Modern Portfolio Management Intro

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Modern Portfolio Management
an intro
Milano, 3 Marzo 2020
Live Streaming
#FightTheVirus

agile42 | the agile coaching company www.agile42.com | All rights reserved. Copyright © 2007 - 2017.
ﬁrst of all
credits
some of the ideas in this talk come from the great work of
Patrick Steyaert, Klaus Leopold, David J Anderson, Liz Keogh and Troy Magennis

Questions
How do you choose which projects and initiatives you should 
start, defer, drop?
there are many questions behind this one
(i.e. balancing demand and supply, risk hedging)

Questions
How do you coordinate multiple teams working on those initiatives?
How do you deal with dependencies?

Questions
How do you monitor progress and issues?
How do you adapt to an ever changing market and technological context
where variability and uncertainty are the norm?

Questions
And then how do you deal with the the inevitable questions: 
how long will this initiative take? how much will it cost?
these questions are usually misplaced

Traditional Portfolio Management
Struggle to answer the previous questions.
Based on a mechanistic vision of organizations and work.
Based on a mindset that believes (hopes) in 
certainty of scope, estimation, plan and costs.

Top/Down, Centralized, PMO
Decisions made too early (decision-making and execution are separated. the business
decides on priorities and the teams execute, later, according to priorities) 
Governance, Compliance, Overspecifying, Overanalysing
Resource Pool, Full capacity Tetris allocation, Push, Extra Push
Cumbersome electronic tools
Annual Budget (wasting money pretending to know how you will make money)

Results are fare from optimal, so:
Even more status meetings (watermelon status)
Even more/better planning and estimating
New/Better Tools will save us
Bring in more people, bring in the heroes (both
team members and [project] managers)
Blame, Punish, Force people to work weekends, etc. Experiences
Beliefs
Actions
Culture
Results
The “Results Pyramid” is copyright of
Partners in Leadership LLC

Agile to the rescue?
So here come Agile Methodologies to save us, right? Ehm no.
Agile Knight
Agile teams only help so much in dealing with those problems.
And scaling frameworks help even less 
(they either ignore the problem or get it wrong)

reminder: 
Team Agility ≠ Business Agility

“We’re so freaking Agile. Yay!”
Klaus Leopold
Agile Teams
Slow End To End Process - Long Time To Market
Where’s agility???

Modern Portfolio Management. What is not
It’s not (just) project tickets on a board plus some WIP limits on the number
of ongoing initiatives.
It’s not using JIRA or other electronic tools to do the same or, even worse,
pretending to use tools to automagically prioritize, allocate capacity, create
plans and successfully control them.

Modern Portfolio Management. What is it then
Accepting uncertainty and variability
Coordinating initiatives, services and teams at different levels of detail and
granularity (including dependencies) to achieve strategic objectives
Managing and Shaping Demand to make best use of limited and constrained
capability

coordinate
Flight Levels
Experiment Consolidate LearnRelease
Flight Level 3

Strategy
triage/select
Concept Build DoneDeliver
Flight Level 2

Coordination
flow #1
flow #2
flow #3
deliver
Flight Level 1

Operational
Team 1
Team 3
Team 2
Team 4
Team 5
Team n
Klaus Leopold

A Modern Portfolio Board
Ideas Analyze Synthesize Validate Delivered
Options
Inventory Build
Upstream
Downstream
upstream
lead time
system
lead timecommitment
point

An Upstream Portfolio Board in the real world

Matching Demand and Capability
Demand usually exceeds Capability
Demand can be:
fluctuating, conflicting, irrefutable, incommensurable
Capability is typically:
overburdened, specialized
We want to make best use of (limited, constrained) capability
We want to improve capability to better deal with a very demanding demand
(no pun intended)
Patrick Steyaert

D
H
J
I
F B
AE
C
6
M L K
2
1
1
O
Q
N
P
EXPEDITE LANE
G
ideas elaborate do deliveredvalidate
overburden
WIP limits are “easy” at Team level, but…

C
D
B
Team Green
E
A
Upstream
Options
Inventory Active Validate
Team Red
Delivered
Team Blue
Team Purple
F
available
(3)
empty slot
overburden &
specialization
Patrick Steyaert
Column WIP Limits are not enough

B
Team Green
Team Red
Specialized Capability
Upstream Active Validate Delivered
Team Blue
Team Purple
!!!
!!!
This is bad!
available
(3)
Patrick Steyaert
Options
Inventory
overburden &
specialization
C
D
E
A F

C
D
Team Green
E
Upstream
Options
Team Red
Team Blue
Team Purple
(3)
empty slot
Patrick Steyaert
CAP Tokens
B
A
overburden &
specialization
CAP Tokens

Tokens in the real world

C’
D
EB
A (very
important)
Team Green
Reservation
Upstream
Options
Team Red
Team Blue
Team Purple
(3)
empty slot
Patrick Steyaert
Reserve CAP
Tokens
overburden &
specialization

Team Green
Selection Policies
Upstream
Options
Team Red
Team Blue
Team Purple
(3)
conflicting
demand
Patrick Steyaert
Conflicting
Demand
Customer A
Customer B
Customer C

Min-Max Limits
Ideas Analyze Synthesize Validate Delivered
Options
Inventory Build
Upstream
Downstream
upstream
lead time
system
lead timecommitment
point
fluctuating
(∞) (10-20) (5-8) (4)

Analyze Synthesize Validate
Delivered
(Accepted)
Options
Inventory Build
Customer Kanban
upstream
lead time
system
lead time
customer
lead time
pull
Patrick Steyaert
Ideas
CONWIP

Now
When?
Later No
Triage
Based on Cost of Delay* and Urgency
*Cost of Delay is meaningful only under some circumstances (gaussian or super exponential distributions)
incommensurable
demand
[&under pressure]

Now
When?
Later No
Triage
Based on Cost of Delay* and Urgency
It’s not just Prioritization
It’s Routing!
*Cost of Delay is meaningful only under some circumstances (gaussian or super exponential distributions)
incommensurable
demand
[&under pressure]

Immediate
Fixed Date
Standard
Classes of Service & Cost of Delay
Intangible

Cost of Delay - Shelf Life
Ultra Short
< 1 delivery cycle
Short
1 delivery cycle
Medium
2-4 delivery cycles
Long
5-10 delivery cycles
Extra Long
>10 delivery cycles
Lifecycle PeriodLead Time
Shelf-Life
(Lifecycle Period)
relative to tail (i.e. 95%)
of Lead time Distribution
David J Anderson
Lifecycle Period
Lead Time

Value Acquisition Functions
David J Anderson

David J Anderson
From Cost of Delay to Triage Tables
Shelf-life /
Payoff
Instant Ultra Short Short Medium Long Extra Long
Immediate Fixed Date - - - - -
Front Loaded - Fixed Date Fixed Date Fixed Date Standard Standard
Evenly Loaded - Fixed Date Standard Standard Standard Intangible
Back Loaded - Standard Standard Standard Intangible Intangible
Constant Rate - Standard Intangible Intangible Intangible Intangible
Extended Life - Standard Intangible Intangible Intangible Intangible
Very Late
Decay
- Intangible Intangible Intangible Intangible Intangible

When should we start
Lead Time Lifecycle Period
time
early
normal
late
LRM* too late
Desired Delivery Date 
(DDD)
*Last Responsible MomentDavid J Anderson

Dependencies & Estimation
Dependencies and delays are usually the majority of delivery lead-time
You are better off estimating the wait time rather than size
Dependencies impact is exponential

Dependency discovery should be treated like estimates: don’t do it unless you
really need to
If cost of delay is low don’t bother to explicitly manage for dependencies which may
cause delay
Otherwise determine a class of service which directs policy on how (or if) you will
manage dependencies and how a reservation will be made
Dependencies Management

Dependencies - Calling Service vs Called Service
David J Anderson

5 Classes for Dependencies Management
Cost of Delay Action Notes
Very Low Don’t Care -
Low Risk Mitigation
Trusted Availability (reserve capacity on the called
service)
More Relevant Check if Dependency Exist Reserve Capacity for it
Significant or Critical Trusted Service Delivery
Reservation System on calling service, DoR requires
reserved slot for the called service
No Margin for Error Guaranteed Delivery
Guaranteed Reservation on calling service, DoR
requires Guaranteed reserved slot for the called service
David J Anderson

Uncertainty and Variability
Uncertainty arises when relevant information is unavailable and unknown. 
Uncertainty may be intrinsic or situational. 
Uncertainty begets unpredictability.
Variability (and Volatility) in this context applies mostly to Demand. 
It makes Demand Unpredictable and cause Uncertainty about the future.
Variability is both about past (history) and future, Uncertainty is about the
future.

Uncertainty, Complexity & Estimation
How do they live together?
Liz Keogh’s classification (adapted):
already done by our team(s)
never done by our team(s)
never done by our company
never done by anyone

Estimating vs Complexity
Complicated
ObviousChaotic
Complex
never done
by anyone
never done by
our team(s)
already done by
our team(s)
never done by
our company

Complicated
ObviousChaotic
Complex
Estimating vs Complexity
never done
by anyone
never done by
our team(s)
already done by
our team(s)
never done by
our company
ok to estimate
these
you got to be
kidding!
outsource
or buy

strategic
operational
a bit of both
Troy Magennis
never done
by anyone
never done by
our company
never done by
our team(s)
already done by
our team(s)
Risk Hedging

Risk Hedging
strategic
operational
a bit of both
Troy Magennis
10% 20% 30% 40%
25%
35%
40%
never done
by anyone
never done by
our company
never done by
our team(s)
already done by
our team(s)

Modern Portfolio Management
Accepting uncertainty and variability
Coordinating initiatives, services and teams at different levels of detail and
granularity (including dependencies)
Managing and Shaping Demand to make best use of limited and constrained
capability

So what?
Starting work costs money. Finishing work makes money

Blocked or delayed work costs money

Debating too much and too early slows us down and costs money

Making work Flow at any level makes money

see you in Milan
https://www.avanscoperta.it/it/training/modern-portfolio-management-workshop/

Gaetano Mazzanti
Enterprise Coach & Trainer 
agile42 Italy 
gaetano.mazzanti@agile42.com
www.linkedin.com/in/gaetanomazzanti
www.agile42.com - www.organic-agility.com
@mgaewsj 
@agile42/coaches

References
wait for the
new one

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The brands and logos of agile42, are Copy Rights and Trademarks of agile42 Consulting srl, agile42 GmbH, and agile42 International
GmbH and can’t be reused without written authorization

Modern Portfolio Management Intro

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