A strategic inflection point is that moment when some combination of technological innovation, market evolution, and customer perception requires the company to make a radical shift or die.

—Andy Grove, Only the Paranoid Survive 

Enterprise

The Enterprise represents the business entity to which each SAFe portfolio belongs.

Each SAFe portfolio contains one or more Value Streams, each of which is dedicated to build, deploy and support a set of solutions the enterprise needs to accomplish its business mission. In the small-to-midsize enterprise, one SAFe Portfolio can typically govern the entire solution set. In larger enterprises—usually those with more than 500 to 1,000 practitioners—there can be multiple SAFe portfolios, typically one for each line of business, or as otherwise structured around the business organization and funding model.

In either case, the portfolio is not the entire business. So, it’s crucial for the enterprise and portfolio stakeholders to ensure that each portfolio solution set evolves to meet the broader business needs. This is a critical capability of Business Agility.

Details

Enterprise Strategy Drives Portfolio Strategy

SAFe’s primary focus is guiding those who build the business solutions that the enterprise and its customers depend on. However, investments in digital solutions are driven directly by the enterprise business strategy. Defining that strategy and deciding how much to invest in the solutions that enable each solution portfolio is a critical concern for every business. For this reason, key portfolio stakeholders are directly involved in defining the enterprise business strategy.

This article describes an approach to formulating the enterprise strategy, which in turn informs the portfolio objectives. In addition, the portfolio context provides the feedback needed to inform the evolving enterprise strategy and support governance.

Small Enterprises May Have a Single SAFe Portfolio

As mentioned above, a single portfolio (a single instance of SAFe) may be enough to deliver a set of solutions for the entire organization. The solution portfolio is connected to the business strategy by strategic themes and the budget, as Figure 1 illustrates.

Figure 1. Small enterprises or government agencies may have a single SAFe portfolio

Large Enterprises Will Have Multiple Portfolios

Many of the world’s largest businesses use SAFe. These enterprises have thousands, and even tens of thousands, of IT, system, application, and solution development practitioners. Of course, not all of these practitioners are working on the same solutions, or within the same value streams. It’s more likely that IT and development are organized to support various lines of business, internal departments, customer segments, or other business capabilities. To achieve this, these enterprises will have multiple SAFe portfolios. Each portfolio will have its own budget and strategic themes reflecting that unit’s portion of the business strategy, as Figure 2 illustrates.

Figure 2. Large enterprises or government agencies may have multiple SAFe portfolios

In this case, each SAFe portfolio exists in this broader enterprise context, which is the source of the business strategy it must address. The enterprise also provides more general funding and governance for all the portfolios.

Enterprise Strategy Formulation

A strategy is best described as a plan of action to achieve the mission of the enterprise. Therefore, defining a strategy may be the most critical activity of every enterprise. An effective strategy answers four critical questions about the business:

  1. What customers and markets do we serve?
  2. What products and solutions do we provide?
  3. What unique value and resources do we bring to the endeavor?
  4. How will we extend these in the future?

Each enterprise must have some approach to determine its strategy.  The best way to think about strategy is that it’s a natural output of a logical and reasoned business process. Rather than leaping to conclusions or allowing the loudest or highest-ranking people to mandate the path, a more effective approach is to collaborate and reason about the strategy inputs. That will generally lead to agreement and alignment about what the strategy should be. One such model was described by Jim Collins in Beyond Entrepreneurship [1]. The adaptation in Figure 3 highlights the inputs to strategy and defines two outputs—Portfolio Budgets and Strategic Themes—that the portfolio needs to link strategy to execution.

Figure 3. A model for enterprise strategy formulation

Each input is discussed briefly in the sections below:

  • Vision – represents the future state of what the business wants to be. It’s persistent and long-lasting.
  • Mission – identifies the business objectives that implement the enterprise vision and frame the strategy. They may be somewhat more temporal, and likely be incremental, in that each build on the one that came before.
  • Core values – provide the immutable belief system that governs all individual and corporate behaviors and activities.
  • Enterprise business drivers – reflect the emerging industry themes and trends that affect the business.
  • Distinctive competence – Strategy naturally leverages distinctive capabilities, the unique advantages that differentiate this business from others, and provides a competitive edge.
  • Financial goals – Whether measured in revenue, profitability, people market share, or other metrics, financial performance goals should be clear to all stakeholders.
  • Competitive environment – Competitive analysis identifies the most significant competitive threats to the business.
  • Portfolio context – Knowledge of the current state of each solution portfolio informs enterprise strategy. (This element of strategy input is elaborated below.)

Portfolio Context Informs Enterprise Strategy

Strategic decision-making is typically a centralized responsibility (See Principle #9 – Decentralized Decision-Making). These decision have far-reaching impact, and are mainly outside the scope, knowledge, and responsibilities of the teams. In addition, leaders still have the ultimate accountability for business outcomes.

However, many factors that inform potential strategy may not be visible to most senior leaders. The challenges, market opportunities, and conditions that exist may be local to various solution offerings. That is why strategy development requires continuous collaboration, communication, and alignment with downstream portfolios. In other words, developing effective strategy demands awareness of the portfolio context, as is illustrated in Figure 4.

Figure 4. Portfolio context is a key element of enterprise strategy

The portfolio context may include:

  • Key performance indicators(KPIs) can include quantitative and financial measures, such as profitability, fitness for use, market share, return on investment (ROI), customer net promoter score, and Innovation Accounting.
  • Qualitative data may include a SWOT analysis and, most importantly, the accumulated solution, market, and business knowledge of the portfolio stakeholders.
  • Lean Budget Guardrails –Each portfolio also contains a set of Guardrails, which describe budgetary aspects and governance for a specific portfolio.

Capturing Strategy in a Business Model Canvas

The concepts above outline a logical and reasoned process in which strategy reflects internal and external objectives, business conditions, and the larger purpose of the enterprise. However, once decided, the strategy must be communicated and made clear to all stakeholders. One popular way to frame a strategy is through the Business Model Canvas (BMC) [2]. The BMC is a one-page template that summarizes the most important aspects of a business model, as illustrated in Figure 5.

Figure 5. The Business Model Canvas

Download The Business Model Canvas

The BMC can be used to model any business, from startup to global enterprise. The BMC is made up of nine somewhat independent building blocks that help clarify thinking and focus when describing a business model. The ‘blocks’ of the canvas are as follows:

  • Value propositions are the set of products and services the enterprise offers.
  • Key partners are the various buyer-supplier relationships and business alliances that facilitate achieving the value proposition.
  • Key activities are the most important actions the enterprise takes to deliver its products and services.
  • Key resources are the critical human, physical, intellectual, financial, and other capabilities and assets the enterprise has to achieve its objectives.
  • Customer relationships reflect the types of relationships needed with customers to effectively apply and leverage the business’ products and services.
  • Customer segments define how the business views and treats various sets of customers differently based on their common attributes.
  • Channels explain how the enterprise delivers its products and services to intermediaries, customers, and end-users.
  • Cost structure highlights the various elements of development, production, deployment, operating, and support costs associated with the business’ products and services.
  • Revenue streams reflect how the enterprise receives financial compensation for its products and services.

Thinking Like a Lean Startup with the Lean Canvas

A popular variant of the BMC is the Lean Canvas created by Ash Mayura [3], which is illustrated in Figure 6 [4].

Figure 6. The Lean Canvas is adapted from the Business Model Canvas

Download The Lean Canvas

This model was based on the thinking that originated in Lean Startup [4] and is designed to address the unique opportunities and challenges of startup enterprises. It’s now also applied to innovations efforts in larger enterprises. The Lean Canvas is similar to the BMC but focuses more keenly on the nature of the problem to be solved, as well as the unique competencies of an enterprise that can be used to address emerging opportunities.

Like the BMC, the Lean Canvas has nine ‘blocks.’ The ‘channels’, ‘customer segments’, ‘revenue streams’, and ‘cost structure’ are shared with the BMC. However, the Lean Canvas replaces the other five blocks with the following:

  • Problem dedicates a block to make sure that solution builders understand the problem that exists in the marketplace before designing a potential solution. This is a signature aspect of Design Thinking.
  • Solution defines the key characteristics of a proposed solution.
  • Unique Value Proposition describes the unique skills, resources, and assets a business brings to the endeavor. In other words, “why you are different and worth getting attention.” [3]
  • Unfair advantage describes the tangible and intangible assets of the business that cannot be easily bought, copied, or replicated by competitors who are addressing the same problem.
  • Key metrics identify the critical, early measures that indicate whether the new solution is likely to address the identified problem.

The Lean Canvas helps define an actionable business plan. It focuses on customer problems, solutions, key metrics and competitive advantages. In contrast, the Business Model Canvas is a strategic management tool, allowing you to describe, design, challenge, invent, and pivot your existing business model. [6] While neither canvas captures all the elements of an enterprise strategy (Figure 3), both are useful tools to evolve the organization’s solution portfolios. The choice is up to the enterprise: Use either or both canvases or develop a derivative best suited to a particular business context.


Learn More

[1] Collins, Jim and Lazier, William. Beyond Entrepreneurship: Turning Your Business into a Great and Enduring Company. Prentice-Hall, 1992.

[2]  Osterwalder, Alexander; Pigneur, Yves; Clark, Tim. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. John Wiley & Sons.

[3] Maurya, Ash. Running Lean: Iterate from Plan A to a Plan That Works. O’Reilly Media.

[4] The Lean Canvas (https://leanstack.com/leancanvas)

[5] Ries, Eric. The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. Random House, Inc.

[6] https://www.eqengineered.com/insights/why-use-lean-vs-business-model-canvas

 

Last update: 28 September 2019