How can organisations optimise investment decisions when priorities change unpredictably? Success depends on the ability to categorise initiatives by strategic relevance and apply lean budgeting principles to translate ambition into measurable outcomes.
Building on our first article, which explored how value-oriented strategy execution lays the foundation for effective portfolio steering, we now turn our focus to the practical mechanisms that enable this. Specifically, we elaborate on the importance of categorising requirements and lean budgeting.
The ability to allocate resources effectively is a critical priority for organisations. The intersection of prioritisation and funding is where portfolio performance is shaped. By structuring initiatives according to their strategic relevance and steering budgets dynamically, organisations can unlock greater value from their investments. A hybrid, lean and value-driven approach to portfolio management ensures that funding decisions are not only aligned with business goals but also responsive to change, laying the foundation for a more adaptive and outcome-oriented portfolio.
The rapid rate of change makes maintaining a clear strategic focus challenging. Regulatory shifts, market disruptions and technological advancements demand a portfolio approach that is both structured and adaptive. Yet many organisations continue to rely on rigid planning cycles and static budgets, leaving little room to navigate when priorities shift. In most cases, traditional means of steering a project portfolio no longer serve business needs in such environments. Their lack of flexibility makes it difficult to respond to evolving business demands, resulting in delayed decisions, misaligned investments and missed opportunities. As a result, organisations often struggle to bridge the gap between long-term strategic intent and dynamic execution. There is evidently a need for a more responsive, value-driven approach to portfolio management.
In response to these challenges, organisations must rethink how they categorise and fund their initiatives. By structuring investments based on strategic relevance and applying lean budgeting principles, they can make faster, value-driven decisions. A focus on continuous adaptation and strategic alignment keeps the organisation responsive to market dynamics.
In this article, we zoom in on the third and fourth steps in the sequence:
As organisations translate their strategic vision into actionable portfolio elements, strategic objectives should be broken down into topic-specific categories to guide budget allocation. A key distinction should be made between “running the business” (associated with operational value streams that focus on enhancing existing operations) and “changing the business” (related to development value streams that drive innovation). Categories under development value streams typically include:
Strategic:
Strategic initiatives critical to long-term goals
Exploratory:
Funding for new, exploratory initiatives that support future growth and competitive advantage
Essentials:
Change initiatives that are unavoidable to keep the organisation’s overall ambition on track (e.g. keeping up with rapidly advancing industry standards, regulatory requirements, etc.).
In turn, categories under operational value streams focus on improving efficiency and optimising current systems and processes. In practice, these categories often overlap. It is therefore beneficial for organisations to manage them with flexibility, allowing dynamic adjustments as priorities evolve.
A key consideration when working within a lean and value-driven portfolio is therefore to structure and prioritise portfolio investments based on the highest economic benefit (business value). SAFe suggests prioritising portfolio items based on the cost of delay, which is determined by user-business value, time criticality and risk reduction. In accordance with agile principles, development initiatives which entail a lean business case (in SAFe terminology, “epics”) are constantly evolving, meaning new ones are created and redundant ones removed on a rolling basis. For this, a structured acceptance process is needed. Planning and prioritisation measures relating to those items (epics) should be aligned within a portfolio roadmap. To ensure alignment with strategic themes and Objectives and Key Results (OKRs), initiatives should be routed through a structured demand management funnel. We will elaborate on this in the next article of our series.
In Lean Portfolio Management (LPM), funding is directed not to individual projects but to overarching value streams. A core principle of LPM is financial steering through lean budgets, which involves at least semi-annual, participatory budgeting cycles. From the total portfolio budget, each value stream receives a dedicated allocation. A portion of this, related to innovation, is directed towards development value streams. Their components (epics) are financed based on the agreed priorities going forward. LPM entails a holistic view of resource allocation, incorporating both internal and external expenditures over time into cost calculations. With quarterly strategic portfolio reviews, it is possible to keep the value streams aligned with the strategic themes and OKRs.
This approach ensures that budgets remain resilient to feature overruns or shifting priorities. Lower-priority backlog items can be deprioritised as needed, using the recurring review meetings to guide decisions. Investments must strike a balance between near-term opportunities and long-term strategic goals. Continuous investments in technical infrastructure and capabilities are essential to support the rapid development and deployment of new features. LPM ensures a steady intake of new portfolio items through regular portfolio syncs. By structuring around value and using cadence-based planning, organisations maintain a comprehensive view that aligns evolving requirements with lean budgets.
Regulatory shifts, market disruptions and technological advancements demand a portfolio approach that is both structured and adaptive. Structuring investments based on strategic relevance and applying lean budgeting principles facilitates faster, value-driven decisions.
Marc Lahmann, Partner, Strategy & Transformation, PwC SwitzerlandCategorising initiatives by requirements and aligning budgets to value streams enables faster, more strategic decisions. Lean budgeting empowers teams and supports innovation through flexible, participatory funding. This approach strengthens the link between strategy and execution. It’s a decisive step towards a more adaptive and value-oriented portfolio.
We help clients put these principles into action. To explore how this approach could benefit your organisation, take a look at our white paper, and don’t hesitate to reach out to discuss your specific challenges and how we can help address them.
Dennis Janssen
Senior Manager, Strategy & Transformation, PwC Switzerland