While these changes allow benefits validation-based portfolio management, they don't reform the basic project-centric execution model of traditional enterprise IT.
Highlights of Product-Centric IT
In addition to the above changes, product-centric IT differs from project-centric IT in the following ways:
1. We maintain stable teams aligned along business capabilities-no ramp up and down based on projects. These teams own a set of related applications/APIs/services and are responsible for the complete lifecycle (iterative think-it, build-it and run-it). This may require a greater headcount than project-centric IT where we only have teams attending to the most important items in the portfolio backlog. Nevertheless, this increase is more than compensated by increase in team knowledge, responsiveness and effectiveness. Long term custody of a small set of systems also results in lower architectural debt as compared to project-centric mode.
2. Each business capability area is headed by a capability owner who has a team of product owners each heading a 10 to 15 member product team. For example, an e-commerce platform may include capabilities such as buying and merchandising, catalogue, marketing, customer service, order management, and fulfillment. An insurance business has capabilities such as policy administration, claims administration, and new business. Each capability area is too big to be served by a single team and is therefore organized as a set of sub-capabilities headed by product owners.
3. Funding for teams rather than projects. More funds allow for bigger teams (or multiple small teams) in a given area of business capability. Funding is changed during annual budgeting cycle based on strategic needs.
4. Funding is against objectives rather than plans. Capability owners and product owners are accountable for the objectives and have the autonomy to use the funds to prioritize different items on their roadmaps at their discretion.
These aspects of product-centric IT effectively turn the funding part of portfolio management on its head. For the most part, there is no portfolio of projects in product-centric IT. Instead, there is a portfolio of business-aligned capabilities and each such capability is funded once a year in terms of a team capacity budget. The next level of fund allocation is within a capability and is delegated to empowered (and accountable) capability owners and product owners. You don't need a separate portfolio management function unless we wish to rejig allocations in the middle of the year or fund new capabilities. This degree of churn is only warranted in the experimental portion of an organization's portfolio. This is the part that benefits from Lean Startup techniques of rapid experimentation and pivoting.
Portfolio Management Across Three Horizons
The three horizons framework offers a way of classifying an organization's portfolio as stable (H1), emerging (H2) or experimental (H3). Note that this classification is orthogonal to the notions of strategic and business-as-usual (BAU). In most big business (even those that are alerted to the prospect of being disrupted) the experimental part of the portfolio is rarely more than 20 percent of the pie. This third horizon, as its more experimental, could do with a separate portfolio management function as the business will want to make more smaller, more frequent, and sometimes, opportunistic bets.
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