Introduction to Value Stream Management
Transforming the way you manage your business operations
Large enterprise organizations often face challenges when it comes to efficiently converting customers’ ideas into tangible value. The key to overcoming this challenge lies in improved Value Stream Management. Value Stream Management (VSM) is an approach that focuses on maximizing the value created throughout a production process, from customer order to product delivery.
What Is a Value Stream?
A value stream is the sequence of steps that a business undertakes to transform an idea into concrete, measurable value. For an enterprise, a value stream represents the process of receiving customer orders, developing products or solutions based on their specifications, and delivering the finished products.
While the concept of value streams is not unique to the software development lifecycle, it is particularly applicable in that context. “Value” can take many forms, including products, services, or a combination of both. Understanding the types of value your business provides can help you recognize your value streams more easily.
What Is Value Stream Management?
Value Stream Management is the practice of planning, aligning, and continually improving the processes that contribute to an organization’s value streams. Its purpose is to maximize value flow efficiency, enhance product quality, and provide greater customer satisfaction.
In the context of software development, Value Stream Management offers a comprehensive view of the entire development process, from start to finish. This insight is crucial for optimizing business value flow and increasing customer satisfaction.
The value that passes through the various services provided by an enterprise organization may not be as easily measurable as the value that flows through organizations producing physical products. Large organizations often have limited visibility into the actual value their digital value streams provide to customers.
However, Value Stream Management capabilities enable enterprise organizations to manage and measure value streams. One of the significant advantages of Value Stream Management in software development is that it enables development teams to rally around a shared understanding of their development process based on a clear and unambiguous view of value flow.
Benefits of Value Stream Management
Value Stream Management offers several benefits to businesses:
- Enhanced insight: Value Stream Management provides businesses with insight into the progression of value from one team or process to the next. This knowledge helps business leaders identify and address disruptions or bottlenecks in the organization’s value flow.
- Operational efficiency: Value Stream Management improves operational efficiency across the entire value stream. It enables organizations to deliver value to customers, whether in the form of products or services, in the shortest time possible.
- Faster delivery: With a structured approach to measuring and improving value flow, organizations can identify areas that require improvement, resulting in faster and more efficient delivery.
- Comprehensive view: Value Stream Management provides a comprehensive bird’s-eye view of the entire software development lifecycle. It helps identify obstacles, risks, or inefficiencies hidden throughout the process, enabling development teams to maximize the value they deliver to customers.
- Customer-centric approach: Effective Value Stream Management allows organizations to view their value streams from the customer’s perspective. This perspective is crucial for eliminating waste and optimizing the development process to ensure maximum value delivery.
What Is Value Stream Mapping?
Value stream mapping involves charting the path of information, materials, and other resources throughout the process of creating and delivering a product. While commonly used in the manufacturing industry, value stream maps are also useful tools for many other industries, including software development.
A value stream map visually represents essential information, such as:
- Time spent working and waiting at each step
- Labor required for each step
- Error rates at each step
- Downtime experienced along the value stream
- Bottlenecks and process delays at each step
Components of a Value Stream Mapping Process
A typical value stream map comprises several important components, including customers and suppliers, product flow, information flow, and a timeline.
Customers and suppliers
When creating a value stream map, it’s essential to include customers and suppliers. This involves capturing customer demand and relevant information about each supplier involved in providing essential services or raw materials for the value stream. If there are numerous suppliers, grouping them based on material type or geographical location can make the map more efficient.
Product flow represents the steps an organization takes to receive customer orders, build products, and deliver them to customers. It is a crucial component of the value stream map, as it visualizes the flow of value through the organization’s processes.
Information flows outlines the structure of interactions between key stakeholders throughout each stage of the value stream. It depicts how information and communication flow between business leaders, employees, suppliers, and customers at various points along the value stream.
The timeline in a value stream map illustrates the difference between value-added and non-value-added cycle times, allowing identification of wasteful processes that do not contribute to value creation. It provides insights into the overall time spent at each step of the value stream and helps identify areas for improvement.
Steps in a Value Stream Mapping Process
The process of creating a value map can be broken down into several distinct steps:
1. Identify the product and process
Clearly define the specific product and process that will be outlined in the value stream map. This step ensures clarity and focuses the mapping effort.
2. Define the map’s scope
Determine the scope of the value stream map, which typically encompasses the entire process of creating and delivering value. This includes suppliers, internal processes, and customer delivery.
3. Map the steps in the value stream
Outline the significant operational stages and steps required to successfully accept an order, create the final product, and deliver it to the customer. Focus on capturing the high-level steps rather than individual tasks.
4. Map the information flow
Document the flow of information between stakeholders at each point along the value stream. This includes communication channels, decision-making processes, and collaboration mechanisms.
5. Collect data
Gather relevant data about the production process to provide a detailed understanding of the value flow. This may include cycle time, work time, wait time, scrap rate, machine uptime, and other metrics that help identify bottlenecks and inefficiencies.
6. Create a timeline
Develop a timeline that visualizes the overall process time and lead time, enabling analysis of efficiency and identification of areas for improvement.
How to Monitor and Measure the Success of Your VSM Process
Assessing the success of Value Stream Management requires a shift from objective-based measurements to value-based measurements. Here are some approaches to monitor and measure the effectiveness of your Value Stream Management process:
Measure business value impact
Measure the benefit the value stream generates for the organization using metrics such as active users, renewal rate, or monthly recurring revenue. Choose metrics based on the type of value being produced.
Measure customer value impact post-deployment
Look beyond delivery and monitor customer outcomes post-deployment. Assess factors such as performance, security, availability, and user behavior to understand the impact of value streams on customer satisfaction.
Measure value stream cost
Calculate the direct and shared expenses required to deliver value to customers, including labor costs, licensing fees, and infrastructure expenses. Understanding the total value stream cost helps evaluate efficiency and identify areas for optimization.
Foster collaboration among product managers, development team leaders, and other stakeholders to determine the Key Performance Indicators (KPIs) necessary for monitoring success in Value Stream Management. Combining different perspectives ensures a comprehensive measurement approach.
Identify and address bottlenecks in your value stream to improve overall efficiency. These bottlenecks can arise from team transitions, inefficient approval processes, or backlogs that hinder value flow. Implement automation and advanced analytics to resolve bottlenecks effectively and optimize Value Stream Management.
Utilize Value Stream Management tools
Leverage Value Stream Management tools to identify and eliminate bottlenecks, streamline processes, and gain real-time insights into your value stream. These digital tools enable organizations to closely monitor and analyze each step of the value stream, facilitating continuous improvement and increased efficiency.
With Apptio’s Value Stream Management solutions, you can align development resources to business outcomes, plan and track value delivery, improve forecasting for long-term value optimization, and more. These tools provide the visibility and capabilities necessary for effective Value Stream Management.
By adopting Value Stream Management best practices and utilizing the right tools, you can transform the way your organization manages its business operations, optimize value flow, enhance product quality, and deliver maximum value to your customers.