Value stream management in action: Banking on transformation

Value stream management in action: Banking on transformation

Authors: Ravi Sawant , Sharat Kunduru

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Value Stream Management (VSM) is a powerful approach that organizations can employ to revolutionize their business processes and elevate customer satisfaction. By identifying the value stream and eliminating wasteful activities, VSM enables streamlined processes, cost reduction, and enhanced customer experiences. In this article, we delve into the practical application of value stream management through the lens of a bank, using its loan process as a compelling example. By exploring the journey of this bank, we uncover how VSM principles can drive remarkable benefits for any organization and its customers.

Concepts we will refer to in this article include?Value, or the benefits received, and the importance of it being measurable and requiring continuous validation. Next, the?Value Stream, that encompasses the activities that comprise the process of delivering a product or service and generate value. This includes all the people, systems, and flow of information needed to deliver the product or service, and there can be one or many value streams. Finally,?Value Stream Management, which is the framework and process of analyzing and improving value streams to maximize efficiencies and minimize waste in the value streams.

Picture yourself in your everyday interactions with a bank—the services you rely on, the moments you appreciate, and the occasional hiccups you face. Behind each of these encounters lies an intricate value stream, working tirelessly to ensure the seamless provision of banking services that shape your banking experience.

In this context, let's redefine the meaning of value, value stream, and value stream management, shedding light on their profound significance in today's organizations. To make it more relatable, let's take a closer look at the loan process in our hypothetical bank and witness Value Stream Management in action firsthand—a familiar example of a value stream consisting of distinct stages and activities.


Uncovering the Value Stream: Identification, Mapping, and Visualization

Acknowledging lower customer satisfaction scores in loan processing, the bank's management commits to improvement, realizing the potential of streamlining and improving the flow of value to the customers. The journey begins with value stream identification, followed by comprehensive value stream mapping that visualizes the systems, processes, and people involved.

To embark on this transformative journey, the bank undertakes the following steps:

  • Value stream identification:?The bank assembles a multidisciplinary team comprising representatives from different departments and levels within the organization. Through detailed discussions, workshops, and interviews, they identify the various value streams within the loan process, examining each step, from the initial customer inquiry to the final loan approval.
  • Value stream mapping:?The team creates a visual representation of the entire loan process, capturing each activity, system, and personas involved. Utilizing process mapping techniques, such as swim lane diagrams or value stream maps, they document the current state of the value stream. They delve into the granular details of each process step, identifying bottlenecks, redundancies, and areas of potential improvement.?
  • Measurement and analysis:?The team measures the performance of each process step, collecting data on cycle times, lead times, error rates, throughput, frictions in the value flow, and customer feedback. This quantitative analysis provides insights into pain points, areas of inefficiency, and optimization opportunities. Additionally, qualitative assessments are conducted by engaging with bank stakeholders and customers to gather feedback on their experiences and pain points.
  • Future state envisioning:?The team envisions an optimized value stream by engaging in brainstorming sessions, innovation workshops, and benchmarking exercises. They explore innovative technologies, best practices, and emerging trends to identify opportunities for improvement. Collaboratively designing the future state value stream, they prioritize proposed changes based on impact, feasibility, and strategic alignment.
  • Action plan formulation:?The team formulates an actionable plan for implementation, outlining necessary process changes, technology upgrades, and skills development initiatives. The plan includes clear timelines, assigned responsibilities, and key performance indicators, both leading and lagging, to track progress.
  • Governance and continuous improvement:?The team establishes regular review meetings, performance tracking mechanisms, and feedback loops to ensure the implemented changes deliver expected outcomes. Ongoing measurement and monitoring are emphasized to identify deviations from the desired future state and address them promptly.


Driving Improvements: Optimizing the Value Stream

By undergoing this comprehensive value stream transformation exercise, the bank is able to clearly visualize their end-to-end value stream containing stages or activities in sequence, with people involved in all those stages and with systems supporting each stage.

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Loan Process

It also helped them better empathize with their customers and understand their needs, and pinpoint areas in need of improvement, such as:

  • Lengthy loan application forms:?Customers find it laborious to fill out lengthy forms, leading to frustration and decreased satisfaction. To address this, the bank decides to implement a pre-filling mechanism for the loan application forms. By leveraging pre-qualification data, they streamline the process, pre-populating as many data points as possible. This simple but effective improvement significantly reduces the time and effort required from customers, enhancing their overall experience.
  • Outdated data processing tools:?The bank's data processing team relies on outdated tools that hinder their efficiency and increases cycle time. To address this issue, the bank decides to modernize their data processing tools. They upgrade to the latest versions and adopt newer features that enable automation and streamlined data processing tasks. This upgrade not only improves the team's productivity but also contributes to faster loan processing times, benefiting both the bank and its customers.
  • Cumbersome decision-making processes:?The loan authorization team faces challenges in navigating through numerous data points, leading to prolonged cycle times and potential errors. To tackle this challenge, the bank leverages the power of AI and ML. By implementing advanced algorithms and intelligent insights, they empower the authorization team to make better and faster decisions. The use of AI and ML aids in fraud analytics, creditworthiness assessments, and other crucial considerations, ultimately expediting the loan approval process and improving the quality of decisions made.

Throughout the transformation journey, the bank emphasizes the importance of continuous monitoring and measurement of their value streams. They understand that optimization is an ongoing process, and they need to ensure that the implemented improvements are yielding the desired results.

By periodically measuring the effectiveness of their changes on the flow of value and customer satisfaction, the bank can identify areas that require further enhancement or any existing changes that may need adjustment. This commitment to continuous improvement ensures that the value stream remains optimized and aligned with evolving customer needs and enables the bank to embrace any uncertainties and changes that may come their way in the future.

By embracing the principles and practices of Value Stream Management and relentlessly addressing their value stream challenges, the bank experiences remarkable improvements in efficiency, cost reduction, and customer satisfaction. The loan process becomes streamlined, faster, and more customer-centric, enhancing the bank's competitive edge in the market.


In Conclusion

Value streams exist in many forms across organizations in all industries. They can be one or two seamless streams covering everything, top-to-bottom. Or it can be many different streams at many different levels. Most organizations will typically have a hierarchy of value streams where each child value stream could be enabling or adding value to the parent value stream. There may be many different sub streams of value in an organization that may or may not be tied to each other in a systemic way. By mastering the principles of VSM, organizations become adept at identifying and optimizing these value streams, unlocking their full potential for growth.

In our next article on VSM, we will delve deeper into the intricate dynamics of value streams within a typical organization. We will break down the concept further and explore value streams in the context of value, work, and organization levels. Whether it is a banking organization like our example or any other sector, the underlying principles remain consistent.?Stay tuned as we unravel the secrets of value streams and uncover valuable insights applicable across diverse industries.

Lynn Reling

Retired - Executive Advisor, Strategic Planning and Portfolio Management, Solution Engineering at Broadcom

1 年

Great article, Ravi and Sharat. I enjoyed reading your practical application of Value Stream Management using a very relatable example.

Mark Julien

Solution Director - Services at HCL Technologies

1 年

I like that this article walks us through what is likely a real customer VSM scenario.?I believe the VS identification is a critical step, leveraging “ multidisciplinary teams” is very important as customer work to identify steams, which help remove the silo barriers as the teams learn a common new language that transcends through all organizational business units.

Pierre Viljoen

Global Head Professional Services & CTO @EnterpriseStudio

1 年

Well put Ravi and Sharat. Ease of doing business is key. Customer alike including each of us are not interested in excused on long winded reasons why some process that is not our context is broken. VSM can help cut out the noise, reduce the waste and drive optimised execution and flow.

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