Unraveling the Distinctions: Traditional, Lean, and Strategic Portfolio Management (2024)

FAQs

Unraveling the Distinctions: Traditional, Lean, and Strategic Portfolio Management? ›

Key Differences and Considerations:

Traditional portfolio management (TPM) works with the same cycles for all aspects, lean portfolio management (LPM) works with different ones. The way budgeting is done is different. TPM is centralized, LPM is decentralized where possible. TPM steers input driven, LPM steers output driven.

An example of a traditional mindset for Lean Portfolio Management is centralized annual planning is a customary mentality for the Lean Portfolio executives and this mentality has been found to hinder.

Lean Portfolio Management brings time-tested lean principles to the teams and leaders that are best positioned to drive organizational change. Overall, the lean approach drives reliable value delivery, reduces time to customer value, and ensures that teams can pivot as the marketplace changes or customer demands shift.

In contrast to the traditional strategy, which uses an investor's desire for income or capital growth as the basis for stock selection, the modern approach examines an investor's needs for market return or dividends as well as his risk tolerance.

Traditional: Focuses on training and relies on people to not make mistakes. Lean: Focuses on building processes that are error proofed (a person cannot make a mistake or it would be difficult to do so).

LPM enables organizations to quickly respond to changing customer needs, market dynamics, and emerging opportunities. By embracing lean thinking, value-driven decision-making, and iterative planning, organizations can adapt their portfolio to maximize value delivery and minimize waste.

Example of Portfolio Management

With a Rs 10,000 investment corpus, a portfolio manager strategically allocates it to various units, such as real estate, mutual funds, and shares. This allocation aligns with the individual's financial goals and risk tolerance, aiming to maximize profitability.

Competency: The LPM competency self-assessment enables organizations to evaluate their proficiency against the three dimensions of Strategy & Investment Funding, Agile Portfolio Operations, and Lean Governance.

How do you set up a lean portfolio management? ›

Portfolio management is the selection, prioritisation and control of an organisation's programmes and projects, in line with its strategic objectives and capacity to deliver. The goal is to balance the implementation of change initiatives and the maintenance of business-as-usual, while optimising return on investment.

At its core, lean management is about continuous improvement. Lean management requires a thoughtful approach to every action. Optimization must be part of the corporate culture itself. Every member of the organization must be working toward removing waste, adding value and delivering quality.

The three aspects of Lean Portfolio Management (LPM) include strategy and investment funding, Agile portfolio operations, and Lean governance. They refer to aligning the portfolio with strategic objectives, adopting Agile practices, and implementing effective governance mechanisms.

It involves clarifying, prioritizing, and selecting the projects that are best aligned with the overall business objectives of the firm and determining the optimal way to sequence timelines in order to make the most out of the enterprise's project activity.

Lean thinking is required in companies to create and design efficient business flows that produce products/services needed by the customers. It transforms the mindset via which businesses operate, focusing on respect for people and continuous improvement to churn out value.

For example, in contrast to generally accepted business plan development methods, the lean approach encourages entrepreneurs to only conduct minimal research. Instead, lean methods encourage entrepreneurs to talk directly with potential initial customers.

Traditional portfolio management is a nonquantitative approach to balancing a portfolio with different assets, such as stocks and bonds, from different companies and different sectors as a way of reducing the overall risk of the portfolio.

Contrary to traditional project management, Lean does not distinguish between project phases. The focus is on following the five core principles of Lean management cyclically. Eliminating project waste and creating a pull system is central to increasing the efficiency of your projects.