Given the imperatives business are facing and the potential payoff of value stream management, the time to start is now.
In recent months, value stream management (VSM) has emerged as an urgent, strategic imperative for today’s businesses. However, in speaking with executives at global enterprises, I’m struck by the wide range of experiences and expertise in this area. Some organizations have made significant investments in VSM and started to see a real payoff. In many other cases, organizations have yet to get started, let alone make much progress. Quite often, I’ve seen that there’s a real lack of clarity on this vital subject, including what VSM really means, what’s required, how it helps, and how to get started.
In the following sections, I’ll offer an overview of each of these topics.
Value stream management defined
With roots going back to the 1950s and the Toyota Production System, VSM is by no means new. At its core, VSM is about applying lean principles to enterprise management. It’s about managing the flow of business value, from idea to development to production.
While there are a lot of definitions available, the Value Stream Management Consortium, in its “State of Value Stream Management Report 2021,” defined it this way: “VSM is a combination of techniques that continually and holistically optimize the flow and realization of value for a product or service.”
Why is VSM so important now? I’d argue there are a few key forces that are converging to raise both the stakes and the opportunities:
- Digital imperatives. In recent years, demands for digital transformation and innovation have continued to accelerate and intensify. Many of the characteristics and advantages of VSM are tightly aligned with the demands of modern digital enterprises.
- DevOps maturation. DevOps uses value streams as a foundational concept. Through agile and DevOps, teams have made great strides, but through advanced VSM, these teams can be positioned to make even greater advancements.
- Technological innovation. Employing VSM in large-scale enterprises has historically presented a number of obstacles. Innovative technologies are now enabling the real-time visibility and data-driven optimization that enable teams to capitalize on VSM.
As mentioned above, the implementation of VSM in large-scale enterprises has traditionally presented a number of technological hurdles. One key challenge is the manual, siloed nature of VSM data. For example, in one survey, the Value Stream Management Consortium found that 36% of respondents are still manually connecting flow data to understand how it ties to business results. These labor-intensive efforts appear to be one reason why so many teams aren’t closing the loop in terms of tracking and optimizing the value ultimately realized by customers. The same survey asked if respondents measured the actual value realized by new features in their products. Almost three-quarters, 72%, replied “rarely,” “once,” or “never.”
To fully capitalize on VSM, business leaders need real-time insights into their investments, so they can intelligently prioritize based on value. In addition, execution teams need a single backlog and visibility into business strategy and objectives, so they can ensure they’re effectively, consistently focused on delivering value and addressing customer needs. To most fully capitalize on VSM’s potential, teams need to broaden the scope and tie VSM concepts across the entire organization.
Toward this end, teams need to combine digital product management and agile management. When these capabilities are seamlessly unified, teams can effectively connect business strategy, program management, and team execution. Using a single platform to track and manage value streams can open up an array of opportunities, which expand well beyond the IT organization.
The potential payoff of value stream management
By establishing a single platform for tracking and managing value streams, organizations can create the transparency, efficiency, and accountability required to deliver continuous business value. These capabilities enable teams to realize a range of advantages:
- Boost alignment. Through unified VSM capabilities, teams can establish the shared insights that help foster trust and eliminate silos. In this way, teams – better ensure business decisions and development processes are more fully aligned with value delivery and realization.
- Enhance effectiveness. With VSM, teams can better ensure that digital transformation initiatives have maximum impact. Teams can optimize prioritization, strategic investment planning, and digital product management. Teams can better ensure they’re funding the most valuable efforts and track the return those investments actually deliver.
- Maximize efficiency. By establishing enhanced transparency and visibility, teams can reduce effort and waste in their value streams. Teams can better ensure they’re building the right things at the right time, helping improve speed and quality.
Ultimately, with all these advantages, teams can be better positioned to boost organizational agility and respond more quickly and effectively to evolving customer and market demands.
How to get started
Given the imperatives business are facing and the potential payoff of VSM, the time to start is now. As organizations look to build – VSM approaches, the following are a few key considerations to keep in mind:
- Identify key sponsors. Across teams, it will be vital to identify and cultivate internal sponsors who can effectively champion continued VSM efforts and investments.
- Establish baselines. It’s critical to start measuring key parameters and to use those initial baselines as measurements to track progress. Those insights are essential to guiding continued iteration and ultimately to measuring value.
- Take a hypothesis-driven approach. Teams need to try new ideas with customers. It’s vital to ship small pieces of new functionality, get immediate feedback, and determine whether it is of value. These insights can then fuel informed decisions in terms of what to expand on and what to toss out.
- Prioritize value stream mapping. Pursuing effective value stream mapping is a critical exercise, one that can play a significant role in the ultimate success of VSM initiatives. Look to establish value stream maps to understand current circumstances and the desired outcomes, and monitor progress toward these outcomes on an ongoing basis.
- Establish data-driven approaches. Rather than relying on manual reporting or aggregation of reports from disparate tools, teams need to establish a real-time, data-driven approach to VSM. In this effort, it is vital to work from unified platforms while ensuring individual team members gain personalized, targeted insights.
To capitalize on the opportunities afforded by VSM, teams need an end-to-end view of value streams, not just across IT but across the entire business. The organizations that gain this visibility will be optimally positioned not only to accelerate their data transformation but to ensure their transformations yield maximum business and customer value.