Unlocking Organizational Value: The Power of Interconnected Value Streams

Authors:?Ravi Sawant,?Sharat Kunduru

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Introduction

In today's dynamic and competitive business landscape, optimizing value is paramount. Value stream management plays a pivotal role in achieving this goal, enabling organizations to analyze and enhance the flow of value. A key aspect of value streams lies in their interconnectedness within an organization, particularly in complex structures with multiple departments or business units. Each value stream is responsible for delivering value to other value streams in a parent-child hierarchy, contributing to the creation and delivery of a larger product or service.

In our previous article, we explored the existence of value streams within an organization and the various types of value streams based on organizational levels. However, it's important to understand how value is delivered through a value stream. A value stream, in essence, does not inherently deliver value on its own. Instead, it is a cohesive combination of stages, processes, systems, and people that collaboratively deliver value to the end customer.

To effectively deliver value, a value stream requires a clear definition of what value to deliver, how to deliver it, when to deliver it, and how to measure the value delivered.

In this blog, our focus will be to delve deeper into these essential organizational dimensions. By understanding these dimensions, organizations can optimize their value streams and ensure the successful delivery of value to their customers and business.

• Objectives or Goals?in an organization play a crucial role in providing direction and setting guardrails for delivering value. Later in this blog, we will explore how Objectives are defined and how they offer the necessary context to value streams, guiding them towards value creation.
• Once the Objectives are established, the next step is to determine how to achieve them. This is where Work-items come into play.?Work-items?represent the various initiatives or capabilities required to drive value creation. Value streams take on the responsibility of delivering these work-items, starting from their inception all the way to the final value delivery.
• Lastly, the ultimate measure of success lies in the?value realized?by the end customer. The value delivered through the work-items translates into tangible outcomes that customers experience and appreciate as the Value element. Understanding and optimizing this element is vital for ensuring sustained customer satisfaction and loyalty.

Building the Foundation: The House Analogy for Interconnected Value Streams

To better grasp the interconnectedness of dimensions within value streams at different levels, let's draw an analogy with building a house. Imagine a "House value stream" as a series of stages, processes, and people working together to construct a house. Just as the objectives define what type of house is desired, the value stream's purpose is determined by clear direction from its objectives. For instance, the same value stream could construct either a farmhouse or a bungalow, all guided by their respective objectives.

Once the objectives are set, various activities like land surveying, creating the plan, obtaining necessary permissions, and the actual construction are considered work-items. These work-items collectively contribute to moving the Objectives needle forward, ensuring progress toward achieving the defined goals. Finally, once the house is built, the benefits and incremental value realized by the homeowner represent the value elements.

It's important to note that Objectives, work-items, and value elements may differ based on the value stream level. In the example of the "House value stream," it serves as the top-level operational value stream. However, there could be several sub-streams, such as plumbing, electrical works, and interior design, each with its own specific objectives, work-items, and value elements. Crucially, these dimensions are interconnected across levels. The top-level objectives and work-items influence and drive the objectives and work-items at the next level.

A misunderstanding of these dimensions, or a lack of communication across levels, could be detrimental to achieving the desired end result. Imagine the plumbing value stream working in isolation without a clear understanding of the overall house plan, or the electrical and interior design value streams operating independently without collaboration.

To avoid such pitfalls, it is essential to clearly define these dimensions at each level and establish their interconnectedness. This alignment ensures that the organization works cohesively towards achieving overarching goals and delivering exceptional value to customers.

Taking Off: Exploring Value Streams with the Airline Check-in Example

Let's dig a little deeper into the vital dimensions of value streams and their interconnectedness across different levels within an organization. To illustrate this, we'll use a practical business example related to airline check-in; a major customer touchpoint for airlines. Effective check-in experiences can enhance an airline's brand and value, while mismanagement can lead to chaos and customer churn.

Imagine an airline aiming to enhance customer experience by introducing automated self-check-in and baggage drop facilities. We'll analyze how this objective is met and how various dimensions are interconnected to achieve it.?

In the context of our organization, each Value Stream is owned by different levels, and the time horizon for value delivery can vary based on these levels. Let's explore this with the following example:

1. Operational Value Stream: The main operational value stream in our case is the Airline check-in process. This value stream is responsible for generating the necessary experiences required for the airline check-in customer journey.
2. Solution Value Streams: Within the Airline check-in value stream, there are multiple solution value streams that contribute to its functioning. One such example is the value stream related to baggage handling. This solution value stream plays a crucial role in supporting the overall airline check-in process.
3. Development Value Streams: Lastly, we have the development value streams, and in this particular example, we have the "NextGen Baggage Handling System (BHS)" as an illustration. This development value stream represents a significant internal IT initiative aimed at transforming the baggage handling process and systems to enhance efficiency and customer experience.

Value Stream: Objectives

Objectives represent the value to be generated and always flow from top to bottom in a nested hierarchy. At the top level, the operational value stream's objective is to improve customer satisfaction. Each solution value stream, nested under the operational value stream, sets its own objectives, linked to the parent objectives. Similarly, development value streams, nested under solution value streams, set objectives for each new release as value gets delivered through the applications. In our example:

• The top-level airline check-in value stream aims to improve customer satisfaction and reduce lead time for check-in.
• The solution value stream, represented by the baggage handling system, sets an objective to increase baggage handling efficiency, thereby aligning with and supporting the parent objective.
• The development value stream, NextGen BHS Program, establishes an objective to transform baggage handling technology and increase automation where possible.

This nested hierarchy of objectives is critical to ensuring transparency, visibility, and participation at all levels toward shared goals. With clear visibility into how their work impacts the larger organization, employees at all levels are empowered to actively contribute to achieving the organization's objectives. This transparency also fosters better alignment and coordination across different teams and departments, resulting in the organization more effectively delivering value to its customers and stakeholders.

Embracing the concept of value realization through interconnectedness necessitates the adoption of various frameworks and techniques, such as OKR (Objective and Key Results), MBO (Management by Objectives), and more. The advantages of doing so can be significant, yielding increased collaboration, more effective communication, and greater agility in responding to changes and challenges. For instance, the OKR framework proves highly valuable in setting clear targets in the form of key results for each objective and tracking progress toward those targets. This approach keeps teams at all levels focused and aligned with the common objectives, enhancing the organization's ability to deliver value and achieve its goals. We will focus on some of these objectives / goals setting frameworks in our future articles.

Value Stream: Work Items

Work items form a vital link across all levels, functioning as the fundamental building blocks that contribute to achieving the defined objectives. At the top level, work takes the form of strategic bets, termed "epics," which enhance the operational value stream and generate greater value. Solution value streams, nested under operational value streams, create fresh initiatives or projects that advance the solutions to meet the requirements of the parent epic. Subsequently, development value streams direct their focus towards delivering the necessary capabilities to the underlying applications or systems through features or stories. This seamless interconnectedness ensures that work aligns harmoniously across all levels, promoting a shared understanding of how each level's contributions amalgamate to foster the overall success of the organization.

Let's revisit the example we explored earlier:

• The airline's top-level objective involves investing in self-check-in facilities to meet customer needs, classifying it as an epic, generating value over a longer time horizon.
• To achieve this epic, the baggage handling value stream decides to invest in an initiative to create self-baggage drop kiosks at the airport for self-check-in customers, aiming to reduce their check-in time further.
• Subsequently, the NextGen BHS development value stream takes charge of building the necessary technology systems to enable the aforementioned initiative.

This interconnected approach ensures that the entire organization works cohesively towards the same objectives, maximizing efficiency, and delivering substantial value to customers and stakeholders alike.

Value Stream: Value Elements

Value elements embody the actual value generated through the execution of work items at various organizational levels. They can be defined as specific outcomes or results that align with the organization's objectives.

Let's delve into our example to understand this better:

• The NextGen BHS Program successfully reduced the wait time for customers who opted for self-check-in. This achievement is the value element, accomplished through the development of a technology system that enabled this initiative.
• The Baggage handling value stream now experiences a reduction in the overall cost per baggage handled, owing to the implementation of automation, which decreased workforce usage and minimized last-minute baggage drops.
• At the top level, the Business witnesses improved CSAT scores from its customers and enhanced customer retention. These are the value elements signifying the successful delivery of value to the customers.

Focusing on value elements is crucial for organizations as it ensures the delivery of tangible outcomes that generate real value for customers and stakeholders. This necessitates a clear understanding of how work items are linked to the organization's objectives and how they contribute to the achievement of specific value elements. By aligning work with value elements, organizations can optimize their efforts, ensuring they generate the highest value with their available resources. This strategic approach leads to more effective prioritization and value-driven decision-making, ultimately benefiting the organization and its stakeholders.

Summary

The concept of value streams and their interconnectedness with value, work, and goals holds transformative potential for organizations. However, many face significant challenges stemming from siloed ways of working, process gaps, and a lack of visibility across all levels. These obstacles can obscure whether value is genuinely being generated, hinder understanding of work progress, and limit the effective utilization of organizational resources.

In the upcoming articles of this series, we will delve deeper into these organizational challenges and examine their root causes. Understanding these hurdles will pave the way for leveraging Value Stream Management (VSM) concepts to overcome them effectively. We will explore how VSM plays a vital role in identifying and removing process gaps, providing valuable insights into value generation, and enabling organizations to optimize both their processes and resources. Embracing VSM's potential unlocks a host of benefits, including enhanced transparency, trust, and substantial value growth for the organization and its stakeholders. Stay tuned for more insights on how VSM can revolutionize your organizational success in our next articles.