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The Recent Emergence of Value Stream Management in Enterprise Organisations

The Recent Emergence of Value Stream Management in Enterprise Organisations

Background

The concept of Value Streams is over a century old. Probably, most notoriously dating back to Ford’s Model T assembly line in 1913, when the time required to assemble one vehicle was reduced from over 12 hours down to just 93 minutes. The cost ended up going down from the original $825 to $260 despite high inflation at the time. 

Ford’s mass production system came with a catch, however. He had a famous saying: "Any customer can have a car painted any colour that he wants, so long as it is black." Unfortunately, such a mass production system wouldn’t work later for Toyota. 

Fast-forward to 1950: Toyota created a new production system (TPS) to address Japan’s car market, which was smaller and more diverse. Through Just-in-time (Flow) and Jidoka (Quality), the company increased production speed, reduced production costs, and improved quality while still maintaining variety—becoming the most efficient car manufacturer of the 20th century.

It took another half-century for Toyota’s Lean concepts to cross-pollinate enterprise organisations performing knowledge work. It ended up entering from the software engineering doors. 

  • Mary Poppendieck started laying down the path with her book Lean Software Development (2003).
  • Donald G. Reinertsen presented the industry with his book Principles of Product Development Flow (2009).
  • David J. Anderson provided significant contributions starting with the Kanban book (2010), then Fit for Purpose (2017), and lately the Kanban Maturity Model (2020). In addition, he has created a global network of multipliers.
  • The continuous evolution of agile practices (2001) and modern engineering practices (2007) also played a big role in the emergence of VSM.

The tooling hell

By 2015, enterprise organisations using SaaS platforms to manage their work became more dominant. Tools like Clarity PPM, Jira, Trello, Azure Boards, ServiceNow, and an army of other niche tools started to become part of how modern organisations operate, regardless of their industry and scale. 

It has democratised information and transformed how agile teams work but also brought some challenges along with it. For example, information started to scatter across several tools, making it difficult to connect all the dots and make information flow across the different silos and levels of the organisation.

In response to that, leveraging the API ecosystem provided by the vendors, a wave of integrators such as IFTTT and Zapier came into play, connecting everything with everything else in a two-way manner. As an example: an incident would arrive at a Service Desk tool like ServiceNow. After triage, a card would automatically be created in the team’s Jira project. The team would maintain the frontline up to date with frequent updates. When the problem got resolved, it would automatically notify them and change the card’s status back in ServiceNow.

That somewhat resolved the problem of information flow but did not resolve the lack of holistic view. Information was still scattered across tools and the different levels of the organisation, just flowing better between specific processes. This pain became one of the main drivers behind emerging Value Stream Management platforms.

The move from a project to a product paradigm

Another critical driver that started to manifest itself around 2011 was the change of the funding model for IT initiatives; moving from funding projects to funding products or long-lived teams, probably with the Spotify paper being the most significant catalyst for that.

We saw smaller companies worldwide that started doing it around 2013 and big corporations following suit from around 2015. It was then accelerated by a wave of agile transformations which began to significantly impact organisational design, operating models, and funding mechanisms around the world. 

The movement brought an immense amount of benefits but brought some governance tensions as well. The predominant model started to shift from the classic ‘iron triangle’—fixed time, cost, and scope to ‘long-lived product teams’—with a fixed cost, open time, open scope.

For a while, organisations simply tried to apply the exact old governance mechanism they had in place, usually through the PMO and its staff (Portfolio Managers, Program Managers, Project Managers and whatnot), but it didn’t work as well as expected.

In the project paradigm, things were not designed to change too much, and every change was controlled as it affected time and cost. On the other hand, in the product paradigm, changing is the norm with constant pivots as teams push through their build-measure-learn cycles while moving towards their North Star.

Leaders started to wonder how they could measure the efficiency and effectiveness of their portfolios in a way that was compatible with the new model, something that would close the gap between strategy and execution. 

The following questions started to become common among executives:

  • With information fragmented all over the place, how can we make sense of what is happening on the ground?
  • How can we respect the autonomy of product teams while ensuring their work aligns with the organisation's strategic objectives?
  • How can we ensure that teams are not over-investing in new features and neglecting technical debt, risks, and compliance concerns? Or vice-versa, over-engineering the product and overlooking new customer features and significant enhancements?
  • How can we have proper governance without wearing the cost of an army of portfolio, program, and project managers?

The tension around governance became another critical driver behind the emergence of VSM platforms, with leaders looking for transparency, alignment, bounded autonomy, and real-time data-driven performance data.

Value Stream Management platforms

From 2018 market analysts from Forrester, Gartner, GigaOm, and Research in Action started reporting a new emerging market niche called ‘Value Stream Management platforms.’ The research included how players, coming from different areas, were trying to solve the following problems: information fragmentation and product governance.

Research in Action said in their ‘Value Stream Management Vendor Selection Matrix’ (Jul 2020), "Whilst some organisations are still trying to understand the value of VSM, many are already trying to build their VSM capability internally. The smart ones have acquired a VSM tool over trying to build their own."

Forrester said in their report The Forrester Wave: Value Stream Management Solutions (Jul 2020), "The need for better management and governance is not going away. We expect to see a lot of progress in VSM over the next 12 to 18 months."

GigaOm said on their ‘Radar for Value Stream Management (Sep 2020), "The VSM market is continuously changing as vendors are acquiring, being acquired, entering and exiting this dynamic space".

Gartner went as far as saying in their ‘Market Guide for DevOps Value Stream Management platforms’ (Sep 2020) that “By 2023, 70% of organisations will use value stream management to improve flow in the DevOps pipeline, leading to faster delivery of customer value.”

We then start seeing vendors from all product lifecycle stages moving into the new emerging Value Stream Management segment—from Project and Portfolio Management (PPM) down to the DevOps tooling space. Vendors started rebranding themselves as Value Stream Management platforms, accelerating their product development and buying other niche players where possible to close gaps sooner and be better positioned in the eyes of global leaders.

The reality is that today, the market is still morphing with traditional players bending their products, while a new generation of entrant players are building new platforms from the ground up with razor-sharp focus on customer needs and the problem space.

If you wanna read more about VSM, check out this article: What is Value Stream Management?

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