Value Stream Management and Organizing Around Value
Co-authored with Cindy Van Epps, with contribution from Jeff Shupack. Originally published in the DevOps Enterprise Journal.
“Organize Around Value” doesn’t mean organizing around systems. That’s just new silos. Value must flow horizontally through a value stream, not vertically through development functions and processes.
Value Stream Management is a set of lean practices that optimizes the flow of value through an organization. It focuses on managing and monitoring the solution development life cycle to identify and eliminate bottlenecks and improve collaboration. It makes your internal processes transparent and enables you to spend your time on the efforts that will return the most value. Value Stream Management isn’t a tool or a platform. It’s a set of practices that drive operational efficiency. It’s not something you achieve or complete. It’s a continuous process as your market and operational context continue to evolve.
The challenge is how to continuously manage optimization without disrupting flow. Over many years of working with large, complex organizations, we’ve found four patterns that consistently disrupt or derail Value Stream Management efforts. These aren’t edge cases. They are the norm. And for each, there are proven patterns that work.
Problem 1: The Enterprise Is Solving the Lean Problem Instead of the Customer-Centric Opportunity
To become more efficient, enterprises typically examine the steps in their current value stream. In traditional fashion, they look for bottlenecks from trigger to result and ask: “How do we remove the bottlenecks? How do we leverage digital solutions to streamline what we do today?” These are worthy goals. Addressing them does enable efficiency. But they often mask the real opportunity: taking a customer-centric view of the value stream and refactoring steps and interactions to streamline the customer experience.
Consider a Fortune 10 energy company in the process of modernizing its operations. They realized that by continually focusing on reducing the cost of producing a barrel of oil, they were missing the bigger picture entirely. The value this business unit created was not a barrel of oil. It was a functioning oil well. Organizing around the successful identification and deployment of an oil well enabled them to serve the rest of the company more efficiently and at significantly lower cost.
The key to successful value stream optimization is not just understanding and refactoring to enhance the customer experience. It also requires giving up non-customer-value-added elements unless those elements are critical to sustaining the business.
What this requires in practice: start doing design thinking with transparency and collective ownership, so every employee learns to think like your customers. Quantify the impact of pathological organizational practices like piecemealing people across projects. The cost of context-switching is a significant energy sink in most organizations. Speak the language of “energy currency” to reinforce that the time, energy, and innovation of the people most directly crafting customer solutions is the most valuable asset in the enterprise.
Problem 2: The Enterprise Is Building New Silos and Celebrating It
When organizations buy into the case studies and wide-scale adoption of agile and scaled agile, they often focus on outputs rather than outcomes. By forming agile teams and Agile Release Trains based on a hierarchical organization structure, the focus shifts to producing systems in the same silos as before, just now in timeboxes. These are only small and isolated steps. They limit improvements to the constraints imposed by existing silos, and by virtue of some improvement, organizations believe they are done.
I saw this firsthand at one large financial group. They had organized themselves into 127 teams of teams called Agile Release Trains, each maintaining a specific system. Then as investments were made into large initiatives, we found that the average initiative required dependency coordination across 70 to 80 of those ARTs. The overhead was staggering and led to them being less efficient than before the transformation, even with a greater understanding of their operational value stream. Had they taken the time to understand the connections between business processes inside their value stream, they would have realized they didn’t need dedicated ARTs for each system and could have better organized around groups of people aligned to achieving specific business purposes.
The push towards organizational efficiency is not new. The relentless focus on value streams to inform and guide streamlined flow of value is the emergent competitive differentiator. And it requires continuous attention not just to how value is flowing through your system, but also to how communication structures support that value.
Problem 3: In the Pursuit of Simplicity, the Enterprise Creates Large, Complex, Slow-Moving Value Streams
Simplifying business execution is on the roadmap of every large enterprise. A worthy goal. Simpler means easier to observe, manage, and execute. But it’s possible to have too much of a good thing.
Consider a Fortune 100 financial services company that “leaned out” their organization by eliminating all middle layers of management. No more “senior” or “assistant” titles. Either you were an individual contributor, a director, or in the VP track. Simple. But the end result was massive confusion about the roles and responsibilities of a director. Some directors managed a team of 4. Some managed 200. But they were all the same to HR.
For large and complex environments, simple does not mean organized around value. You can make something simple and still impede flow.
Operational Value Streamlets are the solution for large organizations. Rather than defining one enormous Operational Value Stream that captures everything from concept to cash, break it down. A single OVS that designs, manufactures, and tests a fighter jet has too many people and systems to effectively describe, communicate, or manage. A set of Operational Value Streamlets, each representing a reusable component of the whole solution, optimizes for stability and enables the interdependencies to be managed through Large Solution Delivery concepts.
Digital Threads take this further. Traditional Value Stream Identification identifies systems and processes but misses a key connection: how business processes connect to each other and how they leverage those systems to actually create value. Digital threads, the use of digital tools and data-driven representations across the lifecycle, tie business processes to technology systems to create that complete picture.
The results are not incremental. In one large program at a Fortune 100 aerospace and defense company that was six months behind schedule with a $2M overrun, we introduced digital threads tied to business processes. Three months later, the program had recovered six weeks of schedule for only $500K in additional spend. The System Architect said at the end of the mapping session: “We didn’t even know how to talk about the work until now.”
In another program at that same organization: “That’s incredible. You delivered in two weeks what took three years before.”
Problem 4: The Enterprise Forgets That DevOps Is a Key Investment in the Value Stream
A round-table at the 2021 Value Stream Management Convention surfaced a widespread industry misconception: Development Value Streams and DevOps are the same thing. By understanding their Development Value Streams, many organizations believe they’re investing in DevOps when they’re not.
Value is measured in working solutions. It’s common for large organizations to emphasize time to market and individual productivity. When organizations are not optimized, different departments work at cross-purposes, each trying to complete their portion as fast as possible. But defective work delivered fast has no value. In fact, it may hurt future sales and funding.
One large banking company awarded a quarterly performance trophy to an individual who had worked nights and weekends to deliver on schedule, despite the Business Owner consistently saying she didn’t want teams to overcommit. She recognized the implicit message. From that point forward, the award went to quality of work rather than quantity. Employee happiness went up. And time to market actually got faster because they had less rework on features that were rushed to completion.
Non-Functional Requirements must be planned for and built into the development process. One of the major invisible costs of development is the rework that happens after initial functional requirements are met but the solution still doesn’t meet NFRs. After the European Union implemented GDPR in 2016, a global financial services company simplified and streamlined their entire development process by holding the entire global organization to GDPR’s strictest level of compliance. While this represented an investment, the increases in quality and reduced time to market justified it by a significant margin.
The Path Forward
The four challenges presented here are not the only ones that arise from Value Stream Management and Organizing Around Value. The context of organizational models is often unique to the enterprise. But the solutions are universal.
We chose to highlight these four challenges because they are the ones most likely to disrupt or destabilize the momentum of transformation. Organizations that make an effort not only to follow these patterns, but to understand and pursue the business outcomes these patterns are designed to create, consistently improve efficiency, quality, and customer value delivery.
The companies that will be most successful in the next decade will be those that can innovate the balance of relentless process efficiency with customer-centricity and organizing around value. We hypothesize this with confidence, because we’ve already seen the early evidence of it in the organizations that have been able to modernize their constructs to support operational efficiency and relentless innovation.
Share your stories with us. The next generation of Value Stream Management practitioners is being shaped now, and every real-world experience advances the field.