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Definitions in Value Stream Management

We believe that value streams are the critical construct of an organization and that understanding an organization’s value stream network and being able to manage it actively results in higher levels of organizational performance.

This taxonomy provides insights into the landscape of value streams in the context of business architecture and digital transformation. It's a central location for debate about what VSM concepts mean, what principles and practices matter, and why.

Value Stream Essentials

Value

A benefit provided to a customer or stakeholder. Distinguished from corporate values such as integrity, openness, etc. When a product or service has been perceived or appraised to fulfill a need or desire—as defined by the customer—the product or service may be said to have value or worth. Components of value may include quality, utility, functionality, capacity, aesthetics, timeliness or availability, price, etc.

Value Stream

A value stream is an end-to-end collection of activities that creates a result for a customer, who may be the ultimate customer or an internal end-user of the value stream. It is the set of actions that add value to a customer from the initial request through the customer's realization of value.

Value Stream Management

Value Stream Management is a collection of practices that visualize, map, organize around, measure, govern, evaluate, and improve the flow and outcomes of work through and across value streams.

Flow

Bottleneck

A constraint restricting flow or any resource with lower capacity than the current load.

Constraint

A limitation or restriction. In a value stream context, the Theory of Constraints defines it as “any factor that limits the organization from getting more of whatever it strives for, which is usually profit.” In further detail, within the larger practice of value stream management, constraints can be seen as either enabling activity or governing (restricting). A constraint is what limits a system from achieving higher performance versus its goal.  If several bottlenecks are present in the same line of flow, the one with the least capacity is the constraint.

Waste

Activities within the value stream that consume resources without enhancing the product or service’s value. Eight types are commonly identified:

  1. Unused human talent
  2. Waiting
  3. Inventory (undeployed work or data)
  4. Transportation (or handoffs)
  5. Defects 
  6. Motion (moving through multiple systems)
  7. Overproduction (excess quantity) 
  8. Overprocessing (excess quality)

Value Realization

Customer

An entity that receives and perceives value from the value stream’s outputs. This encompasses a broad range of recipients, including external clients, internal stakeholders, and partners, highlighting the diverse perspectives of value reception.

Customer Experience

Customer Experience (CX) refers to the sum of all experiences a customer has with a product or service throughout their journey and relationship with the company. It encompasses every interaction, from initial discovery and understanding of the product or service to the various touchpoints of engagement, purchase, use, and even post-purchase support. CX is a critical aspect of modern business success because it directly influences customer satisfaction, loyalty, and advocacy.

Customer Journey

The complete series of experiences that customers go through when interacting with a company and its brand, products, or services. It encompasses each step from the initial discovery, through the buying process, to post-purchase interactions and potentially to loyalty and advocacy. The customer journey is an external view, focusing on how the customer meets the company, gets to know it, and makes a purchase, and it is concerned with how fast and enjoyable that experience is for the customer.

Value Stream Identification

Value Stream Stage

A single distinct activity within a value stream—typically bounded by a handoff between functions. For our purposes, analogous to a step, process, or set of tasks.

Value Stream Categorization

Using categories to place value streams in buckets for reference or segmentation. This can be problematic as value streams can change over time and often exhibit characteristics and behaviors from other categories, making clear definitions challenging or misleading.

Value Stream Types

Core or Supportive

Distinct value stream categories to distinguish those that directly serve external customers (core) from those that support those streams (supportive), based on their primary focus. Can also be referred to as Front of House or Back of House. Streams can change their position and focus over time.

Business or Digital/Technology

This is a common categorization used in environments where business and technology are siloed and separated domains. Every value stream should be relevant and connected to “the business.” In the digital economy, every value stream has a digital or technological aspect.

Development or Operational

These are common categorizations used in environments where business and technology are siloed and separated domains. Problematic as this promotes separation and silos between development and operations as distinct stream types rather than each stream adopting a degree of operational or developmental focus that can change over time (see Performance Focus Spectrum).

Performance Focus Spectrum

A reference for describing or plotting value streams based on their behavior and operating model. A stream can be described as more focused on effectiveness and accuracy (developmental) or efficiency and precision (operational), along with various other characteristics of each end of the spectrum. Streams can change their position and focus over time.

Value Stream Organization

Value Stream Network

The interconnected and interdependent collection of value streams that constitute an organization. The value stream network consumes and produces capabilities that make up value chains.

Value Chain

A value chain refers to the full range of activities that businesses go through to bring a product or service from conception to delivery and beyond. This includes design, production, marketing, distribution, and support to the final consumer. In the context of Value Stream Management, we often talk about value streams, which are similar but not identical to value chains.

While the terms "value chain" and "value stream" are sometimes used interchangeably, they have distinct meanings. A value chain is a broader term that encompasses the entire process of adding value to raw materials through various stages until the final product is sold to the end customer. A value stream, on the other hand, is more specific to the steps and processes within an organization that contribute to the creation and delivery of a specific product or service to the customer.

Value Stream Reference Architecture

A Value Stream Reference Architecture (VSRA) is an organizational template that uses Team Topologies as a pattern language. VSRA promotes focus on Value Stream Management by considering the entire organization to inspect and adapt the Value Stream Network. It employs techniques such as FINE flow analysis and Graph Theory to evaluate the organizational structure and look for ways to improve flow.