Finding and connecting value streams across the organization

Authors:?Ravi Sawant,?Sharat Kunduru

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Article 4

Introduction:?

Value stream management (VSM) has gained recognition as an effective process for analyzing and enhancing the flow of value within organizations. In our previous installments, we explored the origins of VSM, its definitions, and key concepts. Building upon that foundation, this fourth installment delves deeper into the layout of value streams within organizations. By understanding how value streams exist at different levels and their interconnected nature, we can unlock the full potential of VSM and drive exceptional value for both the organization and its customers.

Value Streams and Interconnected Dimensions:

In an ideal organizational setup, value, goals, and work are interconnected across different levels, fostering seamless processes, efficient systems, and effective data flow. However, most organizations fall short of this ideal state. This is where value streams come into play, enabling interconnectedness, and facilitating the smooth flow of value and work.

Multiple Value Streams at Different Levels:?

Value streams can thrive at various levels within an organization, especially in complex structures housing multiple departments or business units. Take, for example, a software company that operates distinct value streams for different software products. These value streams encompass a wide range of activities, including research, customer requirements gathering, funding proof of value, coding, testing, deployment, gathering customer feedback, and validation. Each of these individual value streams contributes to a larger solution or a portfolio of products, collectively delivering remarkable value to customers. In this context, the value streams for each software product serve as child value streams, diligently providing value to the parent value stream of the software suite/solution.

Classification of Value Streams:

Organizational value streams exhibit distinct characteristics that allow them to be classified into three primary categories, each operating at a specific level within the organization. To gain a clearer understanding of these categories, let's explore them through the following illustration.

1.?????Operational Value Streams:?

Operational value streams exist at the portfolio level and involve a series of activities which encompass people, processes, and systems that directly deliver value to external customers through products or services. For example, a loan fulfillment process, e-commerce order fulfillment, or product manufacturing are operational value streams.?

In the case of loan fulfillment, the operational value stream is responsible for providing an exceptional customer experience throughout the loan journey, from loan requests to applications and disbursements. The goal is to increase customer satisfaction and lending transactions by delivering exceptional experiences and offering omnichannel capabilities, allowing customers to access loans through various platforms such as mobile, web, or physical channels.?

2.?????Solution Value Streams:?

Solution value streams play a crucial role in internalizing operational value streams, acting as the bridge that connects them. Each solution value stream also represents a sequence of activities involving individuals, processes, and systems working cohesively to deliver a specific solution.

To illustrate this concept further, let's consider the loan fulfillment value stream. Within this value stream, there may be a dedicated CRM solution that specifically focuses on increasing customer acquisition and reducing churn. This CRM solution works in tandem with the operational value stream to enhance customer relationships and optimize business outcomes.

In addition to the CRM solution, there are other solution value streams that contribute to the operational value stream's success. These solution value streams offer a range of capabilities and services, each with its own unique objectives and work lifecycle. Together, these solution value streams form a comprehensive ecosystem that supports and enables the operational value stream, driving value creation and superior customer experiences.

3.?????Development Value Streams:?

Development value streams play a crucial role in supporting solution value streams by focusing on the application or technology delivery lifecycle. These value streams encompass the individuals and processes responsible for developing and enhancing the solutions that enable operational value streams. It is important to note that in certain cases, the operational value stream can be directly facilitated by development value streams without an intermediate solution value stream.

In the context of the loan fulfillment example, the development value stream may prioritize the provision of excellent UI/UX capabilities, the improvement of third-party integrations, and the aggregation of data to provide valuable insights at the customers' fingertips. Within the development value stream, multiple products, and technologies work in synergy to support and enable the solution value streams, each contributing to the overall success of the operational value stream.

Visualizing Value Stream Connections:

To better understand the layout and interconnectedness of value streams in the context of objectives, values, work items, and stakeholders dimensions, let's revisit our example of a loan fulfillment value stream within a solution value stream.?

In this example, the loan fulfillment value stream operates at the operational level, delivering value to external customers. It is enabled by the solution value stream, which incorporates the CRM solution to enhance customer acquisition and retention. Furthermore, the development value stream supports the solution value stream by focusing on UI/UX capabilities, data integration, and other supporting products and technologies.

Each value stream within an organization has its own definition of value, objectives, work lifecycle, and stakeholders. However, it's important to recognize that these dimensions are not isolated entities. Instead, their connectedness plays a vital role in optimizing operations and delivering value to customers.

In the loan fulfillment example, the objectives of the top-level operational value stream drive the objectives of the solution and development value streams. The work items at each level are interconnected to ensure the overall objectives are met.

Summary:?

Value streams exist within organizations as interconnected networks that drive value creation and delivery.

Regardless of whether an organization adopts a formal VSM framework, value streams naturally exist and interconnect with value, goals, and work at each level.

Every organization strives to generate value for itself and its customers, and this value creation process relies on a connected series of steps, people, processes, and systems—an essence captured by the concept of value streams. VSM practices empower organizations to identify, interconnect, and optimize value streams at various levels, ensuring the delivery of superior value.

Stay tuned for our upcoming article in the series, where we will delve deeper into the intricate attributes of nested value streams. Don't miss out on this exciting exploration of nested value streams!