In a complex and competitive business environment, optimizing value is a top priority. From improving efficiency to reducing waste, value stream management (VSM) can have a significant impact on achieving results. An organization can have multiple value streams, each responsible for delivering value to other value streams in a parent-child hierarchy. This is especially true for complex organizations with multiple departments or business units, where each value stream contributes to the creation and delivery of a larger product or service.
Each value stream has its own definition of value or value element, objectives, work items, scope of work, work lifecycle and stakeholders. Using an example of loan fulfillment, here is how the dimensions would be connected between value streams.
- Each Value Stream is owned by different levels in the organization and the typical time horizon for value delivery varies based on the level.
- Objectives represent the value to be generated and always flow from top to bottom in a nested hierarchy. In this example, at the top level the operational value stream has the objective of improving 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. This nested hierarchy of objectives is critical to ensuring transparency, visibility, and participation at all levels towards the same goals. With clear visibility into how their work impacts the larger organization, employees at all levels are empowered to actively participate in achieving the organization's goals. This transparency also allows for better alignment and coordination across different teams and departments. As a result, the organization can more effectively deliver value to its customers and stakeholders.Embracing the concept of value realization through interconnectedness requires adopting various frameworks and techniques such as OKR (Objective and Key Results), MBO (Management by Objectives) and so on. The benefits of doing so can be significant, including increased collaboration, more effective communication, and greater agility in responding to changes and challenges.
- Work items are also interconnected from top to bottom, serving as the building blocks that contribute to meeting the defined objectives. At the top level, work can be defined as strategic bets in the form of epics, which improve the operational value stream and create more value. Solution value streams can then create new initiatives or Projects that help advance the solutions to meet the requirements of the parent epic. Development value streams subsequently focus on delivering necessary capabilities to the underlying applications or systems through features or stories. This interconnectedness ensures that work is aligned across all levels, promoting a shared understanding of how each level's work contributes to the overall success of the organization.
- Value element is a concept closely tied to the work Items and objectives of an organization, as they are all interdependent and represent different levels of detail in the execution of work towards achieving the goals of the organization. It represents the value generated by performing work in the form of a work item at different levels of the organization. A value element can also be defined as a specific outcome or result that is expected to be achieved through the execution of a work item that is aligned with the objectives of the organization.Value elements are part of the nested hierarchy of objectives and work items, where each level's objectives and work items are connected and build upon each other to deliver value to the organization. By focusing on value elements, organizations can ensure that they are delivering tangible outcomes and generating value for their customers and stakeholders. This requires a clear understanding of how work items are linked to the objectives of the organization, and how they contribute to the achievement of specific value elements. By aligning work with value elements, organizations can improve how they prioritize efforts and so they are generating the greatest value for their resources.
Flow optimization and value growth are the two key imperatives of VSM and can benefit any level and any team within the organization. VSM principles, concepts, and practices can be applied to all levels regardless of where the value stream is. There are many common challenges across any value stream, of different magnitudes and impact and team silos, lack of cross-functional collaboration, lack of visibility, and lack of necessary insights are some of the common ones faced within a value stream or across value streams at different levels.
As an approach, VSM can be applied to a small development value stream at the lowest level, showcasing benefits and using that to scale it further. VSM can also be applied top-down with the right executive sponsorship, where the focus is on VSM adoption across the organization.
Understanding the relationships between multiple value streams can help organizations optimize their operations to achieve greater efficiency and effectiveness in delivering value to the customer. To fully realize the potential benefits of VSM, it is crucial to implement the VSM principles, concepts, and practices across all levels of an organization to ensure better flow optimization and value growth to achieve satisfied customers and stakeholders. This shouldn’t be a barrier to getting started with VSM. Widespread adoption can be a longer-term goal to strive towards. Start small, then incrementally scale and improve—that’s the key.
The concept of value streams and the interconnectedness of value, work, and goals across different levels can be game-changing. However, the unfortunate reality is that many organizations face significant challenges due to siloed ways of working, process gaps, and a lack of visibility across all levels. Value stream management can improve understanding of the value generated, work progress, and utilization of the organization's resources.
As we continue this series, we will dive deeper into these organizational challenges and examine their root causes. By understanding these challenges, we can establish how VSM concepts can assist organizations in overcoming them. Topics such as the role of VSM in identifying and removing process gaps, providing insights into value generation, and enabling organizations to optimize their processes and resources all factor into the benefits VSM can bring to an organization—and getting to the benefits of VSM such as better transparency, trust, and value growth.
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