Evidence-Based Portfolio Management In A Nutshell

Evidence-Based Portfolio Management (E-B PfM) applies agile principles to the process of deciding where to invest funds for maximum benefit to the business. Traditional portfolio management tends to focus on activities and outputs, with less consideration given to outcomes that are often poorly defined.

Understanding Evidence-Based Portfolio Management

Annual budgeting processes, for example, restrict the ideation process to the point where ideas falling outside of budgetary constraints are discarded entirely.

When managers are asked to estimate the cost of delivering a solution, these estimates often come attached with several caveats. These caveats are typically ignored in favor of meeting hard, non-negotiable schedules and deadlines.

Ultimately, this results in funding decisions being made by people who are far removed from the actual work. These rather optimistic decisions cause the scope of the work to expand once knowledgeable individuals are recruited, resulting in budget blowouts and delays.

Evidence-Based Portfolio Management applies lean and agile principles to the challenge of deciding where to invest funds for maximum ROI. By enabling businesses to quickly test ideas and rapidly deliver benefits in small increments, E-B PfM avoids the bloated, non-collaborative, and over-specified aspects of traditional portfolio management

Indeed, E-B PfM replaces expensive and inefficient project meetings with direct evidence to continuously evaluate and adapt strategy where necessary.

Principles of Evidence-Based Portfolio Management

The structure, roles, responsibilities, and processes of every organization are different. E-B PfM is thus based on seven general principles that form an agile philosophy. 

This philosophy can be used to determine how the business identifies opportunities and considers which of those opportunities to pursue. It also strongly advocates the role of experimentation in guiding whether to increase, continue, or cease investment in those opportunities.

Following is a look at each of the seven principles:

1 – Separate budgeting for capacity from investing for innovation

An organization that takes on new work must add new teams or enable existing teams to be more effective. E-B PfM recognizes that there will always be more ideas than teams, so proper portfolio management is largely about deciding what not to work on.

2 – Make the best decision based on the evidence available

Evidence is often incomplete and unreliable, but an empirical approach makes allowances for this fact by testing assumptions and seeking better evidence. When making important decisions, the amount of money invested should be proportional to the quality of the evidence.

3 – Invest in improving business impacts using hypotheses; don’t just fund activity

Cost, schedule, and output are three variables that drive traditional portfolio management. But each has little relevance to value. E-B PfM instead equates value with delivering products and services that help customers achieve better outcomes.

4 – Continuously (re)evaluate and (re)order opportunities

As new opportunities are discovered, the relative attractiveness of existing opportunities will fluctuate. This means that the business will need to refine the list of opportunities according to their relative importance and invest accordingly. Relative importance should always be evaluated when new evidence comes to hand.

5 – Minimize avoidable loss

To minimize loss, the business must determine which ideas will not work. Project teams can perform experiments designed to actively prove that certain solutions don’t work, thereby providing direction for future development. For example, a company that is unsure of how a new product feature will be received can run a customer focus-group to gauge initial reaction.

In keeping with agile principles, solution viability should be tested in the simplest, fastest, and most cost-effective way possible.

6 – Let teams pull work as they have capacity

When a business attempts to work on ideas for which it does not have the capacity, it creates a Work In Process (WIP). A high amount of WIP causes a loss of efficiency, project delays, and impedes the flow of work.

By ensuring that teams pull the most valuable opportunity only once they are ready, WIP is reduced. Free to make their own decisions and focus on one opportunity at a time, the motivation and subsequent performance of the project team increases.

7 – Improve status reporting with increased engagement and transparency

Traditionally, portfolio investment is monitored through status reporting that lacks transparency because it is people outside the team that prepare the reports. By replacing this uninformed and subjective approach with E-B PfM, status reports are based on frequent, iterative product deliveries that contain useful, actionable data. 

Updated estimates of unrealized value and measures of current value are two such examples. Both help project teams reliably verify assumptions and allow them to reassess priorities with respect to organizational goals and strategies.

Key takeaways

  • Evidence-Based Portfolio Management is an empirical, principles-based approach to agile portfolio management.
  • Evidence-Based Portfolio Management replaces the rigid and over-specified nature of traditional portfolio management with collaboration, autonomy, and continuous improvement.
  • Evidence-Based Portfolio Management is based on seven principles. These combine to allows management approaches to be adapted to the specific needs of any business.

Connected Agile Frameworks


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Agile Project Management

Agile project management (APM) is a strategy that breaks large projects into smaller, more manageable tasks. In the APM methodology, each project is completed in small sections – often referred to as iterations. Each iteration is completed according to its project life cycle, beginning with the initial design and progressing to testing and then quality assurance.

Agile Modeling

Agile Modeling (AM) is a methodology for modeling and documenting software-based systems. Agile Modeling is critical to the rapid and continuous delivery of software. It is a collection of values, principles, and practices that guide effective, lightweight software modeling.

Agile Business Analysis

Agile Business Analysis (AgileBA) is certification in the form of guidance and training for business analysts seeking to work in agile environments. To support this shift, AgileBA also helps the business analyst relate Agile projects to a wider organizational mission or strategy. To ensure that analysts have the necessary skills and expertise, AgileBA certification was developed.

Business Model Innovation

Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.

Continuous Innovation

That is a process that requires a continuous feedback loop to develop a valuable product and build a viable business model. Continuous innovation is a mindset where products and services are designed and delivered to tune them around the customers’ problem and not the technical solution of its founders.

Design Sprint

A design sprint is a proven five-day process where critical business questions are answered through speedy design and prototyping, focusing on the end-user. A design sprint starts with a weekly challenge that should finish with a prototype, test at the end, and therefore a lesson learned to be iterated.

Design Thinking

Tim Brown, Executive Chair of IDEO, defined design thinking as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” Therefore, desirability, feasibility, and viability are balanced to solve critical problems.


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Dual Track Agile

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Feature-Driven Development

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eXtreme Programming

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Lean vs. Agile

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Lean Startup

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Kanban is a lean manufacturing framework first developed by Toyota in the late 1940s. The Kanban framework is a means of visualizing work as it moves through identifying potential bottlenecks. It does that through a process called just-in-time (JIT) manufacturing to optimize engineering processes, speed up manufacturing products, and improve the go-to-market strategy.

Rapid Application Development

RAD was first introduced by author and consultant James Martin in 1991. Martin recognized and then took advantage of the endless malleability of software in designing development models. Rapid Application Development (RAD) is a methodology focusing on delivering rapidly through continuous feedback and frequent iterations.

Scaled Agile

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Spotify Model

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Test-Driven Development

As the name suggests, TDD is a test-driven technique for delivering high-quality software rapidly and sustainably. It is an iterative approach based on the idea that a failing test should be written before any code for a feature or function is written. Test-Driven Development (TDD) is an approach to software development that relies on very short development cycles.


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Scrum Anti-Patterns

Scrum anti-patterns describe any attractive, easy-to-implement solution that ultimately makes a problem worse. Therefore, these are the practice not to follow to prevent issues from emerging. Some classic examples of scrum anti-patterns comprise absent product owners, pre-assigned tickets (making individuals work in isolation), and discounting retrospectives (where review meetings are not useful to really make improvements).

Scrum At Scale

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Read Also: Business Models Guide, Sumo Logic Business Model, Snowflake

InnovationAgile MethodologyLean StartupBusiness Model InnovationProject Management.

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