5 minute read 29 Jan 2024
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Efficient resource management: Lean Portfolio Management as the key to modernizing the public sector

Axel Timm
By Axel Timm

Partner, Government & Public Sector | EY Switzerland

Axel is transforming organizations in different Industries, implementing ERP Applications around the globe. As trusted Advisor and Business Unit Leader he advises on Technology and Digitalization.

5 minute read 29 Jan 2024
Related topics Government and Public Sector Public policy Digital and innovation in Government
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Enhancing resource efficiency by adapting to dynamic environments with Lean Portfolio Management solutions: Discover in our recent Whitepaper how Lean Portfolio Management can support your organization.

In brief

  • What are the main benefits and obstacles when implementing Lean Portfolio Management (LPM) in the public sector?
  • What are the essential elements to be incorporated in an organizational Lean Portfolio Management process?
  • What are the effective tools and techniques for Lean Portfolio Management, and how do they enhance the management process?

In the face of volatile challenges, it is crucial for public administration and public sector-related companies to constantly adapt. Government institutions must cope with limited resources, changing political conditions, and evolving citizen expectations. For the public sector to meet these demands and to persist, appropriate strategies and technologies must be employed. In the private sector, Lean Portfolio Management (LPM) is a specific approach to portfolio management that uses a structured methodology to better plan portfolios and help them consistently adapt to growing complexity and dynamics.

This article discusses these aspects, drawing on a recently published EY Whitepaper.

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Government and Public Sector Whitepaper  – Lean Portfolio Management

Download the Whitepaper to delve into our full insights:

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The Lean Method

LPM is based on the Lean Method, the basic idea of which is to focus on creating customer value. The inventors’ aim was to minimize waste in processes (i.e., process steps without added value for the customer), develop a continuous value stream, and increase efficiency and productivity. The Lean Method comprises five basic principles of an effective and efficient value chain:

  1. Define value: The first step is to define the value of the product or service and communicate it clearly to all stakeholders.
  2. Create a value stream map: A value stream analysis or value stream mapping (VSM) helps to compare the current workflow with the ideal workflow between the project initiation and project completion phases and highlight inconsistencies.
  3. Develop a value stream: The flow principle is one of the central elements of Lean thinking and aims to eliminate waste. The inconsistencies mentioned in the second point must be addressed and eliminated in order to achieve the smoothest possible process.
  4. Pull system: Alongside the flow principle, the pull principle is another key element of Lean thinking. The aim is to ensure that activities only arise when there is an actual need for them and not on the basis of forecasts. This reduces dependence on actual demand and avoids wasting resources.
  5. Continuous improvement "Kaizen": The "Kaizen" principle encourages employees to achieve a state of continuous improvement. The four previous Lean principles are constantly reviewed and scrutinized.

LPM is a further development based on the Lean Method. It combines the five Lean principles with the way organizations and companies plan their strategies and finance their investments. LPM offers a dynamic and goal-oriented approach that promotes a continuous flow of value creation. The goal of LPM is to maximize value creation. LPM focuses on managing the backlog to focus on the highest value goals of the company or organization. By clearly prioritizing the projects and tasks that generate the most value for citizens and the organization, value creation is maximized.

How EY can help

Government & Public Sector services

Our Government & Public Sector community brings together more than 20,000 EY people from over 100 countries. All of us share a passion to help governments work better for their people.

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Building a Lean Portfolio Management

LPM adheres to key principles to integrate agile approaches and Lean principles at portfolio levels in organizations, ensuring that projects are executed efficiently and that continuous value is generated for the department. The essential points include:

  1. All activities in the portfolio are linked to strategic goals and priorities.
  2. Agile Principles enable flexibility and rapid adaptation to changing conditions.
  3. Continuous value is created for the department and society.
  4. Portfolio management is conducted transparently at all levels, promoting good cooperation.
  5. Redundant activities are avoided.
  6. A continuous improvement process ensures the effectiveness of the activities.

The core principles of LPM are operationalized by three main dimensions of the SAFe framework. These interconnected dimensions form the foundation for a successful execution of strategic objectives.

  • Strategy and budget allocation

    Strategy and budget allocation is about how financial resources are distributed among initiatives and projects within the department to ensure they align with strategic goals. This requires close coordination among team leaders, and department management, ICT architects, and all individuals involved in the portfolio.

  • Agile portfolio measures

    Agile portfolio measures support the need for agile implementation and adaptability within the department to quickly respond to market changes by integrating agile work methods into portfolio management. This dimension coordinates and supports the decentralized execution of Agile Release Trains (ART) and promotes the decentralization of strategy execution. At the same time, it coordinates the value streams.

  • Lean Governance

    The Lean Governance dimension focuses on efficient governance to achieve the portfolio objectives without introducing unnecessary bureaucracy. Department management, members of agile teams, and ICT architects handle dynamic budgeting and forecasting and set minimum metrics for each department portfolio. This ensures that the strategy is implemented, results are continuously improved, and expenditure meets expectations.

Innovative outlooks for the future

Public sector projects are under constant pressure to use resources effectively by carrying out initiatives as efficiently as possible while ensuring they deliver sustainable and tangible value to the public. In doing so, it is also expected that quality standards are maintained and strategic objectives (i.e. the mandate) pursued. LPM offers promising possibilities for the public sector to optimize efficiency and effectiveness of initiatives. It aims to optimize the utilization of limited resources and promote clear prioritization of projects that generate maximum value for the organization as well as its stakeholders. The application of agile methods, which permits a flexible adjustment to evolving conditions as well as changes in citizens’ demands, promote a perpetual cycle of improvement.

Summary

Lean Portfolio Management (LPM) aids the public sector in adapting proficiently to dynamic environments. Harnessing Lean Methodologies and Agile Principles enables efficient project prioritization, optimal resource allocation and enhanced transparency.

  • Reference

    1. Brunner, F. J. (Ed.). (2023). Japanische Erfolgskonzepte: KAIZEN, KVP, Lean Production Management, Total Productive Maintenance, Shopfloor Management, Toyota Production System, GD3-Lean Development. Carl Hanser Verlag GmbH Co KG.
    2. Ohno, T. (2019). Toyota production system: beyond large-scale production. Productivity press.
    3. Krafcik, J. F. (1988). Triumph of the lean production system. Sloan management review, 30(1), 41-52.
    4. Womack, J. P., & Jones, D. T. (1997). Lean thinking—banish waste and create wealth in your corporation. Journal of the Operational Research Society, 48(11), 1148-1148.
    5. Martin, K., & Osterling, M. (2014). Value stream mapping: how to visualize work and align leadership for organizational transformation.
    6. Oppenheim, B. W. (2004). Lean product development flow. Systems engineering, 7(4)
    7. Sundar, R., Balaji, A. N., & Kumar, R. S. (2014). A review on lean manufacturing implementation techniques. Procedia Engineering, 97, 1875-1885.
    8. Helmold, M. (2021). Kaizen, lean management und Digitalisierung. GABLER.
    9. Agarwal, A., Shankar, R., & Tiwari, M. K. (2006). Modeling the metrics of lean, agile and leagile supply chain: An ANP-based approach. European journal of operational research, 173(1), 211-225.
    10. Martin, K., & Osterling, M. (2014). Value stream mapping: how to visualize work and align leadership for organizational transformation.
    11. Rad, P. F., & Levin, G. (2006). Project portfolio management tools and techniques. www.iil.com/publishing.

About this article

Axel Timm
By Axel Timm

Partner, Government & Public Sector | EY Switzerland

Axel is transforming organizations in different Industries, implementing ERP Applications around the globe. As trusted Advisor and Business Unit Leader he advises on Technology and Digitalization.

Related topics Government and Public Sector Public policy Digital and innovation in Government
Upvote