The process, culture and technology drivers behind value stream management

The current state of organizations and how value streams exist or are managed are sometimes characterized as chaotic. Still,

The path towards order with VSM is straightforward: understanding the flow of value, goals, work within an organization and interconnectedness across levels.

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the path towards order is straightforward: understanding the flow of value, goals, and work within an organization and the interconnectedness across different levels—concepts reviewed in depth earlier in this series. Operational, Solution, and Development value streams have unique objectives, work items, and stakeholders, and a framework like VSM can bridge those levels to foster alignment, transparency, and communication. Despite everyday challenges like organizational silos, VSM principles can be applied at any level, driving flow optimization.

Organizations encounter numerous obstacles in their value creation process from internal and external factors, with a wide range of results from the impact. Contextualizing these challenges within different organizational models can give a more comprehensive understanding. By understanding these challenges and the broader landscape, it becomes more apparent why value stream management is such an effective solution and why the benefits of VSM are worth the effort.

Value creation challenges faced by organizations

The value creation process in organizations has several challenges. The following are some of the most critical ones arising from the perspective of value, objectives, and work, and we will explore each in more depth.

Process

1. Siloed processes and systems. The delivery of value in an organization is a collaborative effort involving multiple teams, each with a unique role. However, suppose these teams operate in silos with their people, processes, and systems that don't interact with other teams in the value stream. In that case, it can lead to process bottlenecks and adversely impact value creation. Silos can exist within a value stream, between various teams, or across value streams that deliver value to a larger value stream. For instance, for a bank optimizing loan fulfillment, imagine that the CRM value stream and loan servicing value stream follow their own processes and systems that don't connect seamlessly. In a bank, for example, it would have a negative effect on a loan product and customer experience, thereby making the loan product from the bank less valuable in the market.
2. Governance. An organization's governance model can also impact value flow negatively. A rigid command-and-control model can slow decision-making and cause value stream delays. For instance, in an organization where decisions need to be approved by higher-ups who only meet once a fortnight, the value stream can suffer from bottlenecks. On the other hand, too little governance can lead to confusion and lack of accountability, causing the value flow to stagnate. It's essential to find the balance between too much and too little governance to optimize value delivery.

Culture

1. Visibility and understanding of goals and value flow. One of the biggest challenges that organizations face during value creation is the need for more visibility and understanding of the value stream, the definition of value, goals, and how they flow from top to bottom. It is often a result of rigid organizational structures. For example, a product manager who needs help understanding how the capabilities and features delivered in a product connect to the parent work item (Initiative) could end up prioritizing features that don't add value to the customer. Similarly, with a clear understanding of how value flows within an organization, the teams involved in the value flow can optimally utilize their resources.
2. Alignment issues. To ensure alignment, value, work, and objectives should seamlessly connect across organizational levels. Without a clear understanding of the purpose (objectives) and reasons to pursue specific initiatives, the teams responsible for delivering value may invest resources in outcomes with little or no value for the business and its customers.
3. Resistance to change. Resistance poses a significant challenge during value creation. Employees may resist new processes, systems, or ways of working, making it challenging to optimize value flow. For example, replacing legacy enterprise systems with modern ones to improve value flow may need more support for employees accustomed to old methods.

Strategy and Communication

1. Inefficient communication and collaboration. Poor communication and collaboration can hinder value creation. When teams work in isolation or need more necessary communication channels, it can lead to delays and errors in the value stream. People and teams can achieve better value delivery only through effective communication, even after fixing process bottlenecks or integrating systems. In the Loan Fulfillment example, assume that the CRM team has decided to streamline its delivery by adopting DevOps practices. It will only be possible if their development, QA, and operations teams collaborate effectively. Communication impacts the flow of value, and when done poorly, it leads to dissatisfied employees who may feel undervalued and demotivated.
2. Understanding customer value. An organization can successfully address other challenges but still need to understand the value it aims to deliver to its customers. Failing to comprehend customers' needs and expectations can produce capabilities and offerings that hold no value for them. Misunderstanding customer needs leads to organizational waste and inefficiency.
3. Market focus. Staying ahead of market dynamics is crucial for effective value creation within organizations. Markets constantly evolve due to technological advancements, shifting customer behaviors, geopolitical risks, economic changes, regulations, and emerging competitors. Neglecting to focus on these market dynamics can lead organizations to invest in outdated solutions or miss out on emerging opportunities, hindering their ability to deliver value effectively.

Technology

1. Outdated technology. Inadequate technology infrastructure can impede value creation. Lack of automation, obsolete systems, or incompatible software can hinder the flow of value and increase the risk of errors and delays. For instance, failure to adopt modern automation technologies for QA practices and DevOps tools for implementing CI/CD can result in prolonged delivery timelines and reduced quality.
2. Adequate data and insights. The absence of useful data and insights can impact value flow at every level within the organization. With reliable data, executive leaders can determine which outcomes to fund, improving the value flow. Similarly, delivery teams can only assess the efficiency of their teams with essential performance metrics like velocity, cycle time, and throughput. With a solid baseline, delivery teams can improve and optimize the flow of value.

Origins of the challenges

Correcting courses and overcoming challenges are far more effective when the origins are understood and addressed. Organizations face several challenges in generating value, with many factors leading to these challenges. Even once-successful organizations face considerable challenges in generating value. Let's take a closer look at the most common factors.

Complex organizational structures. Most organizations start with a lean business model with all teams directly aligned to the same goals and purpose. They often have a flat organizational structure with fewer management layers, allowing quicker decision-making and more efficient communication. But as organizations grow, they create more hierarchical structures and governance processes to manage their business efficiently. Though such structures and processes are essential in managing a big company, a lack of communication and collaboration across different parts of the business creates silos where each department or function has its own goals and responsibilities and works independently of each other. The principles and practices in value stream management are well suited to overcoming these complex issues.

Poor organizational culture or no continuous improvement culture. As complexity grows, organizations can develop a culture of low risk-taking and resistance to change, which negatively impacts the innovation culture in the organization. When teams do not continually seek to improve their processes and methods, it can result in inefficiencies, waste, and inferior quality. A company can leverage the flexibility of value stream management to start on a small scale, then expand for a gradual shift in approaching these issues.

Leadership support and employee autonomy. When leadership can't create and drive an innovative work culture, define a clear vision, and provide the necessary sponsorship to execute the vision can lead to challenges in value creation. In addition, when teams do not have the autonomy to make decisions and take ownership of their work, it can lead to delays, lack of innovation, and poor quality. Not surprisingly, this disconnect can also lead to a failure to anticipate and adapt to industry changes. Organizations need to stay ahead of the curve as the industry landscape evolves. Failure to anticipate or respond to significant industry shifts can render an organization obsolete. Value stream management also embodies and reinforces what strong leaders typically strive for with engaged, adept, adaptive teams.

Complex product portfolio. A small organization usually has a specialized Product portfolio with a niche target market and value offering. The go-to-market pitch and positioning are straightforward in these cases, and customers easily identify with the organization's products. But as the portfolio grows, there is a risk of the brand position getting diluted without a solid go-to-market strategy.

Standardization, scope and complexity of work. Inconsistent processes, standards, and methods across teams and departments can result in challenges in value creation, leading to delays and poor quality. These inconsistencies often lead to a different understanding of value and disconnected teams. As organizations expand their product and service portfolios, the complexity of their work increases. Managing this complexity is critical for value delivery. If not handled properly, the flow of work can become less efficient, affecting the speed and quality of value delivery.

Technology out of sync with industry and tech evolution. This creates a slew of challenges. Organizations that refrain from investing in adopting the latest technologies and industry trends to provide better products to their customers and optimize their business operations can end up with outdated products and reliance on legacy systems to run their operations.

Information for data-driven decision-making. With the correct data, teams and leaders can avoid decisions based on assumptions that lead to sub-optimal results.

As daunting as some of these challenges can be, understanding the factors that create the obstacles is the first step organizations can take to identify and address the root causes of their value creation challenges and take additional steps towards improving their overall performance—as we explore in other installments of this series.

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