If you hold a management role, either in IT or in a business department, you are most likely aware that the metric of “time-to-market” is losing relevance as a business success indicator, being now replaced by “time-to-value”, which has been worth of attention together with concepts like user experience (UX) and other similar ideas. The concept of value has been there for a long time, but these days, in such a global economy with hundreds if not thousands of competitors trying to grab a piece of the market, value is a key determinant for either gaining or losing a customer.
The Value Chain
Some of us grew up hearing the concept of “Value Chain” from adults’ business conversations when we were kids, mostly around the context of manufacturing and supply of goods more than services. The Value Chain is defined as the set of activities and resources that an organization uses to add value to what they do; in other words, the different activities performed by various departments (i.e. production, marketing, sales, etc.) to deliver value to a customer in the form of a product or service.
Talking about a product or service itself, it’s easy to imagine the components that would be involved in the value chain; but if we go beyond the product or service and consider instead the outcome that the customer wants to achieve (which involves other variables such as timing, cost, quality, environment, risks, etc.) through the product or service that we deliver—which is basically the principle behind the so-called concept of “the outcome economy”—it might be harder to have visibility, and moreover control, of the totality of the components involved.
The Value Stream
Though the term “value stream” is not new at all, perhaps it’s just starting to widely obtain management’s attention, especially from IT managers given the responsibility they hold with the digital transformation of the businesses they work for. Identifying the value chain is not enough for understanding how we are delivering value to the customer. We must also understand what the flow looks like; how the idea of a product or service moves through the components in the value chain and how it evolves to become a solution to a customer’s need, until it actually helps the customer obtain the expected outcome. In the end this is what value is all about, right?
Simply said, if businesses want to improve “time-to-value”, they need to focus on improving and optimizing their value streams. Conceptually it might be easy to think of it, but when it comes to practice that’s a whole different story.
Common Challenges around Value Streams
Working in silos, having bureaucratic processes and organizational structures in place, a lack of information and clarity in business vision and goals, all these and more make a contribution for making it difficult to understand and improve value streams. The disciplines of agility and lean are quite useful and have been eagerly adopted by IT organizations in recent years, precisely because they are about speeding the value streams (for example in software development). However, local optimization doesn’t mean global improvement. Optimizing a link in the chain helps, but we should go beyond! (Compare making a software development unit agile vs pursuing agility in the whole enterprise to enable and support customer outcomes.)
The Solution: Value Stream Mapping
Value Stream Mapping is a lean technique that analyzes both the current and the future state of the flow of materials (resources and artifacts) and information, from the conception of an idea or a request from the customer, through the delivery of the customer outcome (yes, beyond the delivery of just a product or service). Value Stream Maps help organizations identify bottlenecks, key components, constraints, waiting times, gaps in critical activities, unnecessary steps and other sources of waste that, when addressed correctly, enable a way faster and more efficient delivery of value to the customer.
Value Stream Mapping becomes critical in approaches like DevOps, where we attempt to remove silos and enable collaboration between multiple teams, even across departments. Understanding the flow of value delivery is the first step to improve it; if we can’t understand how value creation is happening across the enterprise, we can’t do much to improve it.
On June 9-11, Global Lynx is hosting a FREE 12-hour course titled “ENTERPRISE VALUE CREATION AND VALUE STREAMS FOR DIGITAL TRANSFORMATION”, where you can get a full understanding of value creation concepts that, I assure you, will help you improve your value management capabilities. RSVP NOW!
Comments by Manuel Garcia