Project pipeline management for logistics

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welcome to lean and agile portfolio management in this video I will tell you about my experience and my point of view on how to use lean and agile practices for IT portfolio management therefore I will talk about IT portfolio management that is management of investments projects initiatives activities within an enterprise IT department my name is Martin Kramer for more information on my services please visit my website dr. martin kramer com so what is this all about as a program in portfolio manager I was confronted with the situation that my colleagues and myself we had lots of ideas ideas for projects initiatives or activities at the same time we had scarce budgets and that's probably the situation and many even not even all IT departments and that would bring us to the question how do we spend the available budget rights which projects or which initiatives do we tackle do we start which shall we stop so how do we manage the budgets rights to get the most out of the available budgets and bring the best of the ideas to our customers that brings me to the agenda for this video we will first start with some issues on the traditional approach then we'll have a look at the lean an agile approach which will solve some of the issues of the traditional approach and finally we can take a look and how we can implement this new approach and what challenges are lying ahead of us the traditional portfolio management does not work well at least it does not work anymore I have basically two of objections with the traditional portfolio management first too many things change just too rapidly budgets are changing the scope of a portfolio is changing the priorities are changed around in sometimes a weekly manner resources are coming and leaving and even sometimes the management functions is changing moreover the planning process is not lean I will come to that in a minute let me give you some examples for the issues which I have with the traditional portfolio management approach for example planning a year ahead is not realistic anymore how does it usually look let's say you are a portfolio management and you should plan the portfolio of projects and initiatives for year 2017 what you usually do is you start in 2016 with a collection of ideas and projects and then you start to build up your decision matrix and you decide eventually on a number of specific projects that you would like to run for the next year and then you go into budget process and get an approval for these budgets to realize these specific projects what happens if new ideas come on and usually ideas don't wait for the budget cycles that just come in on a regular basis if the idea comes in early enough so within the collection period it just becomes part of your plan for the portfolio and has a good chance to be realized you might still be able to do that once you're in the decision phase but once you're after that or even within the year 2017 it's very hard for a new idea to become realized so usually this kind of ideas there have been bounced back as depicted here let me make a bold and also provocative statement a business case is not the tool to select projects well for long business cases have been the gold standard in the tool of choice to justify investment decisions taking in a closer look reveals some disadvantages of business cases law firstly we need to rely on unsure volatile data we need to look into the future and since we don't have a glass bowl that shows the future to us we need to make assumptions by the way it's a good practice to document down these assumptions for others to better understand the input of the business case but often this is not done though anyway these assumptions have a strong impact on the business case or the outcome of the business case because if assumptions turn out to be wrong the business case can lead to totally different results sometimes but also not often we simulate difference in areas using different assumptions and inputs to the business case but too often that is not done then also external factors like market trends interest rates or currency exchanges are inputs to the business case as well and if these assumptions and external inputs do not turn out as projected or natural responses to claim that the business case was right yes the business case was right it was the assumptions that did not hold true but this does not change the problem in any way the tool has led us to the wrong results then a business case usually contains many parameters which can be changed and need to be fine-tuned these parameters require judgment and again assumptions from the author of the business case and again the results of the business case can be largely affected by changing these parameters moreover the result of a business case usually create a concrete figure or statement something like break-even will be in 9.3 for seven two months this creates an impression of high precision which is usually not justified because of the arguments that have just been given it would be much better to state the results in terms of a range or a probability or probability connected to a range while that is certainly possible we usually lack the knowledge skill or experience or sometimes even time to create and even interpret these results last but not least it takes quite some effort to create high quality business cases let's come to the effort a good business case requires quite some effort just to give you an idea I have gathered a few tasks that you would need to do in order to create and analyze the results of a business case let's quickly go through that first you have to gather some input material and then you need to have a model for the business case if you're lucky you have already a template for a business case or sometimes you need to look up literature and create a model in Excel for yourself very important is that you document the assumptions and then you need to work in the business case it has all usually two sides a revenue side a cost model and you need to project the revenues or the costs and make estimates for them and also document the assumptions you have made then you calculate the business case you've checked the first results make some adjustments and it's also a good idea to review the business case ask your colleagues people who have experience with the domain and with business cases and ask them for the feedback and then also build in the feedback and last but not least once the results are there you need to create a story and you need to sell and communicate the results of the business case if the effort for a business case is too large though people will find workarounds that is a colleague has an idea and he or she would like to state create or start a project for that but if the business case required in order to get the budget approval is such a high hurdle never look for shortcuts and often people find ways and supporters and promoters that in the end will lead to the situation that not for every project the business craze is created and some projects are being started because people have find clever shortcuts to go around the usual approval cycle selecting projects by using business cases creates waste what I mean by that let's say you have a number of project ideas here I've written them down as I do ABCD efg and I D rage all of them have been formulated and stated and let's say you have also created business cases and calculated for example the return on investment for each of these ideas then let's say we have already ordered them in the order of the highest return on investment so idea a brings the highest ROI and I dare be the second highest ROI and so on this is a good thing because it orders with objective KPI here return on investment the different project ideas but in the end you will probably find it not possible to do all of these so there will be a Patchett line in this case let's say projects a B and C will make it into next year's budget but what about ID de G&H you have created a business case for all of them but there will not be realized in the next year maybe idea G or H they are not going to be done in the year after or in the year after that so in the end what you have done is you created waste you created a business case and documented all the assumptions calculated the results but the projects will not be started so this is the opposite of a lean approach creating high-quality business cases will often lead to business cases for project ideas which will never be realized now that we have discussed some issues with the traditional approach I would like to present you a different kind of approach for portfolio management I would like to call that the lean and agile approach a different approach can address these issues I would like now to tell you about lean and agile portfolio management and I would like to do this in three parts first how to collect the demand then how to decide what to start and last but not least is it really that simple let's start with the demand the demand for new projects comes from everywhere it comes from internal customers your external customers it comes from legal requirements it comes from teams or it also comes from individuals you could classify that further you could classify that in functional versus technical demand or the complexity or if a demand is mandatory or optional or the impact or the business or technical architecture in any case demand comes from nearly everywhere inside or outside of the organization we collect the demand in the project backlog a project backlog is an ordered list of all project ideas or requests the project backlog helps us to select the most important projects to start for right now it's just important that we understand that we need to collect and document all the different ideas for projects or initiatives I will come back to some details of the project backlog in a minute to be able to set the right priorities we need the big picture let's say that a project request is in this metaphor here a skyscraper a large house and each request on its own is valid let's remind ourselves that our customers or our colleagues when they come with new project ideas and most of them are very valid they deliver value but in the end we can only decide if a project needs to be started if we have the big picture then we can decide on the importance of each individual project request now here this is skyline with more project requests or here skyscrapers and if let's say the heights of of a building would be equivalent to the importance or the value of a project this house this skyscraper is higher is larger and that might mean this request is more important but this alone is not useful we really need to see the big picture we need to see all of the different requests in a selection to see that there's even one request that is even more important moreover sometimes we can group together certain requests and then we might be able to see synergies and group these different project ideas together to create a program and run them together within this program moreover we need to regularly update and maintain our project backlog just like New York or baleen the demand is not static is not enough to just do this once per year and have a large round of gathering requests and feedback on new project ideas we need to do this more often because our environment is becoming faster and faster we need new products new services internally or externally our demand changes over time and the pace of change is ever becoming faster and faster the project backlog should also be visible this is a screenshot of a SharePoint that I used to capture the demand this should be accessible by the supplier and the customer so the people who will in the end implement the project but also our customers internally or externally the reason for that is that it explains the portfolio decisions by putting all the different project requests into the big picture if people come complain that their project request is not approved and that the project is not started that can directly see that there are lots of other projects competing for scarce resources and that some of them might be more important knowing the demand we need to decide what to start but that is not that simple a business case might not be the right approach as I just explained priorities usually do not work either why is that let me give you an example I once had a documented set of project ideas and project requests 50 to 60 different projects that should have been started now we classify this in different priority categories and it turned out that 10 of these 50 to 6 the project request were given the highest priority but we knew that we probably could just take three or four of these project requests and run them in the next year's budget so we need something else something that is stronger how about a concept that successfully works in the agile software development and that is called a project backlog or during the demand is the key to selecting the right projects a project backlog is therefore an ordered list of project ideas where we have the most important ideas at the top it is regularly updated and also has the most detailed information on the top so the projects that are most likely to be executed next which are at the top and have the highest priority for these projects we have investigated the most we have the most information so that they are able to be executed or started very soon you know it does not make sense to do all that work in investigation and pre up qualification for projects which are at the bottom of this project backlog again this would create waste and that is the opposite of a lean approach but in the end where do we get the order from the order is regularly defined in the demand management workshop this is a workshop with key stakeholders and decision-makers the participants of this workshop need to understand the demand and they need to understand the demand before the workshop actually takes place so I would usually brief the participants a week before the actual workshop and send the material with detailed information about the different project requests that will be discussed during the workshop the workshop needs to be conducted regularly in order to adapt to new situations the demand and the environment today changes quite fast and this is the reason why it's not enough to just do this once per year I to try to do this every quarter but I would at least do this 3 to 2 2 to 3 times per year what is the outcome of such a demand management workshop that's quite simple it's the order of project request it is the agreed project backlog remember that the project backlog is ordered at the top you will find the most important project request which is then ready to be started and that is a difficult workshop let's discuss that a workshop has its dynamics which can lead to wrong decisions decisions are made by people if they're been made by groups of people there's a risk that other factors distort or demon dominate the decision-making process for example if some people are better at communicating and defending their arguments if there are more expressive vocal or more influential than others they can drive the decision-making process into their area and interest you probably all know these problems some of them talk all the time or others use killer phrases something like who would want to do this or others are not participating at all and thus they're not buying into what's being discussed apart from being a good moderator there should be some further tools to make the workshop results more objective so what can we do for that business value points business value points are a simple way to make decisions more objective business value points or be VPS are based on an agreed set of business objectives I'll show an example in a minute we can very easily calculate B VPS by only asking a few simple questions it can be easily and quickly be calculated and moreover B VP's can be created for nearly all situations so how do we calculate business value points in order to calculate business value points we first need to agree on what delivers value to a specific function for example the HR function here you see five values that an HR project should deliver this first step so the definition of the values only needs to be done once upfront for that we defined a set of values and the associated weights the idea is that every project idea is evaluated against these values the weight indicates how relatively important a certain values the higher the way the more important value is once the values are defined we analyze each project request for that we ask ourselves how much does the request support each value we answer that on a scale from one which means it does not support this value to five it's a fully supports this value here we have a screen shot of an excerpt sheet that we use to document assumptions and define the project idea and also asked the different questions for the values of the business value points the simple actual sheet calculates the way that some of the valley so value 1 times fate 1 plus value 2 times away 2 and so on the result is then called business value point or the score of that project request it's important to note that business value points on its own are quite useless they do not tell us anything about monetary value or return on investment they're only good though to relatively compare project requests against each other here's an example for a great business objectives for an HR organization we have five different values with the attached weights for example in how far does it that is the project request or idea improve system integration does it increase or infancy or lower cost and what is the number of affected employees moreover does it functionally improve HR business processes and quite interesting let's look at number five is it required for governance or to keep the lights on here you see that the weight is very high why is that why is keep the lights on so important well some projects simply do not deliver the value nevertheless they are important for example we need to implement a tax change which is legally required for our company that does not really deliver any value we just need for governance sake make changes to our system and that requires effort and cost if you would simply ask for the value or decrease of cost of an information system we would not run this project but it is legally required so in this scheme we need also have a value you for governance topics like legally required to changes or to keep the lights on people lights on might also be we need to upgrade the system to a new version otherwise it would not run anymore and why is the way it's so high in this the reason is that often these types of projects can only score a year because they will not increase functionality or deliver any other benefits many of the other usual project requests can score in many categories but we found out that these keep the lights on projects or governance projects will only score in that value so without this highway that would not be done at all in in order to give them a chance to be up in the project backlog and a high position we give this category a high value biggest bang for the buck uses business value points to structure on the demand but what is biggest bang for the buck this is a simple visualization technique or you might call it an analysis and we can use to better understand and structure our demand we can use it in the demand management workshop it is simple and straightforward here's a screenshot we create a flip chart showing a chart with two dimensions first the size of the cost on the x-axis here we can use money in euros US dollar or something or another metric for the size of a project then we use the business value points on the y-axis we can place the individual project ideas onto that chart let's just use post-its with the names and stick it under the chart ing to their relative size or cost and business value points and we can also add a notations we can draw dependents or at other post-its for annotations what can that chart tell us if we depict the cost over the value there are four simple quadrants which come out the one on the upper left is the goal one that is low cost and high value these are the project ideas we are aiming to implement at the opposite there's project request with high cost and low value on the lower right we should not start this the two others a bit more complicated some have high cost and a high value that is on the upper right there we need to investigate if we really can spend on should spend I cost in order to achieve a high value and then that might be some we could call the quick wins they have low cost but they also don't deliver that much value that is in the lower left area understanding where each project request sits on the dimension of cost versus value helps us to quickly see and identify project requests which we should put high on our project backlog and once that should go to the lower part but let's not out that business value points are not an automatic some criteria I'm more important than business values for example dependencies if you find out that you need to implement one project request before you can actually implement the other one these are hard dependencies and they're obviously more important than business values moreover there might be hard legal fiscal or commercial deadlines now you just need to implement a project request before another one even though the business value might be lower so it is not just enough to calculate business value points and just order your project backlog ing to that and let's pick the one on the top and implement them the outcome of the demand management workshop simply an ordered list here's an example of such a project backlog it's the result of a three-hour discussion on different project initiatives it's important that you come up with such a simple flip chart that shows the ordered list it's not a categories we have like 10 different very high important projects but you need to come up with an order that reflects business value and also dependencies and other milestones or legally required deadlines which you have discussed during the workshop the yellow arrow indicates the budget line everything that is above the yellow arrow will be started within the next budget cycle which is below does not have a chance and will be discussed in the next demand management workshop let's say you have just completed the demand management workshop and you have a project backlog which is ordered do you just simply pick the first projects and all start them and execute them probably not we need to take the capacity of our delivery pipeline into consideration that is even if we have the order and the budget we should not directly start all possible projects the reason for that is that too many things too many activities in parallel are just not efficient multitasking kills our productivity Harvard professor sending melanotan I hope I pronounced that right here tells us the following observation and probably you have observed that on your own faced with a time shortage we squeeze tasks nooks and crannies of our calendar leaving less and less time to switch between them as a result we become less and less productive exactly when we need to be most productive thus we should only start projects once we have the budget and the resources that is there should be a filter for projects into our delivery pipeline one for the budget and another one for the pipeline capacity the pipeline is something like we first architect the solution then design it decide on building or buying it and once we have done that we need to test it maybe rerun a pilot and then then deploy the solution and in the end the result is delivered it's an important to take a look at the capacity to not overfill our pipeline is it really that simple that is gathering your demand putting it into a project backlog grooming that project backlog making sure the most important ones the ones that deliver the most value are at the top and then starting from the top to implement the projects well probably not we will need some fine-tuning let me tell you about two extensions that we have implemented to this process first a lightweight process and then how to make sure that cost-saving projects are really saving costs here's the challenge how about low risk low cost projects some project requests let's face it our low risk and low cost nevertheless there might be important that might be required there might be legally required changes that we need to implement but a workshop a demand management workshop where our major stakeholders very often that say every two weeks it's not reasonable we will not get our major stakeholders to participate but how do we start then legally require changes which might come in between the major demand management workshops the solution is a lean process for these types of projects it's a lean simple effortless way to release budget to start these low-cost low-risk projects this specific path is only available for specific project requests so what's the criteria for example low cost no architectural changes very low risk you might also add legally required or very high business value let's reserve a certain amount of our available budget to fund this low risk low cost projects for example let's reserve 15% of our budget for these types of projects overall there is no substantial risk increase with end but the decision-making is lean and you don't need the full demand management workshop for that we should also have transparency for that lightweight process so it should be report it in the regular demand management workshop the results of your decisions as a portfolio manager to implement and start these low cost low risk projects and a representative from the provider and the customer they should decide jointly on the usage of the lightweight project for example the IT Service Manager and the business process owner they might have as your fix every two weeks and in this terrific's you have a standing agenda to decide on low risk low cost projects here's another challenge calculated cost reductions sometimes do not lead to actual savings projects often promised cost savings often their business cases are based on effort reductions but not all effort reduction can be converted to monetary savings let's say somebody comes into your office and says here's a project request we should change the following process steps and eliminate a few tasks and that will lead to some substantial effort reductions in my team let's say we could overall save another five hundred thousand euros in the next three years with this business case but often these effort reductions will not lead to monetary savings for the company in the end not very often do people come with headcount reduction plans if they're implement a simple process change which then would actually lead to monetary savings so what do we do when people come with these business cases here's my proposal and call it the lean criteria that's the Financial Controller commit to the savings that is we only start cost-saving projects if the savings that are projected in the business cases and you know my complains about business cases but if somebody comes with the business case and says we are going to save this amount of cash in the upcoming business cycles if these are committed by the financial controllers that is they are actually taking out of the next year's budget let's put this all together it starts with the demand demand can come from everywhere it comes from teams from individuals from internal customers or external customers some of these might be legal requirements the next step is the dispatching or distribution for example the service manager can take the demand and distribute it first to the project backlog or some of them can be started as we just discussed by the service manager him or herself or some of the demand goes directly into operations and also another bucket might be the base some of the demand is just not reasonable and will be put away and put aside and not put into the project backlog for that the service manager should have developed a criteria upfront then from the project backlog a demand management workshop is held in which order is established and a steering committee then can allow projects to be started or release the budget for the service manager to start the projects some of the low-cost low-risk projects can be started by the service manager directly we have three phases one is the collection of the demand the second phases distribution and deciding and finally comes the delivery stage now we come to the third part how can you actually implement this approach implementation sometimes requires a paradigm shift here's the challenge let's start with the rope them we will not be able to have a committed three here open up well I believe it is good to create a roadmap and usually we are able to create such a roadmap that shows us what we want to achieve in the upcoming let's say usually three years we should actually do this but we cannot commit to it an HL process just does not allow us we want to be able to adapt and we want to be able to implement agility into our process and this is just a contradiction to committing to a fixed three-year old map we will never be fully clear what will be implemented within the next 12 months since we want to be HL and have the flexibility to change our plan it implies that we are never fully sure what will come in the next 12 months people often misunderstand HR practices sometimes a it's a tight so we do not need to follow we process anymore I believe the opposite is true I think HR methodologies comes with a very strict yet simple and lean process that brings structure into the decision-making many organizations are also or have become risk-averse a fixed-price project therefore appears very favorable since it moves the risk from the buyer to the supplier within an age on environment you might have fixed prices but you cannot have a fixed scope associated with that hmm that usually would mean that you can have a fixed price for a fixed delivery pipeline but not for the fixed scope and trying to realize fixed price projects within an agile environment with fixed scope is difficult and often leads to failure of the approach so we need to rethink our approach if we want to become more agile and actually make this approach to success moreover senior management needs to support this approach and for that we need to establish the required relationships with senior management and build up the trust level and with that we can create the understanding of the approach and get their commitment to make the required changes moreover I would say we really should implement the age on mindset and that is we need to constantly work on the process to improve that and the idea of Kaizen start small and simple and improve along the way let's summarize the traditional approach does not work anymore well that's a bold statement but from my experience the traditional approach that is generating a road map over multi years and then committing to it and implementing it has it's serious issues and problems especially in today's fast-paced and fast and ever-changing environments but Lina and Adrian ceps are a basis for a new approach they give us tools like a project backlog like a demand management workshop which helps us to structure and evaluate our project requests and adapt agility in order to find an order in which we will implement our project request while also looking at the capacity of our pipeline well at the same time the implementation requires of the paradigm shift and we need to take management and different departments along the way for right now thank you very much for listening my name is Martin Kramer I would enjoy your feedback and for more information please visit my website dr. Martin Kramer comm again thank you very much bye-bye