Structuring Application Portfolio Management for Digital Innovation
Structuring Application Portfolio Management for Digital Innovation by Arjo van Oosten
After celebrating the success of your first project, it is time to move from the Start phase to the Structure phase of our Digital Execution Roadmap. The goal of the first app is to create adoption, acceptance and proof of building your digital innovation acceleration capabilities. Once you have that success under your belt, it is time to create a roadmap of the next five to ten projects to work on once your IT team embraces bimodal IT.
Here are the four steps for creating a successful application portfolio management roadmap for Digital Innovation:
1. Create Minimum Viable Business Use Cases
For each initiative, it is important to clarify what the minimum viable business use case is by filling out a one-page template including the following: Current situation, a description of the idea, what it will solve and what are the affected KPI’s and business value. This is a Mode 2 approach that saves time from the long upfront business case analysis that you would see in a Mode 1 approach. This method is a more objective way to evaluate potential projects, versus the stake holder with the loudest voice getting their project approved.
During this step, it is also important to categorize which initiatives are a good Mode 2 fit and which ones are not. Think of which initiatives require a fast, iterative development approach, versus the traditional, long development process.
Think about both business considerations (time-to-market, continuous changing requirements, unclear business requirements before delivery), and technical requirements (a data driven, user friendly application working on multi-device or mobile, with workflow and data integrations). If the project can be categorized with these business and technical considerations, then it is a good fit for Mode 2.
2. Categorize the Initiatives on the Complexity-Exposure Matrix
At this point you should have ten projects thought out, with one pagers that explain their minimum viable business use case. In order to manage your application portfolio roadmap, it is important to categorize each project on the Complexity-Exposure Matrix. The Matrix breaks down the level of complexity and exposure of the project into four quadrants (see illustration).
A high complexity, high exposure app might offer a lot of potential business value/impact but if tackled too early, it might not be successful. So it’s about tackling the right apps at the right time. Starting with Low Complexity, High Exposure or Low Complexity, Low Exposure apps and then getting more sophisticated as your team maturity grows.
During this step, the entire team needs to agree on where to place each of the projects on the Matrix, and to do so from an MVP point of view.
3. Pick T-Shirt Sizes for Each Initiative
T-shirt sizing is another way to categorize the projects in your portfolio to understand the size and scope of the project. Think of your first project as a size small (S). This is your benchmark for how to size the other projects. As a general rule of thumb, each size up (e.g. Medium vs. Small) should be twice the size and effort.
When sizing each of the projects, have a high-level discussion on your gut feelings and rough estimates of each project’s complexity and required effort. Think about:
- What MVP functionality is expected from each project?
- What is expected from integrations?
- Who are the parties involved? Is it Interdepartmental?
- Is the project multi-regional?
- What is the architecture impact?
- What is the governance?
4. Prioritize the initiatives that matches team and scope
Once you have t-shirt sizes for all of your initiatives, your Matrix should show which quadrant each project fits and what size each project is. For the most part, your S and M projects will make up the left side of the matrix where the complexity is low, and your L and XL projects will make up the right side of the matrix where projects are high complexity.
A general rule of thumb when considering which projects to work on first is to avoid the right side of the matrix in the early stage of Structure because these tend to be projects that are higher risk. There is often pushback from customers to start with their high complexity, high exposure app because this is the highest priority initiative in their minds. However, it is better to start with low complexity projects and work your way to the higher complexity projects in order to ensure you will be successful.
For example, start with two S initiatives, follow with one M initiative and the rest of the S initiatives. Then move on to one L initiative while working on the rest of the M initiatives. Continue to progress through the initiatives based on the size and complexity.
After the team has successfully completed two S projects together, you have the opportunity to create a resource strategy as well. This means having multiple teams working on different projects by size, complexity or type. For example, the newer team(s) can spend their time focusing on the left side of the matrix working on S and M projects while the existing, more mature team can focus on the right side of the matrix working on L and XL projects.
The entire process of categorizing and prioritizing your portfolio takes about an hour and a half, after your team is aligned on the one-page descriptions of each project from step one. Your portfolio can, and should, be re-evaluated every few months. Depending on the growth of your team, both in size and expertise, the complexity and size of the projects might change. The categorization is contextual based on your team’s maturity.
This process of innovation application portfolio management works well when moving from Start to Structure. It will be necessary to implement a more structured and formal portfolio management approach before scaling these projects.