To the casual observer, ‘Value’ has emerged as the new buzzword in recent years. The truth is that it may be more apt to say it has risen from the ashes… Go back to 1985, and you can find the management guru Michael Porter introducing what was arguably the origin of the Value Chain, in his book “Competitive Advantage”.
Michael Porter’s Value Chain sought to analyze the activities of a typical organization from a value-adding perspective, categorizing the activities in the chain into Primary and Supporting and bringing focus on to how inputs are converted to outputs both directly and indirectly. The assertion being that non-value adding activities draw cost and reduce margin, essentially decreasing value for the enterprise and the customer.
While that is still relevant, today the evolutionary form of the Value Chain is the concept of Value Streams, and is typically found in the pages of Six Sigma or Lean theory. And the good news is that you necessarily don’t need to be an expert in these methodologies to apply or benefit from the use of Value Streams in your enterprise. Value Stream Mapping can be effectively implemented with just a little bit of understanding and know how, and in my experience is well worth it.
Value Stream Mapping can be defined as a ‘lean enterprise technique or method used to document (flow chart), analyze and improve the flow of information or materials required to produce a product or service for a customer. The objective of Value Stream Mapping is to generate optimal customer value through lean, value rich processes with the bare minimum of waste.
It is imperative that before embarking on Value Stream Mapping, there is complete clarity on what Value ‘looks like’ and means to the customer, for the products and services of the Enterprise. Value criteria comprises of measures such as:
- Price
- Quality
- Lead Time
- Service
- Availability
Remember that customer value = enterprise value, and correlating these through any Value Stream Mapping initiative is key to achieving the results required.
So, with your Value criteria for your products and services set, here’s a simplistic view of how you can go about Value Stream Mapping -
1. Identify Value Opportunity processes
It is likely that there are processes with known deficiencies in terms of value creation and/or which consume inordinately excessive resources or generate excessive waste. These processes may have been identified by customers or internally. I always recommend starting with these.
2. Create Current State Charts or Map of processes
Put pencil to paper to map the current process, and specifically the end to end flow of deliverables (materials and information) from supplier/inputs to customer/outputs. I always find this is where organizations learn things about their business and processes they had no idea about! There are templates and a catalogue of Value Stream Mapping symbols providing for a ‘notation’ to be used.
3. Evaluate Value Gaps or Obsolescence in the Current State
This is the first point where the Value criteria play an important role. Value Gaps can often be clearly evident at this stage, where for instance an excessively long manual process for a product doesn’t satisfy the customer need for short lead time. Similarly steps or activities which may not be required at all, therefore rendered obsolete, are commonly flagged.
4. Create Future State Charts or Map of processes
The future state should represent the blueprint of optimally efficient and valuable processes, considerate of the Value Gaps and Obsolescence from step 3, and the set of Value criteria. Processes should be as lean as possible whilst still satisfying the Value criteria and creating customer value, requiring critical attention to the conversion of inputs to outputs, and the utilization of resources.
5. Define and Design Value based Changes
Making the processes more valuable means determining what changes (or additions) are required to the current state to get to the future state, and ensuring these are well defined and designed to deliver the expected value.
6. Implement Pathway to Future State processes
This is the delivery piece where the enterprise plans and implements the transition (or transformation in some cases) of the process to a higher level of value creation for the customer, and therefore the enterprise.
7. Measure Value Benefits
Don’t forget about this one. Much like continuous improvement, Value Stream Mapping is not a once off exercise. The need for Value Stream Mapping is ongoing as and when customer or enterprise demands change. If the expectation is that a process has been improved to add more value, and be more valuable, then the new process should be measured and compared to the old one to confirm the increased value benefit.
Enterprises are in the business of generating value. Fail to create value for customers, and an organization can be certain that customers will find value elsewhere. To create value for customers, organizational product and service processes need to subscribe to Governance, Operational Efficiency and Value driven principles and criteria. Building value into these processes may seem foreign and even daunting, but value can and should be inherent in any process development or improvement. This is where Value Stream Mapping can help. By providing a way to improve the value of an organization’s core product and service production processes, organizations can readily and continuously set about creating more value.
My advice, don’t wait for the next incarnation of Value, in whatever form it may come – start mapping your enterprise value streams today. After all, it may just be the most valuable thing your organization could undertake right now! Value Stream Mapping is value by design, where more valuable processes create more valuable products and services, which lead to more valuable customers, and yes you guessed it – a more valuable enterprise.