Portfolio Management is the practice of prioritization of the portfolio of available innovations for development at the innovation level. Portfolio Management is also the name of the team of people responsible for this prioritization. This team is a representation of responsibilities throughout the organization for assigning capacity and budget to the flow of innovation development. Usually, it includes one or more members from the CIB and one or more Innovation Coaches. Portfolio Management is responsible for setting transparent criteria for prioritization and for evaluation of the contribution of each innovation to the corporate innovation goals and focus areas. Portfolio Management uses WFIF as a default transparent method for prioritization.
Portfolio Management uses the Portfolio Kanban to create and maintain an overview of all innovations being developed by the organization. It enables fast and transparent decision-making on the strategic direction of innovations and the allocation of resources and budget. The Portfolio Kanban is a method used to visualize, manage, and analyze the prioritization and flow of innovations from their inception to the embedding in the organization.
On this page, the following information is shared over the Portfolio Kanban:
- Structure of Kanban
- Purpose of Kanban
- Measuring flow
- Scaling the Portfolio
The Portfolio Kanban is used as the central system in the organization to track innovation initiatives and their development through the COIN framework phases (Ideation, Validation, Experimentation, Scaling Up and Embedding). The innovations that are managed on the board have been proposed by Innovators, validated and prioritized by Innovation Coaches with the support of the Continuous Innovation Board (CIB).
The Portfolio Kanban contributes to the success of continuous innovation because:
- It visualizes all innovation activity in a single view
- It creates a measurable flow of investments in innovation
- It enables fast and transparent decision-making
- It enables effective, value-driven allocation of resources
Structure of the Kanban
The Portfolio Kanban visualizes the process steps that an innovation passes on its way to embedding in the organization. Each of these steps is described below. In the first two steps of the Kanban, idea backlog and validation, items are referred to as ‘Ideas’. From the third step, experimentation and onwards, items are referred to as ‘innovations’.
Figure 1: Example Kanban
- Ideation backlog
The idea backlog is used to capture all innovative ideas, regardless of their origin. Whether they are proposed by individuals or the result of ideation sessions, hackathons or idea-boxes. Any idea can be added to the backlog with one single requirement: it needs to have an appointed owner, the Innovator. Without an owner who is willing to take responsibility for guiding the innovation through the innovation funnel, ideas cannot be added to the backlog. Innovation Coaches cannot be proxy-innovators to an idea. The idea backlog is unlimited, although in practice it is advisable to place a limit on the time an idea can be on the backlog before it is validated in the Validation Phase.
The Validation Phase holds all ideas that are being validated by their Innovators. Validation encompasses the clear description of the idea, its proposed working (feasibility hypothesis) and its intended business value (value hypothesis). The validation results in an innovation one-pager or Lean Canvas, describing the total concept, an argumentation why the organization should invest time and money in performing the first experimentation round and which experiment should be performed. This proposed experiment describes the biggest ‘fail factor’ for the innovation and an accompanying experiment that can be performed in 6-weeks to prove that the innovation has potential for success. The Validation Phase is typically performed by the Innovator, supported by Innovation Coaches where needed. Innovation Coaches assist Innovators in formulating the one-pager in such a way that it becomes possible to compare different ideas during the prioritization in the Experimentation backlog.
- Experimentation backlog
In this step, ideas are reviewed and prioritized on a periodic basis by the CIB and the Innovation Coaches. The items on the backlog are prioritized using Weighted Fastest Innovation First (WFIF). When sufficient capacity is available to form an Innovation Team the idea will continue to the Experimentation Phase and enter its first of two approved Six Week Innovation Challenge (SWICHs).
During the Experimentation Phase, the innovation will be developed during a maximum of three Six Week Innovation Challenges (SWICHs). The Portfolio Kanban indicates in which of the three SWICHs the innovation is positioned. Although each innovation that enters the Experimentation Phase is granted budget and resources for at least two SWICHs, the CIB can decide to stop the innovation after the first SWICH if results from the first experiments are unsatisfactory.
- Scaling Up
After three SWICHs the innovation enters the Scaling Up Phase. In this step, ownership of the innovation is gradually transferred from the Innovator to the Business Owners. This is done by guiding the innovation through a number of Scaling Up stages: stickiness, virality, and revenue. Within the Scaling Up Phase, the Kanban indicates which stage the innovation is currently in. The Innovation Coaches also registers at which dates the innovation moves into each stage so that it will be possible to calculate the average time that each innovation takes in each step. This information is relevant to be able to assess the speed of scale up of innovations and support the Innovation Coaches in increasing the flow of innovations through the Kanban.
In the Embedding Phase, the innovation is embedded fully into the organizational processes and structures. Where relevant, the existing structure will be adapted to accommodate the innovation and new performance indicators for the innovation are established. Throughout this time, the innovation will be listed in the embedding step of the Kanban. The Innovation Coaches together with the CIB and/or CIB Ambassador, should use this Kanban position to frequently evaluate the speed at which the embedding takes place and to drive for the quickest possible transfer of ownership of the innovation to the business.
Once the ownership of the innovation has been fully transferred to the business and the innovation has been fully embedded into the organizational processes and structures it is considered ‘done’. At this point, the card for the innovation is moved to the done-step. In this step, the Innovation Coaches collects key learnings and flow-data for continuous improvement.
Purpose of the Kanban
The primary purpose of the Portfolio Kanban is to increase the flow of innovations through the process. This is important because increasing the flow inherently means increasing the speed at which unsuccessful innovations are halted. Unsuccessful innovations are those innovations that prove to be not feasible to build or that cannot deliver the expected value. The continuous innovation process ensures that each idea is offered the attention and professional development capability that is required to determine its potential. Each idea is offered the same opportunities in terms of resources and time. Therefore, if an idea fails to deliver on its expected potential, it should be stopped at the earliest possible moment, so that the dedicated resources and time can be spent on the next promising idea.
Flow in a Kanban system is best measured using a Cumulative Flow Diagram (CFD). The CFD shows the time that innovations take to move across the various process steps of the Kanban. In the diagram, each process step is represented by a color, and all process steps are stacked, the first step at the top, the ‘done’ step at the bottom. An even flow of innovations would be represented by roughly equally sized colored bands layered on an increasingly tall bottom color, representing the increasing number of finished items. Sudden fluctuations in the size of a colored band indicate a process flaw.
The CFD visualizes three important metrics of your process:
- Cycle time
This is the average time that an innovation takes to complete the full process, not counting the time it spent in the idea backlog. If you were to include the time in the idea backlog the total time to complete the full process would be referred to as ‘lead time’. The cycle time is an important metric and should be carefully monitored because it is the leading indicator of the speed of innovations through the process. Reducing this speed will free up resources and allow more innovations to be realized with the given resources and budget.
Throughput is the average number of innovations that can be handled in the process per time period. Throughput is first measurable after a number of innovations have completed the entire process and shows the average number of innovations that are completed (embedded or stopped) per month. This indicator is important because it shows the productivity of the innovation process and can be measured against the resources spent on the direct support of the process, such as the time spent by Innovation Coaches and the CIB.
- Work in progress
Measuring Work in Progress (WIP) in each stage of the process is important because it allows the supporting team (Innovation Coaches and CIB) to optimize the number of innovations in each stage. This is important because it allows the supporting team to maximize the number of innovations in the process without clogging the system. Managing WIP allows for maximum efficiency with maximum effectiveness. WIP can be managed by setting WIP-limits per process step: a maximum number of innovations that can be in a specific process step at each given time. By setting WIP-limits, innovations that are in a specific step cannot move to the next step unless the number of innovations in that step is smaller than the WIP-limit. This means that the support team cannot spend time on these innovations, forcing them to spend all attention to finish those innovations that are further to the right in the Kanban.
Scaling the Portfolio
Every organization should strive for keeping its structure flat and agile. Therefore, it is recommended to keep all innovations in one Portfolio Kanban as long as possible. However, in a large multinational company, there may come a point when the overview is lost and the sync meetings of Innovation Coaches are insufficient to prioritize and manage the board. In this case, creating multiple Portfolios based on value streams is recommended. The following steps shall be taken to ensure a well-set up scaled Portfolio Management:
- Organize value stream mapping workshop to find particular streams focusing on producing a particular value for final consumers. When identifying value streams, geographical differences should not be taken into account unless they affect the created solution greatly. Keep the number of value streams as low as possible to prevent too detailed slicing. These value streams will be afterwards enabled to work on their own and manage their portfolio’s independently.
- Assign innovation budget to each value stream.
- Identify a small number of Innovation Coaches and members of the CIB per value stream as ‘Portfolio Management’. One member of this group may represent their portfolio at cross-portfolio sync meetings.
- Organize frequent sync meetings (at least every 2 weeks) across these portfolio management teams to make sure that idea’s, lessons learned and feedback are openly flowing across in the organization.
- Invite all innovation coaches to all SWICHs to ensure knowledge sharing. Let all the portfolio management teams organize the Innovation Days together to foster collaboration.
BlinkLane.com (2019) – Organizing around Value Streams in Product and Service Development. [Accessed online on April 29, 2019] https://www.blinklane.com/insights/organizing-around-value-streams-product-and-service-development/