The 4 basic concepts of Value Stream Management-EN

Value Stream Management (VSM) focuses on accelerating the flow of business value from the moment a customer request arrives until the delivery occurs.

Its origins can be traced back to improvements in Toyota’s manufacturing processes in Japan. But in recent years, VSM has also begun to be applied in other areas, such as digital product development.

Silos in organizations

When we look at the structures of organizations, especially the more traditional ones, we see silos. Silos occur when entire groups or departments work in isolation and do not share information or knowledge.

The workflow between silos is managed by exchanging plans, objectives, documents, mailings, or orders, for example. There is no collaboration. This exchange is what we call ‘hand-off’ or ‘handover’.

Silos cause this mentality of being in ‘parallel worlds’: we know that the other silos exist, and we coexist with them, but we do not interact directly. It’s a ‘them vs. us’ situation: Business vs. IT, Development vs. QA, Development vs. Operations.

Silos as organizational structures go against the first value of the Agile Manifesto: “To be agile, we must empower and encourage direct interaction between people instead of being subordinated to tools and processes”. Interaction between silos is often managed through processes and tools. And, of course, that negatively impacts agility.

Most of the problems with silos have to do with not understanding the global consequences of local actions that occur within the perimeter of each silo. For example: when we measure and pay attention only to the results in our silo, without taking into account the impact of our decisions and way of working in a broader context involving other teams or departments.

Silos, as structures, are barriers that generate bureaucracy, lack of alignment, frustration, and no collaboration. And all this, in turn, leads to delays that ultimately affect the customer.

In today’s context of change and acceleration, organizational silos get in the way of agile generation and delivery of value to customers. Local optimizations occurring in a silo do not improve the flow of value creation and delivery on a global scale – customers hardly perceive any benefit from local improvements.

What alternatives do we have to address these problems?

We can look for solutions and inspiration in other contexts and look at approaches taken in other sectors or industries. Value Stream Management is one of them.

What is a Value Stream?

The concept of Value Stream Management (VSM) provides the systemic view we need to manage value delivery when teams work in isolation-in silos-and the organization has lost sight of the fact that these silos are links in a longer chain.

VSM is a combination of people, processes, and technology to map, optimize, visualize, measure and govern the end-to-end flow of value. 

These concepts have their origins in the 1950s with the Toyota Production System in the processes and assembly lines of automobiles and have to do with the application of Lean principles in the management of companies. More recently, it has started to be applied in other areas, such as technology and digital transformation.

And what is a value stream?

A value stream is a chain or sequence of activities that produces and delivers value to customers and users through a product or service.

In the following image, we see a value stream representing the process of contracting a home insurance policy. At the beginning of the value stream, we find the users and customers who provide the input to the value stream (their needs, problems, pains).

They also appear at the end because they are the recipients of the value created by the teams and represent the output of the value stream. But, although the visual representation looks like a linear sequence, a value stream is not a project, but rather a continuous loop that repeats itself indefinitely.

To put it more finely, we would say that the value stream in the first image is a business value stream, what SAFe calls an Operational Value Stream. Someone from Design Thinking will call it a Customer Journey or Customer Experience. There are different names for a sequence of activities that produce an outcome or benefit to customers.

The concept of value streams is well-known in manufacturing processes and is now being adopted in software development. The application in both contexts is very different and, of course, creates new challenges.

When talking about value streams, it is important to include all stakeholders and actors. If we exclude, for example, support teams or business areas, the result is not a value stream, but segments of a flow.

In that sense, Agile and DevOps teams are segments. The adoption of Scrum, Kanban, and DevOps has only allowed us to optimize some segments of value streams. But in a broader context, the challenge here is to optimize the entire chain, end-to-end, not just the IT areas.

A value stream is a virtual organization that transcends the silo structure, showing the flow of work, information, and agile communication between all those involved in creating and delivering value to customers.

An organization that adopts VSM can reconfigure teams to break down silos and ensure that people are aligned and collaborate directly across the value generation and delivery stream.

The organizational agility that customers expect is achieved when interactions between silos are agile.

This approach, applied to manufacturing processes, allows for increased efficiency over products and processes that do not change. In software development, requirements are continually changing, so it is crucial to establish a flow that is visible and to have frequent feedback cycles to correct problems and vulnerabilities.