Customer-focused and fast time to market — Lean Portfolio Management
The key to providing customers with successful digital solutions
10.01.2024 | Article
Customers now expect to see digital products that are tailored to their needs, combine numerous services, and are regularly updated and enhanced. Digital products that do not meet these standards are often considered outdated. What may be reasonable from a customer perspective poses major challenges to companies, requiring them to delay market launches, for example, or miss out on lucrative short-cycle trends. In most cases, mastering these challenges requires companies to undergo an agile transformation with attention not only to agile teams but also to structural functions such as portfolio management.
To illustrate this situation, consider the example of an app that integrates various functions needed to simplify customer-company interactions. The interests and priorities of different departments do not always harmonize: R&D would like feedback functions; finance wants to integrate new financial services; sales is looking at international rollouts; and IT is focusing on matters like security. The challenge is to find a coordinated management system that accommodates and channels everyone’s interests toward the shared goal of generating value for the company overall while reducing or eliminating any conflicting objectives.
Portfolio management plays a key role in prioritizing the right projects, making the best use of resources, and achieving the company’s strategic goals. At large industrial firms, portfolio complexity and rigid decisional processes can lead to significant problems. Planning processes for product portfolios can get stuck in endless iterations, which in turn can lead to market delays, products of lower value than promised, and what can be massive overspending.
To handle these challenges, companies should rethink their portfolio management and concentrate on agile principles and on meeting changing customer needs. The greater flexibility thereby acquired lets them bring products fast to market while boosting satisfaction among both customers and their own organization.
Lean Portfolio Management: Customer-oriented and fast
To address these problems and meet customer expectations, many companies are introducing a Lean Portfolio Management (LPM) approach. In many methods for scaling agile work, such as Scaled Agile Frameworks (SAFe), LPM is an integral part of coordinating agile product development across multiple teams and departments. It is a comprehensive and agile approach to effective planning, prioritizing, and implementing (digital) products/services that safeguards alignment between company strategy and implementation. It ensures that strategic goals are followed and customer-oriented solutions are developed.
LPM places a premium on the continuous creation of value by cross-functional teams with an agile and flexible approach. The following five benefits illustrate the value added by LPM:
Maximum customer centricity:
The essence of Lean Portfolio Management (LPM) consists of setting aims that focus on customer needs. The Minimal Viable Product (MVP) idea is the driving force behind consistently aligning products and initiatives to these customer needs. For software development, the MVP approach follows a strategy of developing products with a minimum of functions in order to get rapid feedback, which is then used to improve the products on a stepwise basis. New functions can thereby be continuously tested and validated on the basis of customer acceptance.
Customer centricity is crucial for developing apps, because it ensures that they are tailored to user needs and demands. The MVP approach enables customer centricity to be tested by first producing a basic app version with the main functions, having real users test it early on, and using their feedback to refine it.
When LPM is introduced, the focus shifts to a guiding principle of continuous improvement. Portfolio performance is no longer viewed as a single aim, but rather as an ongoing process. This approach makes it possible to incorporate customer feedback in small, iterative steps and achieve durable enhancements that increase overall portfolio performance while also enabling rapid responses to customer and market needs.
LPM assigns similar paramount importance to continuous improvement in the development of smartphone apps. Instead of a single final target, the focus is on unceasing optimization. After an app goes onto the market as an MVP, updates add new functions in response to user and market feedback on a continuous stepwise basis, and go on optimizing and developing it further. This approach can naturally also be applied to cars, machines, appliances, and other digital products.
Joint prioritization and teamwork:
Shared application of the OKR (Objectives and Key Results) method, plus use and prioritization of a “backlog” in the sense of an ordered list of planned functions, yields a clear and coordinated road map. Prioritizing the portfolio backlog sets a clear course that keeps customers’ most valued needs and the company’s strategic aims at the top of the agenda at all times.
This overall approach integrates seamlessly into agile processes and fosters teamwork. That in turn prevents a haphazard approach to communicating new requirements to the development teams. By tackling the backlog together and using an OKR method, a team can create a clear and coordinated road map for developing its app. Transparency is generated early on about the app’s forthcoming functions. This integrated approach reinforces the teamwork needed to ensure that development resources are assigned to those functions and improvements that offer the greatest strategic value to the app.
Efficient use of resources:
LPM makes efficient use of resources into a key strength. The jointly prioritized portfolio backlog ensures that planning can proceed continuously and without requiring the tedious processes that can take as much as a year at many companies. Moreover, clear rules in the LPM process such as defined threshold values enable decentralized decision-making. Below these threshold values, teams enjoy a certain degree of autonomy to make decisions on their own. Common threshold values include cost, duration of use, and impact on the company’s strategic positioning. As a result, resources can be channeled in targeted form to the most valuable initiatives and the budget can be used in the best possible way to achieve strategic goals.
Continuing with the app example, this means that development teams can defer planned features at short notice if that lets them develop and activate more important features. This is often the case, for instance, if companies wish to respond to short-term trends.
Rapid market launches:
By transforming abstract strategic goals into concrete and comprehensible targets for the relevant departments, LPM can rapidly launch products onto the market. This process benefits from OKRs that ensure all initiatives are directed to clear strategic goals and are supported by precisely defined yet flexible KPIs. Decision-making and implementation are thereby accelerated, which in turn makes the company itself more agile and market launches more rapid. This agile approach generates competitive advantages and allows customer needs to be met on short notice.
LPM for smartphone app development enables strategic aims to be met, such as introducing a user-friendly payment option. Clear OKRs and auxiliary KPIs accelerate decision-making and implementation, which makes the app more agile and responsive to customer needs, which in turn generates a competitive edge.
Lean Portfolio Management is the key to providing customers with successful digital solutions
In an era when digital products require constant adaptation and innovation, Lean Portfolio Management is the key to mastering the challenges that arise from ever greater customer demands. LPM enables impressively rapid market launches of products and services. With efficient prioritization, coordinated teamwork, defined roles, standardized routines, and an MVP approach, it substantially shortens development cycles. This gives companies the agility they need to concentrate on customer needs, use resources efficiently, and continuously improve their products. Lean Portfolio Management doesn’t just develop an app. Instead, it establishes a customer-focused and dynamic approach that meets the constantly changing needs and expectations of the digital world. This is the key to coming out ahead of the competition, and also the critical factor in customer satisfaction and excellent business results.