The Ultimate Guide to Value Stream Management in the Lean Portfolio

The Ultimate Guide to Value Stream Management in the Lean Portfolio

One of the most crucial actions in implementing SAFe (Scaled Agile Framework) in any organization is aligning your business around value. Value is at the core of lean thinking, and aligning your organization around it provides maximum benefit.

A concept that originated in lean manufacturing, value streams deliver business value to customers on time while minimizing wasted effort or rework. A value stream is defined by a series of steps required to provide value to a customer – from the moment the customer requests a product or a service to when they have it in their hands.

In the ultimate guide to value stream management in the lean portfolio, we provide an overview of value streams, the different types of value streams, how to align your portfolio around customer value, and how you can optimize these processes.

Let’s start by taking a closer look at the idea of a value stream.

About Value Streams

Any business in any industry benefits from identifying, optimizing, and streamlining its value streams.

The term “value” in the concept of a value stream is defined by your customer needs – what they consider valuable and why. Value can be a specific product that your customer decides to buy or a service that your customer requests. Everything should be focused on that value – getting it to the customer quickly, cost-effectively, and with high quality.

Generally speaking, there are two primary types of value streams:

  • Operational value streams – Operational streams and the people working in them are in charge of delivering value to your customers. This often includes fulfilling customer requests for products, services, and support (such as a help desk).
  • Development value streams – Development processes are responsible for developing new features, enhancements, or components of a product or service that will be delivered in the future. Simply put, development streams support the operational streams.

To successfully identify the value streams in your company, you must be able to answer the following questions:

  • How do you deliver value to your customers?
  • What are the processes you utilize to make this happen?
  • What type of work is done by each team or department for that value delivery process to occur (such as what services they provide)?
  • Who does that work, and what are their roles?

With this information, you can begin to identify which teams should align around value streams.

Let’s first pinpoint the operational value streams.

Operational Value Streams

There are four main groups of operational value streams:

  • Manufacturing value streams – These streams consist of steps required to take raw materials and produce a physical product intended for sale to a customer. Examples can be found in businesses such as car factories or bakeries.
  • Fulfillment value streams – Include steps to process an order or request, take a product that has been manufactured, and deliver it to the customer. Examples can be found in businesses such as retail stores or online retailers.
  • Supporting value streams – Workflows for supporting activities in an organization, such as supplier contracts, annual audits, hiring new employees, etc.
  • Software product value streams – Value streams designed explicitly for software delivery, software development (coding), testing, deployment/release management, etc.

If your business is relatively small, it may be easy to identify your operational value streams. You might only have one or a couple of products or services that you are offering; therefore, you may only have one value stream.

However, as your business grows and diversifies its product/service offerings, it becomes more challenging to identify the operational value streams within the organization. In this case, identifying these processes requires a broader look at the organization and all the core elements that make up the business.

Questions that will help you identify the necessary operations include:

  • What market segments does your company serve?
  • What key system operational capabilities are you enabling?
  • What key business initiatives are targeted?
  • What are the products or services that your company offers consumers or other businesses?
  • What are the more extensive subsystems to these products or services?

Don’t forget that a properly defined operational value stream does not start with input information from a different process and end with output information for a downstream process.

Instead, it starts with a customer request and ends with a product, service, or support (in other words, value) being delivered to the customer.

Development Value Streams

With operational value streams successfully identified, you can now begin to define the development value streams.

It would be best if you considered each solution that supports an operational stream. These solutions are designed and built by one or more development streams.

One of the foundational steps in identifying development value streams is recognizing the ‘triggers’ in your business process.

A trigger represents the first step of a process, which causes the development stream to start. Typically, there are three types of triggers:

  • Customer trigger – when a customer places an order or requests something.
  • Business process milestone – when a milestone is reached in the business process or when any significant event happens, such as changing the company’s business strategy.
  • System trigger – when an event tied to another system brings about the need for developing a solution, such as a new feature or update.

After identifying the most common triggers in your company, you need to define which operational value streams they align with and then identify the development stream that corresponds to these triggers.

The development teams don’t have to be only in one department. They can be divided across different sectors, if necessary. Also, keep in mind that you may have multiple development streams for the same operational value stream.

At the same time, development streams should be as independent of each other as possible. Dependencies slow down the entire process and cause problems. The whole purpose of organizing your work by value streams is to increase the overall agility of your organization.

Value Stream Optimization

Once you identify your value streams, it is time to evaluate them and make sure they are performing as well as possible.

This value stream analysis and process improvement can be achieved through a process called value stream mapping.

Value stream mapping (VSM) analyzes and optimizes the flow of information or materials to create value for customers. It can be applied to any stream in any company in any industry.

The main benefits of a VSM solution include:

  • Improving the speed of processes (decreased lead time)
  • Decreased waste
  • Reducing errors and rework costs
  • Taking advantage of opportunities to increase revenue or reduce expenses
  • Increased customer satisfaction
  • Identifying problems with products, services, people, tools, information flow, etc., before they become major issues

Here are the eight steps you need to take in value stream mapping.

1. Defining the problem

Is the value stream you’re looking at as efficient as it can be? If not, why isn’t it?

In this first step, you should figure out what’s wrong with your existing process and why it’s not working well enough.

Ask yourself the following:

  • What are you trying to achieve?
  • What pain points or issues do you want to address through VSM?
  • What are the main benefits to your customers or company in doing so?

Remember that you can’t come up with a solution without knowing the problem first.

2. Putting together a team

With a well-described problem statement, you can move on to assembling a team for value stream analysis and optimization.

The team should consist of people from different departments and roles (it should be cross-functional). Make sure to include those directly involved in the value stream so everyone can be on the same page and have a clear understanding of what’s going on behind the scenes.

A team of six to ten people should be ideal since more people than that will slow down the process, while fewer people could undermine the analysis.

3. Limiting the scope

Depending on the problem you’re trying to solve in the value stream, you may not need to map out the entire stream. In step three, you can limit the scope of the process by selecting the section of the value stream where your pain points are, the section that will benefit the most from optimization.

4. Mapping the selection

At last, in this step, it is time to get down to work. The team you have put together has the essential task of mapping out the section of your value stream you have determined in the previous step.

There are a few things to keep in mind here:

  • Each step in the stream has to be defined.
  • This is a collaborative activity – all team members should engage with one another and contribute to the process.
  • The team should also evaluate their mapping process to ensure it is working well and nothing is amiss.

It’s also important to note that the value stream mapping doesn’t have to be carried out in a single session – you can take it step by step or complete several maps along different sections of your process and merge them at the end.

5. Current state value stream map

At the end of step four, you will have a map of the current state of the value stream. Analyzing it in great detail is the task of step five.

You can start by identifying and quantifying all the steps, delays, and queues in your process and their associated lead times (the time it takes to go from one point to another). Make sure you also list any information or materials that are lost while going through this value stream.

What are the options for increasing efficiency? Does the current value stream align with your business strategy? What are the main bottlenecks in the process?

6. Designing the future state map

Once you’re done with this analysis, it’s time to come up with improvements!

Here is where that cross-functional team will shine. Remember when we discussed earlier how vital collaboration was for mapping out your value stream? Now you can see exactly why – everyone has a different perspective, and this collaborative effort will help you think outside the box.

Outline what will change, how it will change, who will be involved, and how your customers and company can benefit from these changes.

With a future state map of the value stream in hand, you will have a clear picture of what you need to do next.

This is also where lean principles come into play: don’t try to perfect everything right now; instead, focus on removing the most significant pain points and start there.

7. Validating the future state map

The second to last step includes validating the future state map and seeing how it aligns with your lean strategy.

It is recommended to get feedback from all parties involved in this value stream: customers, the finance department, and the marketing team. Everyone should be able to contribute valuable insights here.

Be sure not to miss out on any suggestions or ideas that could ultimately improve business outcomes and performance.

8. Implementing the future state map

The last step is to implement the future state map if necessary. It includes building a pilot project and refining your processes while still keeping an open mind for additional ideas along the way.

When you’re done with this process, it’s time to repeat it: keep improving on what you’ve created. Make sure that you’re keeping a close eye on your KPIs and continually adjust your map to reflect changes in the market and customer feedback.

Through continuous improvement, you will keep pace with a fast-changing business landscape while still meeting all requirements.

Lean Portfolio Management

Value streams are the foundation of pretty much any lean strategy, so they are essential for lean portfolio management (LPM) and delivery at scale.

LPM consists of applying lean principles and agile practices to investment funding, governance, and general agile portfolio operations.

Aligning your portfolio around value is not the most straightforward task. Here is what you need to know to make the most of it.

Lean Governance

Lean governance is one of the three dimensions of LPM. It has the following responsibilities:

  • Dynamic budgeting and forecasting – In a lean approach, budgets are evaluated and adjusted on a relatively short cycle, usually every six months. They can also be changed outside of that if any significant event calls for it.
  • Measuring portfolio performance – Portfolio performance can be measured through various flow metrics, including value stream KPIs, employee surveys, customer surveys, partner and vendor surveys, and more.
  • Coordinating continuous compliance – Lean governance emphasizes ongoing compliance assessment while the project is still in progress, instead of waiting for it to be completed to assess the compliance concerning relevant standards.

Agile Portfolio Operations

This second dimension of LPM has the responsibility of ensuring that the entire portfolio system is operating correctly.

It achieves that through the following:

  • Supporting program execution – An Agile Program Management Office (APMO) is in charge of establishing relevant KPIs and objective reporting for the purpose of maintaining agility.
  • Coordinating value streams – Sometimes, there are valuable opportunities to take advantage of that lie only in the connections between different value streams. Coordinating value streams is crucial to extract that value.
  • Fostering operational excellence – Lastly, agile profile operations help the business achieve its goals through continuous efficiency improvement and optimizing business performance.

Strategy and Investment Funding

The third dimension of LPM ensures that the portfolio strategy aligns with business objectives (the enterprise’s strategy).

Similar to the value stream mapping process, LPM needs to analyze the current state of the company’s portfolio and how it can be improved.

It involves having a clear understanding of company strategy, as well as a high-level vision for where you want your portfolio to be in the future.

The portfolio vision can be realized through portfolio epics. An epic is defined as a significant initiative, and it can either be a business epic or an enabler epic.

Business epics are key strategic projects that directly help the company achieve its goals and objectives, while enabler epics can be defined as valuable supporting activities or initiatives with a business objective.

Epic management is done through portfolio flow. There should never be too many initiatives (epics) going on at the same time. For the portfolio vision to be realized, portfolio capacity has to be closely monitored.

Conclusion

The ultimate goal of value stream management is to improve how you deliver products, services, or support so that your business may achieve sustainable growth and profitability.

A company’s portfolio is based on the value streams that it uses to achieve its goals.

There are various value stream management tools that can be used in the process of aligning your portfolio around value, maximizing flow and control, measuring performance through relevant KPIs, coordinating continuous compliance throughout all programs or initiatives, and aligning the portfolio strategy with business objectives.

By having a clear understanding of these fundamentals, it is much easier to continuously improve your enterprise’s current state in order to achieve its desired future state.

If you’d like more information on the subject of value stream management, don’t hesitate to reach out to The i4 Group. We’d be happy to provide you with the proper training to help you successfully manage your business under the Lean-Agile mindset.