easily?

Identify and define projects: Start by identifying all current and planned projects. Make sure each project has a clear description, including the value it provides and how it contributes to the organization’s strategic goals.

Prioritize projects: Use methods such as MoSCoW (Must have, Should have, Could have, Won’t have) to determine which projects have the highest priority. Focus on projects that deliver the most value and best fit the strategic direction.

Create a visual display: Create a portfolio overview, such as in the form of a Kanban board, where you keep track of the status of each project. This helps with transparency and makes it easier to see where resources are going.

Involve stakeholders: Ensure that all relevant stakeholders, such as team members and managers, are involved in the portfolio management process. This can be done by holding regular meetings or workshops where feedback and ideas are gathered.

Evaluate and adjust: Conduct regular evaluations of the projects in your portfolio. Use data and feedback to decide whether to continue, modify or discontinue projects. This ensures that you are always supporting the most valuable initiatives.

Learn and improve: Use the experiences and lessons learned from projects to continuously improve your portfolio management process. Agile is all about learning and adapting, so be prepared to change your approach based on what you learn.

Concrete example of portfolio management?

Yes, we got it! Okay, imagine you work for a software company that develops various products, from mobile apps to web applications. The company wants to improve customer satisfaction and respond faster to the market with new features. Then portfolio management might look like this:

Strategic goal

The company sets a goal of increasing customer satisfaction by 20% within the next year by responding more quickly to customer feedback.

Identifying initiatives

• Improvements to the existing mobile app.
• Development of a new web application.
• Integration of a customer feedback system.
• Training the team in Agile methodology.

Prioritizing initiatives

Using a methods such as e.g. MoSCoW, determine that integration of the feedback system is a priority, followed by improvements to the mobile app.

Visual portfolio

You create a Kanban board that lists projects in different stages: “To-do,” “Doing,” and “Done.” Each project has a label indicating its priority.

Iterations and feedback

You work in 2-week sprints. After each sprint you organize a review with stakeholders to gather feedback on the delivered functionality.

Monitoring and Evaluation

During weekly team meetings, you discuss progress. If the feedback on the mobile app is not positive, you decide to increase the priority of that project.

Customize and Optimize

After three months, you find that the feedback system provides valuable insights, but that the mobile app has not yielded sufficient improvements. You decide to shift resources from developing the web application to improving the mobile app and feedback system.

Result

By applying Agile portfolio management, the software company can quickly respond to changing customer needs and continuously optimize the value of their projects. The use of iterations and feedback loops allows the team to adjust their priorities and ensure they are always working on the most valuable initiatives.

With portfolio management, the company can achieve its strategic goals more effectively and significantly improve customer satisfaction.