“We are all familiar with guardrails on highways. They are put there to keep a simple mishap from turning into a full-blown catastrophe. If you go a little off course, the rails help you regain the path towards your destination.
Lean Budget Guardrails
Lean Budget Guardrails describe budgetary, governance and spending policies and practices for the lean budgets allocated to a specific portfolio.
These can be driven by—and are drivers of—elements of the business strategy.
Every SAFe portfolio operates within an approved budget for the development and deployment of products, services, and IT Business Solutions. As described in the Lean Budgets article, the portfolio’s total budget is allocated to individual value stream budgets by Lean Portfolio Management (LPM) and portfolio stakeholders. In turn, value stream leadership allocates the value stream’s budget to the personnel and resources that will help achieve the current Vision and Roadmap.
SAFe provides strategies for Lean budgeting that eliminates the overhead of traditional project-based funding and cost accounting. In this model, LPM fiduciaries maintain appropriate levels of oversight through the allocation of value stream budgets and approval of Epics, while empowering trains to make decisions quickly and enable flexible value delivery. This way, enterprises can have the best of both worlds: a development process that is far more responsive to market needs, along with professional and accountable management of spending.
However, establishing guardrails help ensure the right investments are being made within that budget. Guardrails help ensure that the mix of investments addresses both near-term opportunities and long-term strategy, that large investments are approved, and that investments in technology, infrastructure, and maintenance aren’t routinely ignored. Moreover, Business Owners are continuously engaging to guide the spending over time.
Figure 1 illustrates four budget guardrails:
- Guiding investments by horizon
- Optimizing value and solution integrity with capacity allocation
- Approving significant initiatives
- Continuous Business Owner engagement
The first two guardrails are quantitative, guiding the allocation of investments within the approved budgets. The last two are process related and are mainly qualitative, establishing how the budgets are governed. These guardrails are described in the sections that follow.
Guardrail 1: Guiding Investments by Horizon
As described in Lean Budgets, portfolio investments are organized in accordance with investment horizons that reflect four investment profiles: evaluating, emerging, investing/extracting, and retiring. However, it is the amount of budget that a given value stream allocates to these horizons that determines the near- and long-term health of both the value stream and portfolio.
For example, if a value stream focused solely on horizon 1 solutions, it’s investment mix would be lacking future solution innovations, creating substantial risk in the long term. Accordingly, LPM fiduciaries establish general, portfolio-level guidelines for investments by horizon, as Figure 2 illustrates.Value stream leaders, in turn, should strive to ensure that planned investments are within the investment horizon guidelines–or provide clear business reasons for when they vary.
The example in Figure 2 shows that the LPM has established guidelines to allocate 15% of the budget for Horizon 3, 20% for Horizon 2, 60% for Horizon 1 and 5% for Horizon 0. This may be a healthy mix for a technology business . However, every portfolio and value stream has to consider its current context in making such decisions. A newly created value stream might allocate significantly more of their budget to Horizon 2 because it simply doesn’t have any solutions in Horizon 1; a different value stream that is addressing legacy systems with substantial technical obsolescence might allocate more budget to Horizon 0.
Guardrail 2: Optimizing Value and Solution Integrity with Capacity Allocation
Lean budgeting is a giant step forward which enables decentralized decision-making and more efficient execution. However, one of the challenges every ART and Solution Train faces is how to balance the backlog of new business features with the need to continuously invest in the Architectural Runway, provide time for Continuous Exploration of requirements and design for future PIs, and in maintaining current systems.
ARTs must continuously invest in implementing Enablers to maintain the architectural runway, avoiding velocity reduction and the need for wholesale replacement of components due to technological obsolescence.
Balancing features and enablers complicates the challenge of prioritizing work, since different people can pull the teams in different directions, as Figure 3 shows.
Figure 3. Business versus enabler backlog dilemma
One solution to this challenge is that teams and trains apply capacity allocation as a quantitative guardrail to determine how much of the total effort can be allocated for each type of activity for an upcoming PI. Further, they establish an agreement to determine how the work is performed for each activity type as shown in Figure 4.
Figure 4. Capacity allocation for a single PI
Each value stream should develop explicit policies for managing capacity allocation. Following is an example policy statement that many ARTs and Solution Trains have found useful:
- At each PI boundary, we agree on the percentage of resources to be devoted to new features (or capabilities) versus enablers, and tech debt and maintenance.
- We agree that Product and Solution Management have the authority to prioritize program and solution backlog items
- We agree to prioritize the business and enabler features based on economics
- We agree to collaborate on sequencing work in a way that maximizes customer value and minimizes technical debt
While the agreed-to policies can persist for some time, the amount of capacity allocated will change periodically based on the context. In the context of an ART, this decision can be revisited as part of backlog refinement in preparation for each PI planning, while Solution Management and Solution Architect/Engineering make similar choices for the solution as a whole before pre-PI planning.
Guardrail 3: Approving Significant Initiatives
While each value stream is funded in an effort to promote empowerment and local decision-making authority, it is reasonable to ensure that significant investments are still governed responsibly. Figure 5. shows that a significant initiative has been identified. It then goes through a decision filter to determine whether or not it exceeds the portfolio epic threshold, which is established by LPM.
Below threshold: If the item is below the portfolio epic threshold, then it goes into the funnel of the appropriate Program or Solution Kanban systems.
Above threshold: If the item exceeds the portfolio epic threshold, then it requires review and approval through the Portfolio Kanban system, regardless of whether the initiative arises at the Program, Solution or Portfolio levels. The worthiest epics in the funnel pass to the analysis state where a Lean business case is created and presented to LPM fiduciaries for a ‘go/no-go’ decision approval.
Guardrail 4: Continuous Business Owners Engagement
Business Owners (who are sometimes Customers themselves) are uniquely qualified to ensure that the funding allocated to value streams is going toward the right things. Therefore, they serve as a critical guardrail that ensures that the priorities of the ARTs and Solution Trains are in alignment with LPM, Customers and Product and Solution Management, as illustrated in Figure 6.
Figure 6 shows the minimum activities that Business Owners should actively participate in before, during and after PI execution. They are briefly described next.
- Preparing for the upcoming PI – Business Owners ensure that ARTs and Solution Trains are allocating sufficient capacity for new features, enablers and technical debt and maintenance, as well as providing input on prioritization of Features and Capabilities using the Weighted Shortest Job First (WSJF). Business Owners also collaborate with Product and Solution Management to assure that the work planned for the PI contains the right mix of investments that address both near-term opportunities (horizon 1), long-term strategy (horizon 3 and 2) and that sufficient capacity is allocated for decommissioning solutions (horizon 0). These investments do not need to be the same for every PI, but across a set of PIs, there must be investments in each.
- PI Planning – During PI planning Business Owners actively participate in key activities, including the presentation of vision, draft plan review, assigning business value to program PI objectives, and approving final plans. They also communicate the investment profile for the value stream to further support the reasoning behind the vision.
- Inspect & Adapt (I&A) Workshop – During the I&A workshop, Business Owners provide feedback on the solution’s ‘fitness for purpose’ during the System Demo (or Solution Demo). The Business Owner’s feedback is critical, as only they can give the guidance the train needs to stay on course or take corrective action. Additionally, they help assess actual value achieved versus plan, and they participate in the problem-solving workshop that follows.
Learn More The example allocations shown in this figure were suggested in the Havard Business Review article located at https://hbr.org/2012/05/managing-your-innovation-portfolio.
 Ries, Eric. The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. Crown Business, 2011.
Last update: 21 September 2018