Lean Portfolio Management

5 minutes 5 Questions

Lean Portfolio Management (LPM) is a SAFe concept that represents a shift in mindset for many organizations. With LPM, organizations can execute strategy with a sustainable flow of value, which embraces an iterative planning process. It also establishes portfolio flow by defining the key indicators…

Guide to Lean Portfolio Management

Why it is Important:
Lean Portfolio Management is essential because it aligns strategy to execution, fostering better decision-making capabilities. It also helps optimize portfolio operations, increasing the predictability and visibility of organizational objectives.

What it is:
Lean Portfolio Management (LPM) is a methodology which applies Lean principles to portfolio management, aiming to optimize the flow of value delivery in organizations. It is about applying Lean thinking to prioritize and manage the flow of value through portfolios of dependent, interrelated projects.

How it Works:
LPM operates under three primary functions: Strategy and Investment Funding, Agile Portfolio Operations, and Lean Governance. It utilizes key concepts from Lean thinking, such as visualizing work, limiting work in progress (WIP), managing flow, making policies explicit, and using feedback loops.

Exam Tips - Answering Questions on Lean Portfolio Management:
1. Understand core principles: Get a deep understanding of Lean thinking and the primary functions of LPM.
2. Practical examples: Use practical examples when describing how LPM works.
3. Scenario-based questions: Most questions on LPM test your ability to apply Lean principles in various scenarios.
4. Summary understanding: Ensure a comprehensive understanding of terms and concepts central to LPM, such as limiting WIP and visualizing work.

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PMI-ACP - Lean Portfolio Management Example Questions

Test your knowledge of Lean Portfolio Management

Question 1

In Lean Portfolio Management, what is the most effective method for optimizing value stream funding distribution?

Implementing a fixed annual budget plan with quarterly reviews and predefined allocation percentages Assigning equal funding to all value streams to maintain organizational balance and fairness across departments Prioritizing funding based on the loudest stakeholder voices and most urgent requests from business units Using empirical data from past performance and market signals to adjust allocations

Correct Answer: Using empirical data from past performance and market signals to adjust allocations

Using empirical data and market signals for funding allocation is the most effective method in Lean Portfolio Management because: It aligns with Lean-Agile principles of data-driven decision making and continuous adaptation based on actual results and market conditions. It enables organizations to: - Make objective funding decisions based on measurable outcomes - Respond to market changes effectively - Optimize resource allocation based on value delivery - Support continuous improvement through feedback loops The other options are problematic because: Equal funding distribution fails to account for different value stream needs and strategic priorities. Basing decisions on stakeholder voices and urgent requests leads to reactive management and may not align with strategic objectives. Fixed annual budgets with predefined allocations are too rigid for an agile environment and limit the ability to adapt to changing conditions or opportunities.

Question 2

In Lean Portfolio Management, when determining investment allocations across value streams, what is the primary factor that should guide the decision-making process?

The historical success rate of previous investments in each value stream The strategic value delivered to enterprise objectives The comprehensive analysis of resource allocation and capacity planning metrics The detailed assessment of operational costs and expected return on investment

Correct Answer: The strategic value delivered to enterprise objectives

In Lean Portfolio Management, the primary factor for investment allocation across value streams should be the strategic value delivered to enterprise objectives. This is the correct approach because: - It aligns portfolio decisions with organizational strategy - Ensures investments support overall business goals - Maintains focus on value creation and strategic outcomes - Supports enterprise-wide optimization rather than local optimization The other options are less suitable because: - Historical success rates are backward-looking and may not reflect current strategic needs or market conditions - Resource allocation and capacity planning metrics are operational considerations that should follow strategic decisions, not drive them - ROI and operational costs are important but secondary to strategic alignment - they are tactical measures that should support strategic decisions rather than drive them Lean Portfolio Management emphasizes value delivery and strategic alignment as core principles, making strategic value the primary consideration in investment decisions.

Question 3

In Lean Portfolio Management, which key principle best reflects the method of minimizing waste in the portfolio decision-making process?

Creating comprehensive annual financial forecasts and adhering to rigid budget allocations Establishing extensive documentation processes for all portfolio management activities and decisions Making smaller, frequent investment decisions based on validated learning Maintaining detailed tracking of every resource allocation across all ongoing and future initiatives

Correct Answer: Making smaller, frequent investment decisions based on validated learning

Making smaller, frequent investment decisions based on validated learning is the key principle that best reflects minimizing waste in Lean Portfolio Management. This approach embodies core Lean principles by: - Enabling quick feedback loops - Reducing financial risk through smaller investments - Allowing adjustments based on actual market response - Supporting empirical decision-making The other options introduce waste by: - Annual financial forecasts and rigid budgets create inflexibility and prevent adaptation to changing market conditions - Extensive documentation processes add bureaucratic overhead that doesn't add value - Detailed resource tracking of all initiatives creates unnecessary administrative burden and doesn't focus on value delivery The correct answer aligns with Lean thinking by promoting iterative learning, reducing batch sizes of decisions, and enabling rapid adaptation based on validated market feedback.

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