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value stream management

What is value stream management?

Value stream management (VSM) is an emerging business process intended to gauge the flow of value into business resources and activities as well as the flow of value back into the business.

VSM helps a business oversee the complete end-to-end activity cycle and measure the success of that activity cycle. In short, VSM helps a business see what works and what doesn't. This lets a business to focus on beneficial initiatives while reducing or limiting less-valuable activities and initiatives.

Although VSM can be applied to any business resources and activities, it is most often associated with software development and software delivery. Development focuses on identifying and cultivating value streams rather than traditional features and functions, letting the business visualize complex processes and quickly shift efforts to be a value driver. VSM can help development teams align projects with business objectives and enhance agility while eliminating waste. Ideally, VSM clarifies customer needs and facilitates customer-centric product development.

What is a value stream?

A value stream represents all of the activities needed for the start-to-finish delivery of a product, service or experience to an internal or external customer. A value stream is typically perceived to start and end with the customer. It is intended to bring the following value to both the customer and the business:

  • For customers, value represents every benefit received, such as a capable, high-quality product delivered in a reasonable timeframe for a fair price.
  • For the business, value can be tangible, such as the revenue generated by the product, as well as less-tangible value, including business reputation, the creation of new intellectual property and gains in competitive posture or market share.
Diagram of a value stream
Value streams are typically depicted with a flowchart or diagram that illustrate the various business processes required to deliver a finished project.

Value streams frequently involve many siloed business functions and can be used to understand and model various business processes -- often perceived as a subset of business process initiatives. For example, a value stream may be extracted or identified within broader business processes. Software development and delivery are key targets for value stream analysis. Consequently, value streams are often specific in purpose and limited in scope. Common value streams can include the following:

  • handling a help or support request;
  • implementing a software feature or function;
  • managing a project;
  • onboarding a customer or employee;
  • processing an order; and
  • creating a contract.

The key to a value stream is a value stream map. A value stream map is a diagram created to represent the various activities, time requirements, costs, Quality control standards, and other relevant business resources or services involved in the value stream. Value stream maps are typically created by business analysts. A well-considered value stream map can be used to identify and address problems in the value stream such as quality lapses, time or resource bottlenecks, and unexpected costs.

Why is value stream management important?

As modern business gets faster and leaner, business leaders face problems with resources and insights. Leaner operations mean fewer resources in budgets, staffing and time, while available resources must often be shared across more of the business. At the same time, the business needs more real-time data driven insights to make better business decisions -- what works, what doesn't and what needs to change.

Establishing a value stream lets a business to understand costs as well as the value those costs are creating. VSM applies value stream management tools and processes to the value stream to generate useful data and drive optimizations earlier with measurable outcomes. VSM can do the following:

  • identify unprofitable activities, which can be improved, optimized, changed or discarded;
  • identify bottlenecks and waste;
  • identify resource limitations and resource contention;
  • gather and report metrics such as cycle time, flow time, wait time, and customer satisfaction and experience;
  • shift funding to more agile and profit-centered activities; and
  • ensure that activities -- and corresponding spend -- are aligned with business goals.

Software development and delivery are increasingly influenced by value stream and VSM concepts. Although paradigms such as Agile, DevOps and other development approaches have vastly accelerated and improved software creation, businesses still grapple with dependencies on shared resources and search for greater process insights and auditability. By layering VSM considerations on top of continuous deployment paradigms, a business can better manage those dependencies, optimize workflows along the development pipeline, enhance agile work methodologies, and drive greater levels of automation and management control in software development.

How does value stream management work?

Business management is certainly not a new concept. Countless tools and platforms have evolved to support each emerging management paradigm.

VSM is not a new or revolutionary management strategy but rather a shift in focus from "operations" to "value" -- putting outcomes and customer satisfaction at the center of business management efforts. VSM is approached much like other management strategies:

  1. Identify a value stream.
  2. Study and understand all the steps, touch points, workflows and resources involved in the value stream.
  3. Codify the elements of a value stream into a VSM tool or platform.
  4. Allow the tool to gather data.
  5. Establish metrics and apply KPIs to gathered data.
  6. Use the tool and its analytics to optimize and troubleshoot the value stream.

Although VSM relies heavily on the use of management tools and platforms, the paradigm starts and ends with knowledgeable business and technology leaders needed to evaluate and understand a value stream and its impact on business outcomes.

Consequently, value streams and VSM are largely a matter of production (value streams are a byproduct of lean manufacturing concepts). Although automation is emphasized heavily, regular human involvement is essential to identify new value streams and to enhance or update existing value streams while maintaining value and compliance for the business.

How to measure workflow through value streams

Value streams and VSM require careful attention to metrics. Although there are no fixed metrics for value streams, there are some common metrics -- or variations -- that can help an organization monitor and manage workflows.

Flow metrics are common in value streams and are used to measure rates of work that are relevant to the specific business -- such as products and features completed, defects encountered and technical debt accumulated. Common flow metrics include the following:

  • Flow distribution, which measures the alignment of other flow metrics to gauge productivity.
  • Flow efficiency, which measures the amount of work being done vs the amount of work queued up and waiting. This can be a valuable metric to measure bottlenecks, process risk and unnecessary costs.
  • Flow load, which measures the amount of work in progress and waiting in queues. This can help identify resource bottlenecks and optimize resource utilization.
  • Flow time, which measures how quickly work is completed. This might be how quickly a product is built or how quickly a new software feature is implemented. Flow time can be valuable for making delivery estimates and allocating project resources.
  • Flow velocity, which measures the rate of work completion over time. This can help identify bottlenecks and conflicts within the value stream.

Flow metrics are only one example. Value streams are broadly applied to software development, and software-related metrics can easily be applied to VSM. Common DevOps metrics found in value stream environments might include the following:

  • Change failure rate, which measures the amount or percentage of unsuccessful deployments that require a hot fix, rollback or other remediation.
  • Deployment frequency, which measures the rate at which code is deployed to production. This can be similar to flow time.
  • Lead time, which measures the time between a code commit to a code deploy.
  • Mean time to repair, which measures the time needed to restore service after a defect or incident.

In most cases, metrics are compared against business outcomes where business and technology leaders can evaluate value, cost, quality, customer experience and satisfaction. This lets the business correlate the work done to the business result.

Benefits of value stream management

VSM is designed to help business and technology leaders focus on improved delivery of resources, products or services to customers while creating more value for the business. This is often accomplished through careful understanding of processes, identification of bottlenecks and waste, and detailed analysis of costs and benefits. Consequently, VSM can benefit a business by doing the following:

  • Accelerating time to value. By observing and understanding a complete value stream, a business can make effective and timely decisions that add greater value to the business. This can involve improving resources, eliminating waste, easing bottlenecks and optimizing business results. This is often a more comprehensive and holistic approach than simply optimizing an individual business silo.
  • Enhancing cross-team collaboration. A business is composed of many teams across different functions. VSM can help those disparate teams collaborate and work toward common business goals. Once a stream is identified, it's easy to focus on related tasks, streamline processes and eliminate duplicated effort.
  • Measuring stream performance. VSM helps the business identify, follow and optimize value. This helps business leadership focus on improvements and make well-informed decisions based on well-understood metrics and strategic key performance indicators.
  • Making better investments. A value stream map and ongoing management can identify tasks along the value stream that may be inadequately funded/over-funded or supported with technology. VSM can help a business understand where investments can be improved. For example, VSM may justify a new storage system investment that can serve multiple streams while providing better compliance support.

Although these fundamental benefits focus on business considerations, they can effectively apply to concepts and considerations of software development.

Challenges of value stream management

VSM can offer compelling benefits, but the process can falter -- and even fail -- if it's not embraced and cultivated over time as part of an enterprise management culture. There are several challenges that can plague VSM:

  • Management pushback. VSM changes the way that managers understand and run the business. It can shine an intimidating light on problems and inefficiencies within the process. This can cause some managers to deemphasize and eventually abandon value stream concepts and management. Management that embraces issues as growth opportunities can thrive with VSM data.
  • Overcomplicated concepts. Value streams and value stream mapping are relatively simple and straightforward ideas. However, value stream concepts can take time to apply across business processes, so it may be easy for managers to mistake this time investment for excessive complexity and abandon the value stream paradigm. Managers that start small and learn value streams with simple processes can gain comfort and confidence that will help apply value streams to more complex business work processes.
  • Failure to change. VSM is not a one-time effort. It requires continuous attention and the ability to adapt to changing business needs -- such as the shift from in-person to remote work during the COVID-19 pandemic. Business and technology leaders must collaborate and revisit value streams regularly and make changes that reflect business changes. Otherwise, the value stream will become unmanageable.

Organizations can ease the adoption of value stream concepts by introducing proof-of-concept projects on pay-as-you-go SaaS VSM platforms. They can use the opportunity to make mistakes, gain expertise and refine the way that business and technology leaders use value streams. After that, the business can integrate more complex processes faster and easier with fewer problems.

This was last updated in February 2023

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