What Is a Value Stream? From Theory to Practice

What is a value stream? Start understanding by starting with customer satisfaction.

What is a value stream? When we talk about "Agile value streams," the idea may seem abstract, but value streams help align what matters to the customer with what creates value for you. In a previous blog post on value stream mapping, Tom Wessel writes,

“By identifying the steps required to process a customer request through an organization’s system, value streams shine a light on the reality of what it takes to create value within your organization...”

If you wish to approach your work through the lens of value streams, you need to identify the value streams that are complex, high-value, frequent, and customer critical. Then you can engage in value stream mapping to identify areas of delay and sub-optimization. From that point, you can create a future state value stream that eliminates or significantly reduces the delays to value delivery.

What Is a Value Stream? An Example

A good value stream definition involves major drugstore chains. Prescription fulfillment is a major value stream, as it delivers value to both the customer and the business. If there are any delays in getting a prescription to a customer, the customer will not be happy, and your business will lose value. Since prescription fulfillment is crucial to a drugstore, it would be wise for the company to organize their business around the process of delivering prescriptions rather than areas of expertise.

You can break down value streams even more. According to the Scaled Agile Framework (SAFe), there are two types of value streams: operational value streams and development value streams. To extend our example, operational value streams cover prescription fulfillment, while development value streams represent the development of software that supports prescription fulfillment.

Once you understand your critical value streams, you can organize your development teams around supporting the delivery of systems and tools for those value streams. By having teams with a deep understanding of the operational functions they support, and by having the right mix of skills on those teams, you’re able to deliver rapidly and effectively.

This is a major shift from a traditional IT organization in which you would need to manage tasks across teams who may not have the same goals. To return to the example of the drugstore chain, instead of having IT, inventory management, and supply chain all working separately or working toward different goals, you would actually have supply chain and inventory management experts on your team, all working to ensure that customers receive their prescriptions.

And if your technical practices can enable these groups to work together, even better. The closer the people are to engage with each other, the faster the work goes. Furthermore, the fewer dependencies there are outside that group of people, the faster the work goes.

Building Buy-In for Value Streams

Incorporating value streams may be a big change for your organization, and you may encounter pushback because, as stated earlier, traditional infrastructure groups are organized around areas of expertise. Examples include a networking team, a capacity planning team, or a security team. While organizing around areas of expertise is helpful for simple ticketed transaction processing, it is a challenging structure for complex customer needs.

Here's why:

  • The cost of coordination goes up. Dependencies must be managed across multiple teams, using some sort of joint planning mechanisms. You also need structures for ongoing synchronization, like a Scrum of Scrums.
  • Providing timely, accurate customer updates is more difficult. Even if you roll-up all the backlog items associated with a customer request across teams into a single feature or epic in your Agile Lifecycle Management (ALM) tool, it is hard to get an accurate picture of what’s going on. Impediments may exist, but not be explicitly called out in the ALM, or they may be called out, but it is difficult for an engagement manager to understand without talking to each of the individual teams contributing to the larger solution. Impediments in one team may lead to cascading delays across multiple teams, for example.

Case Study

If your organization or client still isn't convinced, our work with a hardware company may get the point across. By reorganizing around value streams, this company realized the following:

  • 19-month end-to-end cycle time
  • 9 months of delay inherent

The three largest sources of delay for the company included the following:

  • Project Planning: 4 months
    • Funding resources and equipment: 2 months
    • Re-planning associated with changes: 2 months.
  • Non-dedicated team members: lack of project focus: 3 months
    • Projects trump teams, lack of focus on project completion
  • Quality checks left until the end (regression): 2 months.

Our solution also incorporated the following:

  • Customer-centric cross-functional dedicated Scrum or Kanban teams, which included QA members, alleviated delays due to lack of focus and change of context as well as the quality delay.
  • We also relied on Agile funding, or funded increments of value which allowed for a real understanding of ROI and accountability.

Implementing the solutions above allowed for whole projects being completed on time and on budget, at a high quality, with savings of over $45K/per month that first year.

You can always dive deeper into value stream mapping, but this high-level overview demonstrates that starting with what matters to the customer can go a long way toward improving your work. Interested in learning more? Explore our Agile Consulting Services.