by the Cornerstone Agility Team | 6 Minute Read
Shifting the Mindset From Project Delivery to Product Transformation
Lean thinking is the engine-room for twenty-first-century businesses. Chairperson and CEO of General Electric, Jack Welch once famously declared, "An organization's ability to learn and translate that learning into action rapidly is the ultimate competitive business advantage." This quote summarizes the heart of Lean Thinking. In this informatively detailed discussion, we delve into Value Stream Mapping, one of the most compelling tools to: embed lean thinking into businesses, capture, visualize, and manage workflow processes.
Value Stream Mapping: The Backbone of Lean
Value Stream Mapping (VSM), a lean-management method, has rapidly gained gravitas in strategic business process reengineering. Its growth is closely tied to its ability to scrutinize, visualize, and fundamentally communicate the importance of creating customer value with optimal resource spending. It is a strategy-based visual modeling tool designed to optimize production efficiency and eliminate waste by identifying bottlenecks and redundancies.
For a vivid understanding, we can gather an in-depth example from Toyota Executive Taiichi Ohno’s book, "Toyota Production System." He associates Value Stream concept with supermarkets where the customer needed to shop for only what needed immediately. This concept morphed into what we now know as a 'pull system,' which decreases waste in the mass production line, the very heart of VSM.
Value Stream Mapping (VSM) has emerged as the fulcrum of the Lean management philosophy. Notably, it can be insinuated as the intricate backbone that supports the structure of Lean thinking by providing a comprehensive diagnostic tool for process improvement.
A derivative of the manufacturing methodology, Lean principles propel enterprises to maximize customer value while minimizing wastage. To become “Lean” signifies an organization's initiative-taking endeavor to ensure that every process, resource, and task is used optimally to provide the highest value to clients. Amidst this, the role of VSM is accentuated. It functions as a graphic representation of the production process, focusing on illuminating every action that plays a part in achieving the ultimate outcome.
VSM hinges on documenting, analyzing, and improving the flow of information or materials required to produce a product or service for a customer. This lean-management method facilitates compelling visibility into critical factors like process delays, restrictions, and information flow inefficiencies.
The value of VSM lies in its unique ability to illuminate the entire production process, exposing both the value-adding actions and those areas plagued by wastage and redundancy. By visually laying bare bottlenecks and delays, it paves the path towards enhanced productivity and minimized wastage.
For a marvelous real-world congregation, one could consider the supermarket analogy drawn by Taiichi Ohno in his groundbreaking book, "Toyota Production System." This concept captures the essence of VSM, wherein a shopper's journey mirrors a 'pull system' in a Lean environment. The shopper - much like a product in a production line - only moves forward as required, pulling replenishment as needed. This simple, yet powerful concept strives to eradicate waste in a mass production system, thereby embodying the central philosophy behind VSM.
Operational Value Streams: Mastering Everyday Workflows
Operational Value Streams focus on improving the daily operational functions of a business. This can encompass anything from administrative tasks, supply chain operations, or customer support processes; essentially, any process that keeps the wheels of the organization running smoothly. The focus here is to identify and eliminate waste within ongoing operations, thereby honing efficiencies and enhancing productivity.
One illustrious application of Operational Value Streams is seen within Amazon's organizational structure. Amazon revolves around continuous innovation driven by small, autonomous teams throughout the organization. Each team operates as a standalone Operational Value Stream, focusing on distinct business facets, from supply chain management to customer service, each consistently pushing the boundaries of operational efficiency.
Development Value Streams: Turbocharging Product Delivery
Development Value Streams are a series of steps stitched together to transform a nascent concept into a tangible deliverable offering value to the end customer. This stream focuses on the product or service's entire life cycle, from conception and design to deployment and delivery. These Value Streams revolve around creating new products, enhancing existing ones, or providing service offerings that deliver customer satisfaction.
To illustrate, let us turn to Dell Inc.'s transformative journey. Dell raised the PC market bar through its innovative, build-to-order model. By eliminating unnecessary intermediaries, Dell drastically reduced inventory costs and delivery times, significantly altering the IT industry landscape. This model infused agility into their product development process, ensuring customers received innovative technology with minimal delays, a true embodiment of Development Value Stream efficiency.
Bridging Operational and Development Value Streams
While they might seem contrasting, the interplay between Development and Operational Value Streams forms a fundamental part of any Agile organization. Development Value Streams build the theoretical framework and products based on market requirements, laying the groundwork. Operational Value Streams, in contrast, take these products and streamline them within daily workflows, maintaining continual service delivery. It is this symbiosis that provides momentum to Lean enterprises, focusing not just on efficient product development, but also on sustaining, maintaining, and incrementally improving existing systems.
Understanding the dual path of Development Value Streams and Operational Value Streams offers a holistic insight into value creation and waste management. Leveraging both these facets empowers organizations to embark on a journey of steady growth, increased efficiency, and continuous improvement, thereby truly embodying the spirit of Agile leadership in a hyper-competitive landscape.
Diving further into this intricate method, we find two principal cornerstones – Development Value Streams and Operational Value Streams.
Development Value Streams focus on product development lifecycle, from idea conception to product delivery to the customer. Dell Inc.'s transformation story has become a classic example here. Through Dell's customized, build-to-order model, they revolutionized the PC market by eliminating intermediaries, reducing inventory costs, and decreasing product delivery times, which as a result restructured the entire IT industry.
On the other hand, Operational Value Streams concentrate on improving daily business functions like administrative, supply chain, or customer support processes. A robust example can be found in Amazon's nexus as they achieve perpetual innovation through small, autonomous teams across the organization, each team acting as an Operational Value Stream.
Vital Metrics: Lead Time and Opportunity Cost
The practice of Value Stream Mapping (VSM) involves numerous metrics, specifically chosen to ensure detailed scrutiny of workflow efficiency, product lifecycle, and associated costs, thereby aiding in a robust stream identification and mapping process. These metrics, serving as critical indicators, guide teams towards systematic problem-solving and identifying areas of improvement.
Lead Time: Lead Time stands among the most critical metrics. It measures the total duration from a customer initiating a request to delivery of the value. The aim is to shorten this period as much as possible, hence enhancing customer satisfaction. Shortening Lead Time can often unveil hidden inefficiencies and lead to procedural improvements.
Processing Time: Another crucial metric in VSM is the actual time taken to complete each process. It helps determine the Value-Adding Time, where the product is being altered to meet customer requirements and leads to improved productivity.
Cycle Time: Cycle Time tracks the time between two successive units coming out of a process. It assists in understanding how quick or slow a process is and contributes to optimizing workflow efficiency.
Changeover Time: Changeover Time is the time taken to change a manufacturing process or production line from one product type to another. A low Changeover Time often correlates to higher operational flexibility.
First Pass Yield: This measures efficiency at each process step, defined as the percentage of products produced correctly without the need for rework or repair. A higher First Pass Yield suggests an efficient, high-quality process.
Opportunity Cost: This metric is critical in decision-making. It refers to the cost of forgone alternatives when one decision is chosen over another. A keen understanding of Opportunity Cost can prevent organizations from committing resources in less productive areas.
ROI (Return on Investment): This encompasses the financial gain relative to the cost of an investment. It is an essential metric to understand the profitability and viability of specific mapping initiatives.
WIP (Work In Progress): This refers to the number of items or tasks within a process started but not completed. It is a key metric for controlling throughput and reducing lead times.
Process Efficiency: This ratio compares the value-add time to the lead time. It helps determine the efficiency of a process, and organizations can leverage it for consistent process improvements.
Availability: Measuring the amount of uptime or productive time as a percentage of total time, Availability is an important metric for system reliability.
Each of these metrics plays a pivotal role in the strategic mapping and identification of Value Streams. By observing and analyzing these indicators, organizations can create a more precise map, recognize pain points, and action changes that will result in a leaner, more efficient, and more profitable process flow.
Mapping Your Operational Value Streams
Operational Value Stream Mapping (OVSM) is the key to unlocking efficiencies in your organization's day-to-day processes. From supply chain operations to administrative tasks and customer support, it can be applied to any workflow. The following steps provide an in-depth guide to applying an Operational Value Stream map:
- Identify the Product or Service: The first step is to pinpoint the service or product that the operational process delivers. It could be anything from a customer service call, delivery of goods, or processing an invoice.
- Define the Start and End: Identify the process's start point (customer request or process initiation) and endpoint (delivery of value to the customer). These boundaries will form the scope of your OVSM.
- Map the Current State: Create a visual representation of the current process. This includes every activity, person, and resource involved from start to finish. Your goal is to capture the reality of what is happening - not what is supposed to happen or what usually happens.
- Classify Activities: Categorize each activity as value-adding (directly contributing to the end-product or service) or non-value-adding (although may be necessary for the process, it does not contribute to customer value). Your aim is to maximize the value-adding activities and minimize the non-value-adding ones.
- Locate Waste: Look for any form of waste in the operational process. Waste could be in the form of delay, errors, duplications, unnecessary movements, overproduction, or underutilized resources.
- Gather Data: Record data associated with each stage of the process. Metrics might include elapsed times, waiting times, error rates, and resource usage amongst others.
- Analyze and Interpret Results: Examine the data to identify areas for improvement. Find the factors causing waste and suggest solutions for them.
- Design the Future State: Visualize an optimized process that minimizes waste and improves efficiency. Implement lean tools such as pull systems, 5S, and Kaizen to improve the operational process.
- Create an Action Plan: Develop a detailed implementation plan to transition from the current state to the redesigned process. This should include precise steps, responsibilities, timelines, and measurement methods.
- Roll out Changes and Monitor: Execute your action plan and make sure to monitor your metrics closely. Operational changes can have unexpected outcomes, so it is important to keep track and adjust your approach as needed.
Mapping Your Development Value Streams
Identifying and mapping Development Value Streams is an integral part of Lean and Agile transformation. From concept to cash, every step, process, and person involved in the product development are brought into focus for a more efficient and streamlined workflow. Here is an actionable guide to help you get started:
- Identifying the Product: Value Streams are associated with a resultant product or service that delivers value to the customer. Start by identifying your product portfolio, which can be a physical asset, software system, or a service offering.
- Map the Current State: Identify all processes and activities involved in developing the product. This includes everything from initial customer request, design phase, coding, testing, and delivery. Plot these activities chronologically on your Value Stream map.
- Identify Value-Adding and Non-Value-Adding Steps: Scrutinize each step in your workflow and demarcate them as value-adding (directly contributing to the end-product) and non-value-adding (incidental tasks which do not contribute to end-product value). The aim would be to minimize or eliminate these non-value-adding steps.
- Analyze Flow and Waste: Study the flow of work across the Value Stream. Identify points of delay, bottlenecks, and waste. Waste could appear in many forms, including excess production, waiting times, unnecessary transportation, over-processing, excess inventory, unnecessary movement, and defects.
- Collect Data: Supplement your Value Stream map with data such as process times, lead times, and the quality of output at each step. Actual measured data is always preferable, but estimations can also be used if necessary.
- Design the Future State: Based on your analysis of the current state, design a future state that eliminates or minimizes waste and non-value-adding steps, balances the flow of work, and promotes efficiency. This includes implementing lean principles such as just-in-time production and the use of 'pull' systems.
- Create an Implementation Plan: Develop a clear and actionable plan to transition from the current state to the future state. This should lay out a timeline, define responsibilities, and set measurable objectives for improvement.
- Review and Continuously Improve: Your Development Value Stream is a live entity and should be subjected to continuous review and improvement. As conditions change or improvements are made, the Value Stream should be updated accordingly.
Keep in mind, a detailed and efficient Value Stream map will not only cut down on waste, but also enhance overall productivity, eventually reflecting in improved customer satisfaction and bottom-line growth.
Value Stream Mapping is not a 'set-and-forget' process. Review the operational and development processes regularly and revise the Value Stream map to reflect reality. Continuous improvement is the key to lasting efficiency.
Understanding and applying Value Stream Mapping can be a transformative experience for any organization. By visualizing and analyzing the realities of processes, organizations can strategically modify and improve operational functions, thereby delivering more value to customers and boosting profit margins.
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