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WHAT IS “LEAN PORTFOLIO MANAGEMENT” (LPM) AND ITS IMPORTANCE IN THE M&A PROCESS


Francisco Couto – Senior Partner at DMS PARTNERS


The change to Strategic Portfolio Management for organizational agility was signaled by Gartner Research, in the trends report for 2022, whose conclusions from this study showed that:


Only 16% of organizations are highly effective in all three key attributes of strategic portfolio management (SPM): 1. portfolio alignment, 2. ongoing portfolio flexibility, and 3. value-driven decision making.


A fragmented approach to designing the future of work can lead to excessive costs due to contradictory priorities, redundant processes and misaligned objectives.


Investments in sustainability have increased by more than 5% in the last five years; however, management paradigms have not changed to support this change.


What is SAFe - Lean Portfolio Management-LPM?


Configurable and scalable, Scaled Agile FraScaled (SAFe) allows organizations to adapt the framework to their own business needs. A critical aspect of the SAFe framework is LPM which provides organizations with a systematic approach to align strategy with execution, prioritize investments and optimize the value stream.


The three dimensions of LPM are: 1. Strategy & Investment Capture: ensures that the entire portfolio is aligned and financed to create and maintain the solutions necessary to achieve business goals. 2. Agile Portfolio Operations: coordinate and support the decentralized execution of ART (agile delivery teams) and promote operational excellence. 3. Lean Governance supports spending oversight, auditing, compliance, expenses, measurement and reporting.


Benefits of organizing around value


Value does not follow structures within Organizations, value delivery is inhibited by transfers and delays. Political boundaries can impede cooperation between departments. Communication between them is difficult.


It is essential to move from organizing around projects to organizing around the “Value Stream Development Portfolio”. Customers do not buy Features or Capabilities, instead, they buy complete product solutions that deliver desired results, which makes solutions one of the core concepts of LMP.


The SAFe Portfolio Framework is a collection of development value streams. Each Development Value Stream creates, supports and maintains solutions. The solutions are delivered to the Customer, whether internal or external to the organization. A company can have a single portfolio or multiple portfolios.


An LPM Adoption Roadmap


Below is the LPM implementation roadmap recommended by SAFe, which helps portfolio managers, business leaders, product managers, and other interested parties to have a common and integrated vision for the success of this process.


The Importance of Lean Portfolio Management in M&A


The implementation of SAFe - Lean Portfolio Management (LPM) principles during the pre and post Mergers and Acquisitions (M&A) process can significantly increase the efficiency and effectiveness of the Integration Process, as we will see below:


“Strategy Alignment” - SAFe LPM emphasizes the alignment of portfolio strategy with business strategy. During mergers and acquisitions, it is crucial to ensure that the strategic objectives of both organizations are aligned. LPM practices, such as defining transformative purpose, mission, and strategic themes, can help establish this alignment.


“Portfolio Prioritization” - With the integration of two portfolios, there will be a multitude of projects and initiatives. SAFe LPM assists in prioritizing these initiatives based on strategic alignment, economic benefits, and risk considerations. This prioritization ensures that resources are allocated to the most critical initiatives first.


“Continuous Assessment and Adaptation”: Pre- and post-M&A processes are dynamic and priorities can change as the integration progresses. SAFe LPM's principles of continuous assessment and adaptation enable organizations to regularly reevaluate their portfolio and adjust priorities accordingly. This agility is crucial during uncertain M&A times.


“Value Stream Identification and Optimization”: SAFe emphasizes identifying value streams and optimizing them for efficiency and value delivery. During pre- and post-M&A processes, understanding the combined value streams of the merged entities can help streamline processes, eliminate redundancies, and deliver value to customers more effectively.


“Lean Budgeting and Financial Management”: SAFe LPM promotes lean budgeting practices such as decentralized financing and value stream budgeting. These practices can help in the efficient allocation of post-merger financial resources and ensure that investments are aligned with strategic objectives.


“Leadership Alignment and Collaboration”: Effective healthy leadership alignment and collaboration


Lean Portfolio Management 6.0: Aligning Strategy with Execution – Workbook Course

Christoph Rohloff: Post-Merger Management - 9 Success Factors for Complex M&A IntegrationProjects https://www.linkedin.com/pulse/post-merger-management-9-success-factors-complex-ma-rohloff/

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