Portfolio Kanban and Doing the Right Thing

There’s an ongoing discussion that I occasionally refresh with Markus Andrezak on usefulness of applying Kanban to manage portfolio and generally to the process of figuring out which products should be built.

What is Portfolio

One obvious thing that we can start with is focusing on a specific context. After all portfolio is a pretty loaded word and it is used in all sorts of situations. While my goal isn’t to boil down portfolio discussion to only few available options I see at least three distinctively different cases.

There are organizations that ore focused on project work. A typical gig they run would be a distinct initiative that is different form all the other initiatives they run. What’s even more important the revenue from that work would be connected to delivering work. This would be a project portfolio case. A classic example would be an offshore web software shop.

Then we have organizations that, similarly to the previous example, focus on building multiple concurrent and independent initiatives yet they would operate them as products by themselves. In other words they earn money by directly selling their software, or services provided by that software, to the end users. There’s no simple definition when the work is done. This would be a product portfolio case. A classic example would be a game development studio.

Then there is an alternative version of product portfolio where the whole company is focused on building a single product. In such a case the overarching initiative that everyone contributes to is obvious as there is only a single one. The discussion would happen between either specific goals to achieve or specific big scale functionalities to build. This would frequently be labeled a product portfolio too although for the sake of this discussion I’d go with a feature portfolio label, even if it isn’t precise especially for big organizations. A classic example would be a startup building what they believe is the next world-changing product.

Of course we can think of a mix of any of these scenarios and rarely only one of them will be pursued by an organization exclusively. What’s more we could go further with a differentiation within these scenarios. We’d see a completely different dynamics of project portfolio in a company that works under time and material terms than from one that build fixed price projects. A very different feature portfolio will be in a startup at an early phase which is still figuring out product-market fit that in an established company focusing on leveraging their user base or staying ahead of competition.

Where is the Problem

The discussion about applicability of Portfolio Kanban boils down to defining what is the most painful problem on a portfolio level in a given context. From that perspective there is a clear distinction between project portfolios and the other two scenarios. The difference is in the way revenues are generated.

In project work the more projects we finish the more revenues we can expect. With product or feature portfolio building software is only an intermediate step in order to generate revenues. In other words we know much more up front about return on investment in project portfolio scenario than we do in other two.

That doesn’t completely change the bottom line. In each case the choice on endeavors an organization works on is crucial for its long-term health. In each case overcommitment and too much work in progress on portfolio level can decimate the value of any ongoing work, no matter how carefully chosen. There are commonly mentioned reasons for that: long lead times mean long feedback loops and a lot of work in progress results in inefficient work.

There’s one more dimension that from my experience is at least equally, if not more, important. The constraints provided by work in progress limits change the dynamics of the discussion about starting new stuff, be it projects, products or major features.

Typically the discussion about economic feasibility of starting a new product or a project happens in isolation. If the ultimate problem that we are trying to solve is choosing the right initiatives to work on it should never happen in isolation. After all most of ideas we come up with make sense… in some context. An interesting question would be whether we are in such a context.

We may have a bunch of projects that we expect to be profitable. But which of them provide us most monetary and non-monetary value? How starting another one affects the ones that are already ongoing? Given a business hypothesis which we want to validate, which out of all possible experiments would generate most valuable information? Would starting another concurrent experiment obfuscate the outcomes of ongoing ones?

Of course we can say that each project will provide some value and each experiment will provide some learning opportunities. We don’t have infinite capabilities thus we need to choose.

Role of Portfolio Kanban

The way I look at Portfolio Kanban is that is addresses a very common issue of overburden at portfolio level and as a result it drives the discussion about what are the right endeavors to pursue. The latter starts happening when, thanks to WIP limits, we start saying no to new initiatives. What WIP limits create is they underscore available capabilities as a scarce resource. The next step typically is more careful consideration how these capabilities are put in the best use, which ultimately means a discussion about what is the right thing to build.

Obviously this dynamics is not true in all environments. Startups, especially at the early stages, will likely focus on figuring out what is the right thing to build without any external incentive. Organizations built around a single product, at least to a certain size, will naturally maintain discipline in strategy planning that will provide an answer what are the crucial product goals for them.

Beyond that it all gets fuzzy. If an organization gets big enough it has capacity to build multiple initiatives concurrently. Each product that grew far enough has a number of potential development paths it can follow and each of them can be promising on its own. If we talk about multiple product organization a temptation to follow a bunch of new goals at the same time is even stronger. And with projects it’s like an everyday issue.

Of course I don’t say that it’s not possible to start the other way around: nailing down the ultimate purpose, which may mean answering the Spice Girls question, and following up with defining what are the right features, products or projects that serve the purpose. This would likely mean that the number of concurrent initiatives will be limited as majority of activities would be optimized toward pursuing the purpose.

The problem is few organizations are ready to make this step just like that. And even when they are, there are still a lot of risks along the way. First, depending on how the ultimate goal is defined it doesn’t have to limit the options for what constitutes an attractive endeavor and we’re back to the square one. Second, even if the purpose provides enough focus there’s typically still plenty of options how to pursue the goal and thus overburdening portfolio is still a viable option. Third, and most importantly, in bigger organizations defining a single purpose may be impossible because office politics kicks in or there isn’t enough strategic leadership present.

In either of these cases as well as in the most common situation where there isn’t enough awareness to even start the discussion about the purpose Portfolio Kanban may serve as a facilitation tool. On the top of efficiency gains, similar to those seen in other applications of Kanban, it would catalyze the discussion about what is the right thing.

This is, in fact, the most important outcome of introducing Portfolio Kanban that I’ve seen.

What Portfolio Kanban Is Not

An argument I’ve heard a couple of times is that Portfolio Kanban doesn’t help to define what is the right thing to build or what is the ultimate purpose. I completely agree with this one. That answer simply isn’t there. Portfolio Kanban, pretty much alike any Kanban application, is a meta method. One shouldn’t expect to get context-specific answers.

If an organization is ready to look for these answers that’s great. Depending on specific context Lean Startup, Lean UX or other modern product management approaches may be relevant. That’s where awesome guys like Will Evans or Markus Andrezak kicks in with their expertise. That’s where Stephen Bungay’s work will prove invaluable, which Jimdo guys will happily confirm. That’s where Don Reinertsen would provide outstanding guidance for decision making.

In such cases, usefulness of Portfolio Kanban will indeed be limited. It will be mostly process improvement and efficiency stuff.

A common case wouldn’t be even remotely as rosy though. That’s why value provided by Portfolio Kanban typically go beyond the process stuff. It would still stop at introducing pressure to start important and difficult discussions. It wouldn’t provide guidance for that conversation. A good thing is that there would be more pressure the more screwed up the situation is. We can expect this catalyzing mechanism to exist continuously till we either solve the problem or give up on limiting work in progress on portfolio level.

If someone claims that Portfolio Kanban is supposed to provide more than that in terms of defining what is the right thing, well, we may be talking about different things.