What is Value Stream Management (VSM) and Why is it Important?
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What is Value Stream Management (VSM) and Why is it Important?
Software is a key differentiator in many industries. The length of time it takes a company to turn a customer request into a deliverable feature impacts long-term success.
Nimble companies with digital products and services that delight customers capture market share and increase revenue, while less responsive enterprises struggle.
To remain competitive, enterprise agility initiatives have been rolled out in larger organizations. Not all of these initiatives were as successful as hoped for a variety of reasons, including organizational resistance, poor leadership, and lack of alignment. As economic uncertainty causes enterprises to cut staffing and budgets, streamlining the delivery of products is even more essential. Value stream management can reinvigorate enterprise agility efforts and provide a way to meet customer needs, adapt to market changes, and deliver more predictably.
What is Value Stream Management (VSM)?
Value stream management is a set of practices that improve the way teams deliver high-quality customer experiences. VSM focuses on two things – how quickly customer-requested features or updates are delivered and whether the customer realizes the value from those changes.
According to Forrester, “Value stream management (VSM) has the potential to completely transform the process of funding, building, managing, and maintaining software at scale.”
Value stream management’s roots are in lean manufacturing and connect to the Toyota Production System (TPS) in the 1950s. This systematic approach is designed to shorten time-to-value and deliver higher-quality products.
Value stream management helps connect the C-Suite with Agile and DevOps teams to align around customer satisfaction. Managing value streams provides:
- Faster delivery of customer-centric products, increasing competitiveness and revenue
- Better customer experiences, leading to positive reviews and referrals
- Improved employee engagement with cross-functional teams, enabling people to see the big picture instead of just their silo
- Data and insights-driven decision-making for future investments
What is a value stream?
Gartner defines a value stream as “the sequence of activities necessary to deliver a product, service or experience to a customer, internal or external.” Value streams already exist in companies, even if they aren’t labeled as such. Understanding your value streams lets you make better investment decisions, so resources aren’t wasted.
Value streams include every touchpoint on the journey from idea generation to delivery of value to customers. Without this knowledge, you won’t know what is working and where you have problems. For example, you may find lengthy delays during handoffs between teams, which hurts productivity and quality.
Value streams in software development
Value streams and DevOps are both rooted in lean principles. Thinking and working as value streams help technology teams identify and prioritize areas for improvement in software development. DevOps provides practices and tools to improve value stream delivery. By focusing on flow optimization, inefficiencies are identified and processes are streamlined.
What is value stream mapping?
Value stream mapping is a visual collaboration technique used to describe value streams by identifying and analyzing the flow of activities required to deliver a product or service to a customer. Mapping value streams reveals dependencies, roadblocks, inefficiencies, and waste that bust budgets and delays delivery.
To map value streams, cross-functional teams collect data to identify steps and measure touch time and idle time for each step. This allows them to calculate the cycle time for the value stream when they sum all the touch and idle times. Using whiteboards or mapping software to visually collaborate, teams can designate items as adding or not adding value from the customer’s perspective. They can also determine problem areas, like an understaffed team that blocks other teams from moving forward.
Why is value stream management important?
There is often a disconnect between what customers say they want (gathered from sources like customer support or sales teams) and what is actually being delivered. Lack of effective communication between business teams and technology teams is part of the problem. While the C-Suite is focused on goals and overall strategies, technology leaders often speak in terms of delivery cadence and technical outputs. Leaders and their teams need to establish a common language and better communications channels to align around customer goals and experience.
Value stream management facilitates cross-team communications to improve the flow of information and value creation. The customer requests a feature through sales or support teams, product teams design functionality, engineering teams build the software, and the product is shipped. Having a representative from each team on a cross-functional team makes delivering the right product more efficient and effective.
Problems addressed by VSM include:
- Customer frustration with current offerings
- Slow delivery of bug fixes and new features or products
- Losing market share to competitors that adapt quickly to market changes
- Fewer resources due to layoffs and other cost-cutting measures
- Agile and/or digital transformations aren’t delivering as effectively as desired
- Lack of visibility throughout the organization due to silos and disparate data
- Organizational structure not designed for value creation
What are the benefits of value stream management?
Once value streams are identified and mapped, enterprises can analyze them to create new products or features. They can use real-time, data-driven insights along the value stream to make better business decisions, such as what customers think about current products and what needs to change. Instead of investing in individual projects, the entire value stream can be funded, providing flexibility to adapt to changing customer needs without the need for new budget requests.
The benefits of value stream management include:
- Increased predictability. Understanding the entire value stream helps reduce uncertainty and surprises that lead to missed deadlines.
- Higher customer satisfaction. Responding quickly to customer requests can improve their experience and the company’s reputation.
- Improved productivity. Streamlining operations and reducing roadblocks allows teams to ideate, test, and deliver faster.
- Reduced costs. Identifying unnecessary work and wasted resources saves money and time.
- Better software. Automating manual tasks frees up time for innovation and reduces opportunities for errors and defects.
- Increased end-to-end visibility. Having real-time data available throughout the organization lets people track initiatives and adapt to changing corporate priorities.
- Boosted innovation and morale. Focusing on products that really matter to customers is more satisfying for developers.
Value stream management solutions
Value stream management solutions help leaders elevate value stream thinking across the organization to increase the effectiveness of their teams. Teams need real-time access to data and reporting to understand whether processes are running smoothly. They can use VSM tools to drive continuous improvement and correlate investments to customer value.
VSM software solutions scale up collaboration without slowing teams down by:
- Offering an integrated view that breaks down company silos
- Linking people, work, and time across every level of the company
- Combining data from disparate sources like heterogenous toolchains
- Creating a single source of truth without disrupting day-to-day operations
- Continuously reinforcing Agile best practices
- Working with the framework of your choice, such as SAFe, Scrum@Scale, LeSS, Disciplined agile, Spotify, or hybrids.
- Providing tools for teams at every level - from executives through release trains
- Proactively managing cross-team dependencies to improve predictability
- Creating an environment of continuous improvement with shortened feedback loops
- Measuring and analyzing the things that matter
VSM solutions allow teams to act autonomously to deliver customer-requested products, then analyze whether they resulted in tangible, measurable changes in customer experiences, and respond to what they learn.
Value stream metrics for measuring goals and progress
Many enterprises suffer from lack of visibility and comprehensive reporting, especially those that are highly matrixed. Value stream management solutions cut through silos, pulling together disparate data to provide you with the metrics you need and actionable insights.
Flow metrics
Flow metrics evaluate the rate of value delivery in relation to desired business outcomes.
- Flow velocity measures the number of units of value that are completed during a specific time period within a value stream.
- Flow time measures the time from when work is started on a unit of value within a value stream to when it is released to a customer. Excessive flow times can indicate inefficiencies or bottlenecks.
- Flow load measures work in progress (WIP), a leading indicator that correlates to inefficiencies within a value stream.
- Flow efficiency measures the proportion of time that units of value are actively worked on compared to total flow time. A low flow efficiency may indicate lengthy wait times between steps causing large queues and more WIP.
- Flow distribution measures the ratio of the above flow items completed over a period of time. It is useful for prioritizing the work required to achieve corporate and team goals.
DORA metrics
DORA metrics evaluate and improve the effectiveness of DevOps teams.
- Lead time for changes is the length of time between when a code change is committed to the trunk branch and when it is in a deployable state.
- Change failure rate is the percentage of code changes that require hot fixes or other remediation after production.
- Deployment frequency measures how often new code is deployed into production, and can be used to measure a team’s speed and agility.
- Mean time to recovery (MTTR) measures how long it takes to recover from a partial service interruption or total failure.
Objectives and key results (OKRs)
Enterprises need to keep work done by teams aligned with corporate goals. Objectives and key results (OKRs) have two components: the objective you want to achieve and the key results that measure success. The C-Suite sets high-level OKRs connected to the organization’s mission, vision, and core values. Individual teams decide how to achieve those goals by setting their own team-level OKRs. OKRs can be set on a quarterly basis to allow for quicker pivot or persevere decisions based on new data or market changes. OKRs are tracked so you can see the current status of activities, such as whether they are on time, at risk or blocked.
How does VSM improve value realization?
Value realization focuses on making sure the right items are being worked on, they deliver what is intended, and they contribute to the next cycle of product development. While priority is typically given to developing new products or features rather than systemic improvements, a holistic view is required when making investments into features, defects, tech debt, and risk.
Value realization can be divided into two categories:
Outputs (value stream health)
Outputs are connected to the flow of work from idea to realization and delivery of a continuous stream of value for customers. Making improvements to the underlying delivery system (people, process, and technology) releases more time for value creation. By measuring work distribution and cycle times, teams can see how their actions impact their ability to deliver new features and increase capacity.
Outcomes (customer experiences)
By measuring customer experience, teams can see if they delivered the desired customer value, such as increased customer usage or positive reviews. These metrics (based on data, feedback, and analysis) provide teams with information needed to make future decisions and investments.
Learn how Atlassian’s value stream management solution helps align people, processes, and data with end-to-end visibility across the organization.
Our VSM solution can improve time to market, reduce waste and risk, identify bottlenecks, and analyze data to prioritize initiatives that provide value to customers.
VSM Resources
Solution page
Atlassian’s VSM Solution
Learn how Atlassian’s VSM Solution can help your organization deliver value to its customers.
Webinar
The secrets of value stream thinking
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Atlassian is part of the Value Stream Management Consortium
Learn how Atlassian strengthened our commitment to advancing value stream-centric ways of working.
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Talking VSM: 3 tips for IT and DevOps leaders to engage the C-suite
Get tips on improving communications between business and technology leaders.
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VSM for banking: Creating magic for customers by prioritizing value
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Value stream mapping
Learn more about value streams and how to map them in your enterprise.
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Flow Metrics
Learn how to measure the flow of value using flow metrics.
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DevOps metrics
Learn how to measure success in DevOps with DORA metrics.
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