What is value stream management?

A value stream is the sequence of steps that a business undertakes to transform an idea into concrete, measurable value. For an enterprise, a value stream represents the process of receiving customer orders, developing products or solutions based on their specifications and delivering the finished products.

While the concept of value streams is not unique to the software development lifecycle, it is applicable in that context. “Value” can take many forms, including products, services or a combination of both. Understanding the types of value the business provides can help organizations recognize value streams more easily.

Value stream management uses cross-functional teams that break operational silos to give stakeholders visibility and input across business functions, helping them identify bottlenecks and inefficient workflows.

It also offers tools and protocols to create clear, data-driven metrics—such as flow time, throughput, flow load, flow efficiency and flow distribution—to understand the flow of work enterprise-wide. Through this data-driven overview of business functions, enterprises can better understand how resources are used. They can also improve value delivery and business outcomes.

Value stream management gives enterprises access to real-time data directly related to the value generated by every business function. This level of visibility promotes a culture of collaboration and optimization across teams and workflows. The overall goal of VSM is to deliver better products and services, improve customer experience and drive revenue growth.

The benefits of value stream management include:

• Enhanced insights
• Operational efficiency
• Faster delivery
• Improved customer experience

Value stream management provides end-to-end visibility across the product development lifecycle. It gives businesses insight into the progression of value from one team or process to the next. It helps identify obstacles, risks or inefficiencies hidden throughout the process, enabling development teams to maximize the value they deliver to customers. This knowledge also helps business leaders identify and address disruptions or bottlenecks in the organization’s value flow.

Value stream management improves operational efficiency across the entire value stream. It enables organizations to deliver value to customers, whether in the form of products or services, in the shortest time possible. Through clear metrics, organizations can begin to remove inefficiencies and spend time innovating new products and initiatives.

With a structured approach to measuring and improving value flow, organizations can identify areas that require improvement, resulting in faster and more efficient delivery. Value stream management helps reduce lead time or the time it takes to go from idea generation to product delivery. Expediting the delivery process also reduces the amount of time customers must wait for updates or errors to be remediated, increasing overall customer satisfaction.

Effective value stream management enables organizations to view their value streams from the customer’s perspective. This perspective is crucial for eliminating waste and optimizing the development process to help ensure maximum value delivery. By optimizing operations, enterprises can deliver more consistent and higher-quality products and services.

Value stream mapping involves charting the path of information, materials and other resources throughout the process of creating and delivering a product. While commonly used in the manufacturing industry, value stream maps are also useful tools for many other industries, including software development. Value stream mapping creates a clear visualization of the sequence of activities required to deliver a product or service.

A value stream map visually represents essential information, such as:

• Time spent working and waiting at each step
• Labor required for each step
• Error rates at each step
• Downtime experienced along the value stream
• Bottlenecks and process delays at each step

The process of creating a value map can be broken down into several distinct steps:

Clearly define the specific product and process that will be outlined in the value stream map. This step creates clarity and focuses the mapping effort.

Determine the scope of the value stream map, which typically encompasses the entire process of creating and delivering value. This includes suppliers, internal processes and customer delivery.

This also involves capturing customer needs and relevant information about each supplier and the supply chains involved in providing essential services or raw materials for the value stream. If there are numerous suppliers, grouping them based on material type or geographical location can make the map more efficient.

Outline the significant operational stages and steps required to successfully accept an order, create the final product and deliver it to the customer. The focus in this step is on capturing the high-level steps rather than the individual tasks. It is a crucial component of the value stream map, as it visualizes the flow of value through the organization’s processes.

Document the flow of information between stakeholders at each point along the value stream. This includes communication channels, decision-making processes and collaboration mechanisms.

Information flows outline the structure of interactions between key stakeholders throughout each stage of the value stream. It depicts how information and communication flow between business leaders, employees, suppliers and customers at various points along the value stream.

Gather relevant data about the production process to provide a detailed understanding of the value flow. This might include flow velocity, flow load, flow time, flow efficiency and other metrics that help identify bottlenecks and inefficiencies.

Develop a timeline that visualizes the overall process time and lead time (with special attention to any dependencies that might cause delays), enabling the analysis of efficiency and identification of areas for improvement.

The timeline in a value stream map illustrates the difference between value-added and non-value-added cycle times, enabling the identification of wasteful processes that do not contribute to value creation. It provides insights into the overall time spent at each step of the value stream and helps identify areas for improvement.

Flow metrics are used to uncover the inefficiencies, bottlenecks, areas for optimization and overall flow of value. These metrics enable teams to gauge the current state of value streams at each step in the development process, helping teams improve production and drive customer value and customer experience.

Flow velocity: Also known as throughput, flow velocity in VSM measures the amount of work completed during a specific period in a value stream.

Flow load: Flow load measures the volume of in-progress work within a value stream. The flow load helps determine how value streams are being used and if resources need to be provisioned or deprovisioned to work efficiently.

Flow time: Flow time measures the time from when work begins on a product or initiative to when it is released and begins to deliver value. It is an important metric when analyzing and evaluating the efficiency of workflows.

Flow efficiency: Flow efficiency measures the amount of active time (when a unit is actively worked on) versus the amount of time that teams are not actively working and are waiting for other work to be completed. Long waits for handoffs and low efficiency rates can be signs of wasted personnel time and bottlenecks that are slowing production.

Lead time: Lead time refers to the time that it takes to go from ideation to product delivery or the amount of time between the identification of a needed change or update and when that change is implemented. Long lead times slow production processes and make updating systems or starting new features inefficient. 

Mean time to remediation (MTTR): MTTR is the amount of time that it takes to repair and recover from a service disruption or system error. Reducing MTTR and improving the responsiveness of internal systems help improve customer experience and reduce security risks.

Change failure rate (CFR): CFR measures how often updates cause errors or service disruptions. Understanding this rate helps teams evaluate the development process. If CFR rates are high, teams might need to implement stronger testing before code or updates are delivered to customers to reduce the number of errors.

Deployment frequency: Opposite CFR, deployment frequency measures the rate and speed of successful updates and new code delivery.

Assessing the success of value stream management requires a shift from objective-based measurements to value-based measurements. Here are some approaches to monitor and measure the effectiveness of your value stream management process:

Measure the benefit that the value stream generates for the organization by using metrics such as active users, renewal rate or monthly recurring revenue. Choose metrics based on the type of value being produced.

Look beyond delivery and monitor customer outcomes postdeployment. Assess factors such as performance, security, availability and user behavior to understand the impact of value streams on customer satisfaction.

Calculate the direct and shared expenses required to deliver value to customers, including labor costs, licensing fees and infrastructure expenses. Understanding the total value stream cost helps evaluate efficiency and identify areas for optimization.

Foster collaboration among product managers, development team leaders and other stakeholders to determine the key performance indicators (KPIs) necessary for monitoring success in value stream management. Combining different perspectives helps ensure a comprehensive measurement approach.

Identify and address bottlenecks in the value stream to improve overall efficiency. These bottlenecks can arise from team transitions, inefficient approval processes or backlogs that hinder value flow. Implement automation and advanced analytics to resolve bottlenecks effectively and optimize value stream management.

There are 2 types of value streams: Operational value streams and development value streams. Operational value streams make up the personnel, workflows, systems and tools needed to deliver a product to a customer. Development value streams involve the teams and resources needed to develop products and services before they go out to customers.

Modern software development methodologies, such as DevOps, implement many of the same principles of value stream management while combining value streams. DevOps combines the work of software developers and IT operations and uses automation to continuously test, deploy and optimize software delivery. DevOps relies on cross-functional teams providing input throughout the entire software development lifecycle.

Agile methodologies break down larger projects into smaller phases or sprints. Agile development prioritizes collaboration, continuous improvement and user feedback to make improvements throughout the software development cycle.

Value stream management can work with both methodologies but extends the principles a bit further by incorporating additional teams such as project management teams, marketing teams and customer service teams.