Business Agility is the ability to continuously sense and respond to change. This means companies need to be able to quickly shift resources among business units, products and individual initiatives. Portfolio management is where strategy is translated into investment decisions, and strives to ensure that business resources are optimally invested to achieve the best possible business outcomes. The ability to quickly adapt is a key source of competitive advantage.
Portfolio Management Defined
- Deciding which initiatives to pursue/invest in, and their relative priorities.
- Deciding whether to continue, modify or cancel ongoing initiatives
Lean Portfolio Management is the upstream stage of the same value flow that continues through ART backlogs and team-level delivery. Its purpose is to translate strategy into prioritized investment decisions that can flow continuously into execution.
Portfolio management determines what to invest in and how much, not how or when work is delivered. Delivery sequencing, feature prioritization, and execution decisions are intentionally delegated to value streams and ARTs within portfolio guardrails.
A Portfolio Management Framework
Portfolio Management is the highest level planning process within an enterprise and includes the definition, refinement, prioritization, funding and ongoing management of in-flight initiatives. All of this requires a basic governance framework, the core elements of which should include:
- Portfolio Planning → Portfolio Discovery & Investment Decisions
- Portfolio Review → Ongoing Investment Adjustment
- Portfolio Retrospective → System Improvement
While these activities may occur in cadenced forums, they represent continuous responsibilities within the value flow system—not isolated events.
Portfolio Planning
Each product or program or initiative in a portfolio serves some strategic objective. Organizations conduct analysis of their portfolios to determine priorities and investment levels. Strategy frameworks can be leveraged to help companies formulate a portfolio strategy. For example, McKinsey’s Three Horizons Model might be used to determine the appropriate investment mix. The model provides a framework that requires you to categorize your goals into 3 different ‘horizons’. The overall goal for is to build a pipeline of initiatives that keeps the company continuously supplied and refreshed with new sources of business. (More here).
- Horizon 1: Maintain & Defend Core Business. Your goals in horizon 1 will be mostly around maintaining your revenue streams, reducing operating expenses, and improving existing processes.
- Horizon 2: Nurture Emerging Business. Extending the core Horizon 1 business it into areas of emerging opportunity.
- Horizon 3: Create Genuinely New Business. Introducing entirely new products or services to your business that don’t exist today. This may take the form of new products, services, or capabilities, that show great promise but are highly uncertain.
McKinsey Three Horizons analysis is appropriate when:
- The epic represents innovation or disruption
- The time horizon matters (core vs adjacent vs transformational)
- You need to balance near-term returns with long-term bets
Value it provides:
- Prevents Horizon 3 work from being killed by Horizon 1 economics
- Sets expectations for ROI timing
- Informs funding horizon and success criteria
How to use it well:
- Classify the epic’s horizon
- Adjust WSJF assumptions accordingly
- Set learning-based milestones, not revenue promises
Refining the Portfolio Backlog
For Portfolio Planning, the establishment of a Portfolio Kanban can provide a method for defining business epics and a way to refine them to the point where they can be consumed by program teams. A Portfolio Kanban can be used to visualize the work, make status explicit, and limit work in progress (WIP) to ensure the focus is on getting individual epics to a Go/No-Go decision as quickly as possible. Different levels of epic refinement are reflected in a series of workflow states, each representing more detail than the previous one, until the final state (the Portfolio Backlog) contains those epics that are considered approved for investment and eligible to be pulled into ART discovery.
For consistency, a template should be established for epics:
Epic Hypothesis / Value Statement
A concise statement describing (elevator-pitch style) – what are we building, who is it for, and why do they need it – See Geoffrey Moore’s Crossing The Chasm for details and examples.
- Who the target customer or user is
- What problem or opportunity is being addressed
- Why solving it matters to the business
This represents the current hypothesis, not a guaranteed outcome.
Evidence to Date (Learning to Decide)
A summary of discovery performed so far, proportional to the size of the investment, such as:
- Customer interviews or observations
- Market analysis
- Prototypes or experiments
- Prior delivery or usage data
This evidence supports the investment decision, not delivery certainty.
Minimum Viable Product (MVP) Intent
A description of the smallest outcome that would meaningfully test the epic hypothesis.
This defines planned learning, not fixed scope.
Individual features may be refined, sequenced, split, or discarded as learning progresses.
Candidate Features (Initial Scope Boundary)
An initial set of candidate features and enablers that could contribute to the MVP, including:
- Must-have features
- Explicit exclusions (what is not in scope)
- Known architectural or technology enablers
These are inputs to ART Backlog discovery, not commitments.
Epic-Level Economic Priority (WSJF)
A relative ranking of this epic against other portfolio epics using WSJF or equivalent methods.
This ranking determines which epic should be explored next, not the delivery order of individual features.
A Portfolio Kanban system is an effective way to manage this process and track progress. The portfolio management team (epic owners and the enterprise architect) drives this process via regular portfolio management (or portfolio backlog refinement) meetings. For portfolio planning governance tasks include:
- Create/Review epic definitions
- Establish scope to meet MVP
- Identify architectural enablers
- Determine priorities, estimates and epic rankings (e.g. using WSJF)
- Update the Kanban board
Recommended Portfolio Kanban states:
Funnel
- Raw ideas and opportunities
- No commitment, no analysis depth required
Review / Exploration
- Problem framing
- Initial hypothesis
- Cheap discovery (interviews, market signals, prototypes)
- Rough WSJF inputs
Analysis (Learning to Decide)
Epic analysis exists to inform an investment decision. Techniques should reduce uncertainty that materially affects the decision.
- Hypothesis refined
- Economic rationale clarified
- MVP intent sketched
- Risks identified
- Evidence proportional to investment size
- One-page business case, solution alternatives, enablers, relative ranking (WSJF), and Go/No-Go decision on moving to the Portfolio Backlog. Strategy Tools like McKinsey’s Three Horizons, or the BCG Growth/Share Matrix might be used to support the analysis. Strategy tools (such as Three Horizons or BCG) help decide whether to invest; economic tools (like WSJF) help decide when. The depth of analysis should be proportional to the size and risk of the investment. Remember – The goal of epic analysis is not certainty. It is informed commitment.
Portfolio Backlog (Approved for Investment)
- Investment decision made
- Value stream identified
- Funding allocated
- Epic is eligible to be pulled into ART discovery process
Implementation (ART Discovery & Delivery)
- Epic pulled into ART Funnel
- Features refined
- MVP delivered incrementally
- Outcomes measured
Done / Pivot / Stop
- Hypothesis validated or invalidated
- Funding adjusted accordingly
Epic Ranking using WSJF
Weighted Shortest Job First (WSJF) is a technique first popularized by Don Reinertsen in his book: The Principles of Product Development Flow. It provides a method to prioritize a list of epics (initiatives) in an objective way based on business value and relative return on investment. Each epic is scored based on it’s Cost Of Delay divided by it’s size or development effort. How is WSJF calculated?
-
- WSJF = COD (Cost Of Delay)/Effort, where
- COD = Business Value + Time Criticality + Risk Reduction Opportunity
- Rank = COD/Effort
Scoring each parameter is done relative to other epics using the Fibonacci Series (1, 2, 3, 5, 8, 13, 20)
Example:
How To Calculate:
- Proceed column-by-column. Assign a score to each epic. Complete each column before starting the next one
- Make sure there is a “1” in each column, and score other epics relative to that one
- When done, if necessary adjust scores until rankings are unique
Some considerations/examples:
- Business Value: Highest scores should significantly move KPIs
- Time Criticality: For example, a regulatory deadline
- Risk Reduction: For example, a database upgrade that addresses a major security risk
Portfolio Review
Agile Portfolio Review means establishing the ability to quickly respond to change and make adjustments to the portfolio. Agility is based on the empirical pillars of transparency, inspection and adaptation. By adopting an agile approach, portfolio managers can mitigate financial risks and optimize their portfolios for maximum returns. Rapid decision-making requires lightweight artifacts that can be developed and maintained with minimum effort, and can provide a source of actionable data. The Portfolio Kanban continues to provide guidance for appropriate actions to be taken during the implementation stage of an epic.
Once implementation has begun on an epic, ongoing review is required in order to decide whether to continue development, modify or potentially terminate further development. During Portfolio Planning we conducted a basic business analysis and also ranked epics using WSJF. As epics are developed and incrementally deployed, factors affecting WSJF rankings will change, and at some point the value from further development will diminish.
Updated WSJF scoring should provide guidance on whether continued development makes business sense. Terminating further investment in an epic that has reached a point of diminishing returns creates value in the sense that it frees up resources for investment elsewhere – redirect capacity to higher value work (value creation). A regular (cadenced) portfolio review is needed to monitor updated epic WSJF rankings, together with other appropriate data such as OKRs, and to make decisions on whether to continue or pivot on epic development.