Lean Portfolio Management for Financial Services

The entire financial services industry is in a state of disruptive innovation. While opportunities have never been so plentiful, neither has the threat of obsolescence ever been so prevalent. Financial services must now innovate to survive, and that starts with replacing long-standing business concepts with modern methodologies like Lean Portfolio Management for financial services.>

Traditional approaches to portfolio management once acted as the business foundation for many financial services companies. But those approaches were designed for an entirely different paradigm. Today, they can restrain innovation and impede the flow of value. Financial services organizations are now turning to Lean Portfolio Management approaches to nurture innovation, enable the flow of value, and improve funding and planning speed.

Planning and funding can no longer be an annual event. For the financial services industry, planning and funding must be continuous and collaborative, budgeting cycles must be flexible, and demand must be managed against capacity. Additionally, progress must be measured in terms of value delivered and businesses must strive to achieve agility.

During the strategic planning process, financial services leaders set objectives, define direction, identify priorities and determine funding requirements and allocation. Lean Portfolio Management assists by allowing them to:

• Work more efficiently by looking at how value as a whole is flowing throughout the organization. Continuous focus on what the customer needs and desires minimizes wasted time and effort.
• Focus on how their organization is funding priorities: Are they funding projects on a 12-18 month funding and planning model, or are they aligning funding to value streams or key areas of the business?
• Introduce new operational teams and groups to ensure adherence to Lean Portfolio Management practices and principles throughout the organization, as the shift is made to new ways of working, funding, and planning.
• Establish parameters for incremental funding to value streams, relinquishing control from the executive level to the value stream leader, and holding the teams accountable to delivering value.

With the right information and portfolio management model in place, stakeholders make informed portfolio decisions, and can break the traditional strategic planning and funding cycles to deliver what customers want, when they want it.

Lean and Agile Delivery (LAD) solutions are designed to help financial services organizations quickly translate customer needs into customer-ready deliverables. Lean and Agile ways of working, including Lean Portfolio Management for financial services, empower teams to deliver value quickly and efficiently by:

• Decentralizing decision making so that those closest to the work have the decision-making autonomy necessary to enable speed, efficiency, innovation, and adaptation.
• Achieving a continuous flow of value by ensuring work is planned, executed, and delivered as dictated by demand and capacity.
• Decentralizing planning cycles so planning occurs as needed, and incorporates new circumstances, information, and innovation. Planning, execution, and delivery done independently from the rest of the organization speeds learning and delivery.
• Structuring deliverables in ways that incentivizes innovation and the production of customer value, and measuring success in terms of how well teams deliver desirable products in spite of market shifts.
• Replacing highly-detailed, long-shot plans with lightweight business cases that provide a dynamic framework for achieving a goal. Plans are modified as data becomes available and details are filled in.
• Empowering self-managing Agile Release Trains (ARTs) that encourage the development of high-performing, cross-functional teams that plan, commit, and execute work together.
• Taking a Lean-Agile budgeting approach that allocates to the full value stream, fostering growth and innovation and reducing waste.
• Measuring objectively with fact-based milestones to discover a team’s actual ability to deliver customer value.

With the right Lean and Agile Delivery solution, financial services companies can adopt Lean Portfolio Management practices to optimize throughput by ensuring the right people on the right teams are working on the right priorities, and are funded properly and more incrementally. This helps financial services organizations address disruption by quickly pivoting in response to market demands.

In today’s global economy, enterprise agility in financial services is more important than ever. New technologies in the form of fintech and insurtech are threatening the market share of leading institutions. The race to digitalize is also well underway and, just over the horizon, machine learning and AI have the potential to disrupt in ways we can only imagine.

Consumer expectations evolve

Customers of every financial services company have changed. The millennial generation – the target demographic for most businesses today – grew up with digital shopping, entertainment, and socializing, and that formed their expectations. Today, they anticipate a wide variety of digital services that include mobility, personalization, on-demand access, and innovation at the same level they see in consumer tech companies.>

This has created countless opportunities for disruption in the financial services space. It’s put fintech, insurtech, big tech digital “neo banks,” demographic-focused products, and lending innovation center stage.

New Fintech solutions are designed to disrupt

In this era of disruptive innovation, the key to growth and capturing market share has been in applying innovative technologies that speed, enhance, and improve financial activities. That’s what the modern consumer is looking for and the top reason enterprise agility for financial services is essential.>

Even traditional financial advisors are at risk of being replaced by automated robo-advisors using algorithms to provide investment advice and management, with minimal human intervention. That’s one example among hundreds. Anticipate further waves of disruption that will ultimately transform the industry as fintechs more effectively meet customers’ evolving demands.

Enterprise agility is the answer for many modern challenges

Established financial services organizations are feeling the heat. While they have the benefit of experience on their side, many are still struggling to overcome the bureaucratic culture, organizational siloes, and hierarchical management structures that arose as they were dealing with critical challenges of the last paradigm: Cybersecurity, expanding regulation, and an increasingly complex infrastructure.>

It’s now imperative that these organizations overcome the legacy business models and technologies that lack the flexibility needed to deal with modern challenges. Lean and Agile approaches were developed in response to this new, more volatile world. And they’re exactly what’s required in this era of disruption.

Most financial services organizations today are in a state of transition by necessity. They’re reimagining their businesses to retain and attract new customers by:

• Rebundling multiple services into one product that customers leverage across their financial lives.
• Diversifying to provide a “platform” of new services.
• Removing transactional barriers to enable real-time payments.
• Eliminating branch, call center, and operational siloes to improve communication and data sharing that better serves the customer and the business.

In order to achieve the goals above, many financial institutions are adopting Agile principles and practices, alongside two other important technological advances: digitization and automation.

Each of these efforts can be considered a transformation in its own right. While it may be a challenge to address all three simultaneously, they go hand-in-hand. It’s Agile development practices that will allow financial services organizations to design, build, and incorporate new ideas and deliver value faster to the customer.

Financial services companies are among the most likely to have adopted Agile. But many aren’t seeing the results they’d anticipated. They’re still not responding quickly to opportunities or disruption. And they’re not delivering new ideas with commercial value.

Others are seeing results. They’re moving faster, embracing digital disruption by embracing an Agile shift. What’s the difference? Often, it’s the adoption of Lean Portfolio Management.>

Lean Portfolio Management for Financial Services: The Key to Fintech Success?

I motsetning til tradisjonell porteføljeadministrasjon, gjør Leans porteføljeadministrasjonsprinsipper at organisasjoner kan jobbe mer effektivt, noe som reduserer bortkastet tid og krefter mens kundebehov kontinuerlig prioriteres.

Lean practices enable financial services companies to validate and align on priorities. This:>

• increases speed and delivery
• produces higher quality products
• improves organizational health

Lean Portfolio Management for financial services restructures planning and funding processes and aligns them to the business outcomes desired.

Rather than focusing on individual projects, leaders evaluate a holistic flow of value, and from that perspective identify opportunities for improvement and value delivery. Funding models and planning cycles become continuous processes. Business units make decisions on how value is produced or achieved. Value streams self-organize to deliver the highest-value work first.>

Guidelines for Successful Lean Portfolio Management

To excel at Lean Portfolio Management, companies must focus on three key areas:

• Strategy and investment funding: Organizations must ensure they’re investing in the right portfolio areas. They must set politics aside, review business cases objectively, ascertain their potential business impact, and fund the top value streams incrementally to reduce financial risk.
• Agile portfolio operations: As more processes are decentralized and responsibilities are shifted to the value streams, a team should be assigned to drive alignment and governance throughout the value chain. Planning and steering meetings will help to realign on key priorities and change course when value streams aren’t yielding anticipated outcomes.
• Lean governance: Lean guardrails provide a structure for financial planning and spending forecasts. They include budgetary, governance and spending policies and practices for value streams within a portfolio. These help ensure the more effective and profitable value streams receive greater funding and capacity allocation than those delivering lesser value.

Financial services organizations that take a traditional approach to portfolio management often find it conflicts with Lean-Agile development at the team level. That’s because traditional budgeting and project cost accounting methods centralize control and place a heavy focus on projects.

Lean-Agile practices and principles, however, require more decentralized control with a focus on value stream delivery. This disconnect between traditional portfolio management and Lean-Agile delivery makes it nearly impossible to answer key questions:>

• How are we investing in and realizing value from the streams across our Lean-Agile portfolio?
• How can we quantify the value of our change initiatives?
• How much are we directly investing in the transformation initiatives that will drive the majority of our future? What return are we seeing?
• Which transformation initiatives are most aligned to our strategy and delivering the best ROI?
• Can we visualize the work in our portfolio? And is our funding optimized to maximize the value in it?

Lean Portfolio Management for Financial Services is a significant shift from traditional portfolio management. Stakeholders are less concerned with the funding of individual projects. Instead, they’re highly invested in the outcomes produced.

Through Lean Portfolio Management, financial services companies fund value streams incrementally. This reduces the financial risks associated with longer-cycle funding models. And iterative funding combined with continuous planning maximize portfolio value and ensure plans remain dynamic and relevant.>

Most financial services organizations scale Agile in order to solve complex problems by breaking them down and tackling each piece individually. The result is faster, more efficient delivery, enhanced innovation, and the ability to exploit new opportunities as they arise. There are a number of important benefits of scaling Agile in financial services:

Strategic alignment across the enterprise:

• makes strategic objectives a focal point for everyone
• aligns and organizes teams around value streams focused on the customer
• leverages transparency and cross-team coordination to quickly pivot if priorities change

Funding the value streams that matter most:

• builds value streams around products, processes, and solutions for customers
• ties funding directly to value streams to ensure financial support for areas with the most persistent demand, and with the most potential to improve delivery
• evaluates KPIs rather than the completion of deliverables for future funding decisions

Enabling enterprise-wide visibility:

• provides leadership with insight into how value streams are delivering, their progress, and financial impacts
• rolls up the work of all teams of teams to see program and financial progress against the value streams and strategic objectives
• visualizes the work of all teams to manage cross-team dependencies, compare alternatives, identify and respond to bottlenecks, and evaluate shifting teams among value streams as priorities pivot

Scaling Agile can help financial services organizations to thrive in this era of disruption. With its proven ability to align teams, provide insight, and ensure funding for the most consequential initiatives, scaling Agile removes many of the obstacles on the road to delivering rapid customer value. And with those obstacles removed, you can place more attention on anticipating and guiding the evolution of your industry rather than responding to it.