Value stream management is becoming increasingly prevalent because of its effectiveness as a process for analyzing and improving the flow of value. The first installments of this series deconstructed the origins of VSM, different meanings and definitions, and the key concepts.
The second installment of this series started with the objective of describing the relationship between value streams and the key dimensions of value, work, and goals and how they flow across different levels in the organization. In an ideal organization setup, the value, goals, and work are interconnected across each level with a seamless flow of processes, systems, and data across the levels. This setup enables complete alignment, increases transparency, and improves trust in the organization. But most organizations are far from this ideal state, and value streams can foster that interconnectedness leading to a seamless flow of value and work.
Just as the dimensions of value, work, and goals can exist across different levels in an organization, value streams can also exist at different levels. An organization can have multiple value streams that deliver value to other value streams in a parent-child hierarchy. It is especially true for complex organizations with multiple departments or business units.
For example, a software development organization may have multiple value streams for different software products, each with its own activities, such as requirements gathering, coding, testing, and deployment. Each value stream may also contribute to a more extensive product or service, such as a suite of software products that provide value to the customer. The value streams for the individual software products are child value streams that deliver value to the parent value stream of the software suite.
Typically, the value streams in an organization can be classified into three categories, based on the level at which they exist.
- Operational value streams. These exist at the portfolio level and represent the series of activities that deliver value to external customers using products or services. For example, a loan fulfillment process, fulfilling an e-commerce order or manufacturing a product are operational value streams.
- Solution value streams. Any operational value stream is internally enabled by one or more solutions. Each such solution represents a Solution Value stream, which again is a sequence of activities and related people, processes, systems that deliver the solution.
- Development value stream - Each Solution value stream could further be supported by multiple Development value streams. A Development values stream typically represents an application or a technology delivery lifecycle, with the people and processes supporting it. Sometimes, the Operational Value stream could be directly enabled by Development value streams without a solution value stream in between.
The following shows how the loan fulfillment value stream and its related solution and development value streams--of one of the solution value streams--are connected.
It's essential to note that 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 from one another. In fact, the connectedness between value streams is critical for optimizing operations and delivering value to customers. This can be seen in the loan fulfillment example below, where the objectives of the top-level operational value stream drive the objectives of the solution and development value streams, and the work items at each level are connected to ensure the objectives are met.
Whether organizations realize it or not, value streams always have existed in their businesses, and they are always interconnected to value, goals, and work at each level—whether tightly or loosely coupled. These connections are irrespective of whether the organization is adopting a VSM type of framework or not. Every organization strives to generate value for itself and its customers, and this value-creation process is enabled by a series of steps, people, processes, and systems that are connected, which in essence, is a value stream. Based on the size and complexity of the organization, the number of value streams could vastly differ. VSM practices enable the organization to identify those value streams at various levels, interconnect them, and optimize them to ensure better value delivery.
Other installments in this series on value stream management explore how the dimensions of value, work and objectives are connected between value streams and a deep dive into how multiple value streams align and contribute to the overall creation and delivery of products and services.
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