What is Value Stream Management?
Value Stream Management (VSM) is the process of understanding the criteria that make your product or service relevant to your customers and stakeholders, and ensuring your service level continues to fall within acceptable customer thresholds where you are considered to be fit for purpose.
Put simply, managing Value Streams is all about maintaining fitness in the presence of a rapidly changing external environment.
After reading this article, we hope that you can start seeing Value Streams where you could only see companies, divisions, teams, and individual contributors before.
Understanding Value Streams
Value Streams are embedded throughout our lives. Such is how we interact with brands and collaborate with people from all sorts of disciplines to produce value and help advance the world.
Connect someone with a need; to a product or service provider that can fulfil it. Get that person’s need satisfied. Voila! There you have a Value Stream.
The Value part comes from the exchange of economic value (money, time, information, influence, etc.) for the product or service requested. The Stream part comes from the continuous flow of requests and deliveries.
That’s the most fundamental concept to grasp when trying to understand what Value Streams are: request and delivery, request and delivery, in and out, in and out.
Between request and delivery is everything necessary to transform customer requests into value delivered.
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 fulfilment 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 life cycle.
That being said, whichever industry you are in, what is common across all the above examples is the fact that they all have:
- A product or service provider
- A product or service catalogue that customers understand and can request from
- A customer
- A customer order
- A customer service level expectation
- Exchange of economic value
- Production process
- Delivery of the customer order
When talking about Value Streams, this combination of elements repeatedly happens, producing a continuous flow of requests and deliveries.
Establishing a good flow for your business is critical, especially if you aim to be fluid and flexible in a dynamic business environment. If you want to know more about VSM and its origin, check out this article: The Recent Emergence of Value Stream Management in Enterprise Organisations.
→ Read more about VSM implementation Roadmap
→ Read more about Organising Around Value Streams