Introduction

If you’re new to Lean Portfolio Management and have not yet familiarized yourself with the concept of Value Streams – we strongly recommend that you start there. You can follow this link to take you straight to our introduction to value stream centric delivery.

The key difference between traditional funding and Lean Budgeting is the concept of continuous funding. Rather than funding the project, you fund the value stream. Specifically,  funding should cover the available capacity (i.e. permanent resources) that belong to each value stream.

The diagram below illustrates how to start thinking about this:

We will explore how we manage and allocate the “Unallocated” pot later.

When we then start to think about investment prioritization, we must replace the concept of “how much will it cost” with “how much effort will it take my teams to achieve?”

But that doesn’t mean we totally lose sight of cost. Cost in Lean Budgeting becomes representative, rather than actual.

🧠 Cost in Lean Budgeting becomes representative, rather than actual.

Let’s look at a simple example:

Worked Example

In the original diagram, you will have noticed that we have an allocated pot. This pot is reserved to fund additional capacity – for instance engaging third parties to accelerate or augment delivery. Or buying physical infrastructure for a specific initiative.

This unallocated funding can also be used to fund specific projects that do not fit within a value stream. These might be significant pan-organisation regulatory projects for example.

This mechanism is also helpful for organizations as they are transitioning from traditional portfolio management towards lean portfolio management. It allows organizations to configure “Temporary Value Streams” to support their traditional delivery as they iteratively and incrementally roll out Lean Portfolio Management across the organization.

It means that the transition does not need to be seen as an “On/Off Switch” but rather an iterative journey towards agility.

Got questions? Not sure? Get in touch and one of our experts can help you apply these concepts to your organization.