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Value Stream Management Explained

Value Stream Management Explained

If you're trying really hard to see the problem in your delivery process but you just can't seem to put a finger on it, you're not the first one to experience it. As a matter of fact, it is a common dilemma among organisations that practice product or service delivery. While most companies or businesses struggle to optimise their teams through fragmented and stopgap solutions, there is a better and more systematic way of doing so: Value Stream Management.

Value Stream Management (VSM) is the process of understanding the criteria that makes your product or service capable of delivering to your customers within the expected value, quality, and speed. It ensures your service level continues to fall within acceptable customer thresholds where you are considered to be fit for purpose.

The history of Value Stream Management goes way back to 1913 but has evolved its way to today's organisations since then. When done correctly, value stream management can reduce cost, speed up processes, and simplify tasks in any organisation. It creates transparency and visibility over projects and programs. This empowers leaders to steer with more precision based on historical data. Value stream management surfaces problems existing within value streams, aiding project and program managers to strategise and plan. 

Understanding value streams

But “What is value stream?,” you may ask. Let us help you understand it in the simplest way possible.

Connect someone (customer/stakeholder) requesting something (product/service) to someone who can provide it (let’s call it a service provider), and voila! There you have a Value Stream.


Value Stream Management Explained


Regardless of industry, the common elements that make up a value stream are as follows:

  1. A product or service provider
  2. A product or service catalogue that customers understand and can request from
  3. A customer
  4. A customer order
  5. A customer service level expectation
  6. Exchange of economic value
  7. Production process
  8. Delivery of the customer order

In manufacturing, a good example of a Value Stream would be a customer going to tesla.com, selecting Model X and clicking ‘order now’. Between customer order and delivery, there’s Tesla’s assembly line with all complexities of its supply chain in Fremont, California.

In retail, on the other hand, a great example would be a customer going to amazon.com, searching for new gadgets for a new home office, adding them to the cart, and proceeding to checkout. Between customer order and delivery, there are Amazon’s warehouses and fulfillment processes where they pick, pack, and ship your product with maximum efficiency.

In the hospitality industry, one example would be a customer having a Sunday brunch with their family at their favourite Cafe. Between customer order and delivery, there’s the waitress, the kitchen, and all its processes and supply chain.

Finally, an example that best fits a digital business context would be an executive of a financial institution commissioning their IT Department to build and ship a new ‘Buy Now, Pay Later’ product to compete with AfterPay. Between customer order and delivery, there’s a whole software lifecycle.


Qualities of a strong value stream

Knowing what VSM or Value Stream Management is helps you win only half the battle at this point—things certainly don't end there. Another important thing to ponder on when integrating VSM into your workflow is to be aware of its best traits. Below are the top 10 attributes that make a good value stream:

Measuring value streams

Sensing complex adaptive systems such as Value Streams can be tricky. There are an endless number of metrics you could use to get a sense of how a value stream is operating. Using too many metrics creates noise, which distracts you. Using too little, you might miss critical health indicators. Below are the customer-centric and flow-based metrics we believe to be useful at a higher level of analysis.

Value Stream Reflection Mechanisms

We know strong Value Streams have distinguished strategies to improve efficiency and effectiveness to create alignment, rhythm and process feedback, signals, and tensions inside and outside of a value stream.

You can check out our blog about Value Stream Reflection Mechanisms to learn more.

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.’ As per Gartner’s 2021 Market Guide for DevOps Value Stream Management Platforms, 70% of organisations will be using value stream management in 2 years to improve the delivery of customer value.

Establishing a good flow for your business is critical, especially if enterprises are to scale, be fluid and flexible in a dynamic business environment. Flomatika helps you build your business better, faster, and more efficiently with a fortified value stream.

Flomatika helps you build your business better, faster, and more efficiently with a fortified value stream. Schedule a demo with us to deliver value to your customers with utmost excellence.

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