Enterprise

A strategic inflection point is that moment when some combination of technological innovation, market evolution, and customer perception requires the company to make a radical shift or die.

– Allen Ward, Lean Product and Process Development [1]

Definition: The Enterprise represents the business entity to which each SAFe portfolio belongs.

What is an enterprise in SAFe?

The enterprise is the business/organization that portfolios, ARTs and Agile Teams are a part of. It provides the resources and support they need for success. Enterprises utilizing Lean Portfolio Management (LPM) often organize their portfolios to ensure a continuous flow of valuable solutions that align with their business mission. When multiple portfolios need to align and collaborate, the enterprise may implement Enterprise Portfolio Management (EPM) to coordinate a connected strategy across them. This ensures that related portfolios are aligned with the vision and strategy of the organization.

Each enterprise has an enterprise strategy — a plan of action to achieve the enterprise’s mission. An enterprise strategy should answer four critical questions:

1. What customers and markets do we serve?
2. What products and solutions do we provide?
3. What unique value and resources do we bring to the endeavor?
4. How will we extend these in the future?

The guidance covered in this article explains the techniques and practices for coordinating portfolios across an enterprise.

How do portfolios align with an enterprise?

Smaller enterprises and government agencies may only need a single SAFe portfolio, which can build and govern all the solutions required to fulfill their mission and help deliver on this enterprise strategy. The portfolio is connected to the enterprise strategy via strategic themes and an allocated lean budget (Figure 1). The Portfolio article explains the constructs, interactions, and activities of a SAFe portfolio in more detail.

Collaboration among portfolio executives and Business Owners determines the portfolio budget, identifies strategic themes, and supports other LPM activities.

However, many of the world’s largest organizations use SAFe. These enterprises have thousands, and even tens of thousands, of IT, system, hardware, and solution development practitioners. Not all these practitioners work in the same portfolios. More likely, people are organized to support various lines of business, internal departments, customer segments, regional areas, and specific business capabilities. In these cases, there is often a need to coordinate work across portfolios, create strategic themes that connect them, and allocate appropriate budgets across them (Figure 2). In this situation, EPM is required.

What is Enterprise Portfolio Management (EPM)

Enterprise portfolio management (EPM) ensures alignment between a related set of portfolios and the overall enterprise vision and strategy. An effective EPM team enables the highest priority work to have a clear path from strategy and investment planning to execution. This approach empowers individual portfolios to make localized decisions within their context whilst remaining connected to the enterprise strategy. This decentralized decision-making enables portfolios to respond to quickly changing customer needs and market environments. This is critical for companies that need to respond to market conditions quickly. Organizations already applying strategic portfolio management still benefit from the practices described here, especially when they have some portfolios applying SAFe practices and others not.

Who is involved in enterprise portfolio management?

Ensuring alignment with the enterprise’s vision and strategy requires key individuals to work together. The collaborations that fuel EPM (Figure 3) are represented by existing roles that can be categorized as follows:

• Enterprise Executives – the most senior executives of the organization.
• Portfolio leadership – those who lead the strategy and investment activities for each SAFe portfolio.
• Enterprise strategists – those who help enterprise executives and portfolio leaders identify long-term strategic goals through ongoing analysis and research.
• Portfolio Stakeholders – those with critical knowledge and insights needed to ensure the successful delivery of the solutions within each portfolio. The business unit and departmental executives often represent these.
• Enterprise Epic Owners – those responsible for shepherding cross-portfolio initiatives through the enterprise portfolio Kanban system.

These are challenging and rewarding roles that require translating strategy into actionable objectives in a constantly changing environment.

How are enterprise portfolio strategic themes defined?

SAFe recommends using strategic themes, typically described using the Objective and Key Results (OKRs) format, to communicate strategic intent for each SAFe portfolio. When an organization has more than one portfolio, a set of enterprise portfolio strategic themes may be needed to align, inform, and connect each portfolio strategy to the enterprise strategy, as illustrated in Figure 4. This bridges the entire enterprise and the portfolios that innovate and develop new solutions. The EPM collaboration creates and communicates these enterprise portfolio strategic themes and ensures they align with the overall enterprise vision and strategy.

Enterprise executives are accountable for the outcomes of each portfolio, and well-written strategic themes should assist in answering the following questions:

• How does the work of our value streams connect to the enterprise strategy?
• What is the future potential value of the portfolio?
• How should funds be spent to meet customer and stakeholder expectations?
• Which capabilities could enable positive revenue and value flow?

The answers to these questions ground not only the individual spending and execution of each portfolio but also the coordination needed across them.

How are portfolio budgets allocated?

In addition to strategic themes, the other critical component each portfolio needs to deliver on the enterprise strategy is a portfolio budget. Strategy and investment funding ensures the entire portfolio is aligned and funded to create and maintain the solutions needed to achieve the required business objectives.

Many business challenges, market opportunities, and conditions may be local to various solutions. Consequently, budget discussions require continuous collaboration, communication, and alignment with each portfolio. To support flexibility and decentralized decision-making, EPM allocates budgets to portfolios, including appropriate guardrails, which each portfolio can use to fund its value streams as it deems appropriate (Figure 5).

How are cross-portfolio initiatives coordinated?

New initiatives are generally contained within a single portfolio. Some initiatives, however, require the collaboration of multiple portfolios. Many are critical and not subject to debate. And yet, if not managed appropriately, these cross-cutting initiatives can be blindly pushed onto busy portfolios and overload the system.

Enterprise epics can be created to define and reason about this significant work. Like the portfolio Kanban for portfolio epics, the work intake process for the enterprise portfolio Kanban helps match demand to capacity, preventing overload and fostering faster value delivery. Figure 6 illustrates an example of an enterprise portfolio Kanban system.

The process can be summarized as follows:

• All significant new cross-portfolio initiatives enter the funnel of the Kanban and progress through review and analysis in close collaboration with the portfolios that will do the work. It is critical to model very few items exiting the funnel. This maintains focus, reduces WIP, and accelerates value flow.
• Like portfolio epics, the epic hypothesis statement and the lean business case can be used to define and further elaborate enterprise epics.
• After the analysis is complete, a go/no-go decision is made.
• Approved enterprise epics are pulled into implementation by portfolios that create portfolio epics to describe their portion of the work.
• Measurement and Epic Owner involvement continue past this Kanban’s done state to progress the epic’s leading indicators and business outcome hypotheses.

Examples of enterprise epics could be:

• Modernizing the enterprise brand across all solutions
• Pulling disconnected experiences and architectures together to optimize technical flow and customer journeys
• Merging customer segments to create differentiated blended offerings
• Implementing emerging technologies, such as applying AI assistants, to enable roles and innovation across the organization.

Enterprise epic owners foster and drive collaboration around cross-portfolio initiatives. In many cases, the scope and implementation rhythm of the corresponding portfolio epics may require synchronization across the enterprise. For example, an enterprise epic may require a coordinated minimal viable product (MVP) to validate the business hypothesis (Figure 7). This limits investment risk and allows exploratory discovery for the most significant and critical enterprise initiatives.

How is enterprise portfolio performance measured?

An organization needs to assess and improve its ability to deliver innovative business solutions quickly. This requires measuring flow, outcomes, and competency. Further, as each portfolio adopts LPM practices, EPM can utilize transparent portfolio outcomes and data to evolve the enterprise strategy as rapidly as the market requires (Figure 8). Additionally, interruptions to cross-portfolio flow can be identified and addressed systematically to enable continuous value delivery of critical initiatives.

Measuring Enterprise Portfolio Strategic Themes and Value Stream KPIs

EPM needs to pay particular attention to the progress that each portfolio is making toward its strategic themes and the overall enterprise portfolio’s strategic themes. They should also review ongoing measures of portfolio performance captured by key performance indicators (KPIs). This enables learning and helps them to make informed decisions about whether to continue with an initiative or strategy, make changes, or cancel it altogether.

Consider the following example from a modern automotive enterprise (Figure 9). In this example, progress has been measured across each portfolio against the enterprise portfolio strategic themes. Quarterly alignment sessions are typical for reviewing the strategic themes and their associated key results, celebrating successes, and unblocking issues to help each portfolio move forward.

In addition, KPIs are the quantifiable measures used to evaluate how each value stream and its associated solutions are performing. Example KPIs might include revenue growth, profit growth, market share, customer satisfaction, employee engagement, product quality, returning customer rate, innovation rate, and time to market. Some of these will be best aggregated across each portfolio, while others will be specific KPIs EPM has chosen to measure.

Evaluating the Flow of Value across Portfolios

EPM is responsible for improving the flow of value across all portfolios. Some suggestions for how EPM can start to measure and improve flow are:

• Measure each portfolio’s flow efficiency with value stream mapping activities. Use consolidated data to identify and improve systemic areas of delay and waste.
• Keep a healthy number of active items in the system. Use flow load to ensure the enterprise portfolio kanban system and the related portfolio kanban systems are manageable and ensure that capacity and demand are balanced.
• Review the enterprise portfolio flow distribution to track funding allocation across investment horizons and align work with the near- and long-term strategy.

Organizing Portfolios

As organizations grow, they often need to reorganize portfolios based on learnings, changing market landscape, and new solutions. Enterprises with multiple portfolios often define them to advance strategy, reinforce flow, and minimize costs. To identify the greatest opportunity for change in the future, EPM must first understand the current portfolio blend. As more SAFe portfolios are initiated, the power of the inherent transparency in the method allows for consideration of placing value streams in different portfolios over time to accelerate enterprise strategy.

Below are several examples of how portfolios can be organized around value. The Portfolio article provides more information on each.

Note: This is a partial list intended to inform and inspire different ways of organizing portfolios. Larger enterprises will mix and match these to achieve their organizational objectives.

• Business Unit Portfolio – Enterprises often find that their business units pursue different strategies against different market landscapes using distinct solutions to deliver relevant customer experiences. In these cases, the enterprise may create a portfolio specific to the business unit. This portfolio contains all the solutions needed to operate the business and pursue its strategy,
• Platform Portfolio – Larger enterprises often find that various business units rely on the same solutions for their core operations as they pursue strategies unique to each business unit. In these cases, the enterprise may create a portfolio responsible for operating and extending the core platform.
• Regional Operating Portfolio – Global enterprises often find that different operating regions must engage regional markets differently due to local customer expectations and competitive landscapes. In these cases, the enterprises may place all the solutions necessary to deliver and improve the business in their home region into a single portfolio and then establish a set of small portfolios aligned to a single country or geographical region.
• Regulatory and Risk Portfolio – Some enterprises operate highly regulated businesses due to human safety, national security, antitrust, or insider trading concerns. In these cases, the enterprise may create portfolios containing solutions for products and services sharing a regulatory context.
• Innovation Portfolio – Larger enterprises often find it challenging to create new business models that differ substantively from their prior successful businesses. In these cases, enterprises often create a new portfolio to provide the entire solution set for that emerging business unit.

Across the enterprise, a blend of these portfolio designs can be utilized to create flow in innovative ways. Additionally, portfolios can be reorganized to limit the need for cross-portfolio overlap as EPM leaders and Portfolio leadership discover how the work truly flows over time.

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References

[1] Ward, Allen C., and Durward K. Sobek II. Lean Product and Process Development. Lean Enterprise Institute, 2014.

[2] Collins, Jim. BE 2.0 (Beyond Entrepreneurship 2.0): Turning Your Business into an Enduring Great Company. Portfolio, 2020.