What Is Value Stream Management in Software Delivery?

If organizations are unable to scale and improve their ability to deliver software fast enough, they risk not getting to market fast enough or providing the value customers expect from their products. Value stream management goes beyond Agile and DevOps to help established enterprises compete with tech giants, startups, and other digital natives.

This article gives an overview of what value stream management is, why it’s so powerful in driving greater productivity and efficiency in software delivery, and which metrics are the most important to track to achieve the desired business outcomes.

Value stream management is a proven lean business technique that focuses on increasing the flow of business value from customer request to customer delivery through software development and delivery initiatives across an organization.

Its systematic approach to measuring and improving flow helps organizations shorten time-to-market, increase throughput, improve product quality, and optimize for business outcomes.

Overall, effective value stream management enables cross-functional teams, or teams of teams, to optimize value delivery from end-to-end. Organizations get a bird’s-eye view of the entire software delivery lifecycle to better identify and evaluate individual elements of the value stream and analyze data holistically.

Value stream management shines a light on all the activities that take place to plan, build, and deliver a software product across four key stages—ideate, create, release, and operate. It allows you to identify where processes are slow, constrained, or blocked in a way that diminishes value. With that level of insight, you can then address the constraints or problems you observe in order to achieve better business outcomes.

Aligning around the creation of customer value – and optimizing development and delivery resources toward that end – is a critical step for many software organizations in their value optimization journey. Organizations that benefit the most from value stream management are those who have the following challenges:

• Keeping up with digital transformation. Competition and shifting customer demands are compelling you to be more agile, innovative, and data-driven in everything you do, from development to software delivery.
• A complex software development organization. Software development is difficult to manage due to a complex web of teams and/or value streams that interact with each other.
• Inability to measure process and results. You don’t have a clear understanding of how value is delivered across multiple teams, tools, and data sets and you struggle to correlate performance with business outcomes.

A product value stream is a sequence of activities an organization undertakes to deliver on a customer need. Value streams are entirely customer-focused, from the initial request through to the customer’s realization of value. Customers may be external (customer-facing value streams) or internal (value-enabling value streams).

Learn how to identify and gain visibility into the four types of product value streams. Download the What Is a Product Value Stream ebook.

Product value streams put the customer at the center, which helps transition IT organizations from an internal, project- and cost-centric focus to a product operating model. That’s why product value streams are foundational in both the Project to Product movement and enterprise agility frameworks, like SAFe®.

Software delivery organizations have a value stream per product, application, or service. Thinking in value streams helps them zoom out of the details and take a macro look at business processes in order to identify strategic ways to improve.

Value stream thinkers ask: How can we provide greater and greater value to our customers while eliminating delays, improving quality, and reducing cost, labor, and employee frustration?

From a customer standpoint, value is something for which they are willing to exchange an economic unit (i.e., time or money). According to the Flow Framework® for software delivery, the units of value that flow through a software product value stream are called Flow Items.

There are four types of Flow Items: features (new business value), defects (quality), risk (security, governance, compliance), and debt (removal of technical impediments to future delivery). All the work and actions taken across all the people and teams within a product value stream is associated with one of these Flow Items.

An example of a Flow Item is a feature that delivers a new product capability. If customers need or want it, they will pay to have it. Another example of a Flow Item is a fix for a defect that impairs product usage.

Increasing the rate of Flow Items going through the product value stream is one of the goals of value stream management in software delivery. This requires shortening the time it takes to complete Flow Items, from start to finish.

Understanding how Flow Items are prioritized within product value streams is a key element of value stream management because it enables teams to have productive conversations about business needs. This includes how to:

• Identify trade-offs between new features and mounting technical debt
• Ensure sufficient attention is paid to compliance and security work
• Keep unplanned defect work to reasonable levels
• Reserve adequate capacity for innovation

With literally hundreds of KPIs measured throughout IT, selecting the ones that truly measure value delivery can be hard. Previous attempts at measuring software delivery at scale have failed because they’re based on proxy metrics, for example, counting the number of lines of code committed or the frequency of deployments. These metrics represent local activities and optimizations that are not directly linked to business outcomes such as revenue, customer engagement, and retention.

While trillions are being invested in IT, from new tooling to different methodologies (e.g., Agile, DevOps, SAFe®) to costly accompanying training and consulting, many businesses and IT leaders lack the means to establish whether they are really improving.

The iterative creative process of software design is a complex collaboration network of planning, design, and engineering communication. Work moves back and forth between contributors as it progresses through each phase, while also morphing, changing, and converging throughout a highly creative process.

This network of activity takes place in many best-of-breed and specialized tools that have grown through the Agile and DevOps movements. Yet, IT leadership understandably struggles to make sense of all that complicated activity – to see it clearly and to extract insight from it.

If the underlying infrastructure of developing and delivering Flow Items through the product value stream is so complex, how can enterprises truly measure how fast they can deliver critical business capabilities? How will they know where flow is slowing down so they can fix it?

The answer is Flow Metrics – a clear set of outcome-based metrics for measuring and tracking work in end-to-end product value streams. They are constructed from the combined work of all the contributing practitioners across a product value stream and can be shared by both technology and business leaders, helping to improve communication between the various stakeholders.

Similar to temperature, blood pressure, heart rate, and weight for evaluating the health of our bodies, Flow Metrics are the vital signs for software delivery. They need to be measured first, as they provide a clear indication of whether your value streams are healthy, trending positively, and able to support the business results you’ve targeted.

If there is a problem in those vital signs, a drill-down into Flow Metrics reveals where work is slowing down, where system bottlenecks exist, and where corrective action can be taken to remove the constraint and unblock flow for the entire product value stream.

As with the human body, after identifying a problem, the ability to diagnose the ailment and heal a specific function will require detailed metrics extracted from the specific tool (i.e., the organ) used to perform that function. However, Flow Metrics need to be generated from data residing in all the tools, supporting all the functions.

Proxy metrics that measure a specific silo are only meaningful if the silo itself is the bottleneck. Be careful not to confuse proxy metrics with an indication of the value stream’s overall health.

The types of Flow Metrics that give you the best insight into your software delivery value streams against business outcomes are:

• Flow Time: Is the time-to-market getting shorter?
• Flow Velocity®: Is value delivery accelerating?
• Flow Efficiency®: Are waste and delays decreasing in our processes?
• Flow Load®: Are value streams stable, with enough capacity to serve demand?

In addition to the four Flow Metrics, Flow Distribution® measures the distribution of Flow Items in delivery to ensure a healthy balance between value generation and value protection work.

Flow Velocity and Flow Time are sometimes referred to as the “money metrics”. They show how much business value is being delivered and how quickly. While money metrics are naturally the most appealing, they are indirectly impacted by the supporting metrics, Flow Load and Flow Efficiency.

Flow Load measures if the work in progress is overloading teams, while Flow Efficiency helps identify where long wait states are impacting Flow Time.

With the widespread adoption of DevOps practices to streamline and automate the activities that take place from “code commit” to “code deploy”, many technology organizations now use the DORA metrics. These four metrics, defined by DevOps Research and Assessment (DORA) and annually reported in the Accelerate State of DevOps Report, have set the gold standard for operational efficiency for releasing new code.

The four DORA metrics are:

• Lead Time: The time it takes for committed code to reach production and deployment
• Deployment Frequency: How often a company deploys code for a particular application
• Mean Time to Restore: How long it takes a DevOps team to restore service when a service incident or defect impacts customers
• Change Failure Rate: The percentage of changes that were made to a code that then resulted in incidents, rollbacks, or any type of production failure

While the DORA metrics are necessary, they are not sufficient on their own. They are the first-stage booster rocket that will get you off the ground, but they are not enough to get you to the moon. Without a doubt, you must become proficient at releasing code rapidly, securely, and confidently. But this has quickly become table stakes across the industry. In the circles where you compete, everyone will become a DORA high performer in short order.

Your organization will remain competitive only if it can deliver business value—not code changes—at an ever-increasing clip. For example, while the DORA Lead Time metric measures ‘code commit’ to ‘code deploy’, Flow Time measures ideation to production – starting from when work is accepted by the value stream and ending when the value is delivered to the customer.

For most organizations, half the time and half the money get spent before a card ever gets to a development team’s backlog, let alone the first code commit. Flow Metrics help you identify bottlenecks across the entire value stream and address them in a systematic and sustainable way.

Crunching the objective data captured from integrated software delivery toolchains across teams, tools, and departments enables organizations to generate clear business-centric metrics. This will help improve cross-organizational decision-making and answer crucial business questions such as:

• How is software delivery impacting revenue, quality, and costs?
• What’s slowing value delivery down?
• How are DevOps, Agile, and SAFe transformations performing?
• Where should we make strategic investments to improve business outcomes?

These are questions that Flow Metrics can help answer along with the corresponding business results, as defined in the Flow Framework:

• Value (benefit to business)
• Cost (the cost of operating the value stream)
• Quality (of product)
• Happiness (engagement of those doing the work)

Flow Metrics abstract internal details like team structure, technical architecture, and tool implementations and instead focus on business value, namely, how much business value is being delivered today and where dollars and talent can be invested to deliver greater value faster tomorrow.

The modern software delivery toolchain is comprised of best-of-breed and specialized tools born of the Agile and DevOps movements, mixed in with legacy tools from past movements. For all the productivity benefits of tool choice and proliferation, it often comes at a cost to flow.

The benefits of specialization can only be fully realized if the silos that it creates can be connected effectively. Getting actionable, real-time visibility into end-to-end Flow Metrics within your enterprise tool networks requires three things:

• The ability to capture data from any tool without interrupting or destabilizing the tools’ daily operation.
• The ability to combine and abstract the data from individual tools into one integrated set of Flow Metrics.
• The ability to view the data sliced-and-diced through the business lens so that software delivery performance can be correlated to business results.

Once armed with visibility into the flow of the product value streams, the next step is problem-solving. With value stream management solutions, you can identify where flow slows down due to a constraint, figure out what’s needed to alleviate the constraint, and then take action to eliminate the bottleneck. After that, it’s onto the next bottleneck, and so on. The key is to generate Flow Metrics fast and in real-time so that little problems don’t become bigger ones.

Given your large investment in development resources, you may think you have the expertise and capacity to build your own Flow Metrics solution in-house. It may seem like a fun and simple project to undertake, one that utilizes the people and knowledge you already have, as well as leveraging your existing data lake strategy.

However, homegrown Flow Metrics can take years to produce due to the sheer effort of culling, normalizing, selecting, and visualizing the right data. Additional hurdles with in-house solutions include:

• The cost of data replication and storage
• The expertise required for each tool’s APIs and data schemas
• Extra attention needed to prevent bad queries from impacting tool performance
• Break/fix work following every tool upgrade

In many cases, the overall investment in creating an in-house solution can be devastating. One leading U.S. insurance company spent a year and over $1 Million to generate their own cross-tool Flow Time metric, only to find the investment was rendered obsolete the moment they modified their toolchain.

Conversely, turnkey, purpose-built value stream management tools can provide Flow Metrics within days. They provide out-of-the-box dashboards that trend performance over time, visualize bottlenecks, and generate insights into the constraints impacting flow and outcomes.

Learn what to look for in a value stream management tool. Download the The Buyer’s Guide for Value Stream Management (VSM) and Flow Metrics.

The three tenets of improving flow in software delivery value streams are connecting your toolchain, deriving actionable insights from your measurements, and creating a visualization of your metrics that can be used to easily communicate your progress to the business.

Connect your toolchain

Connecting value stream networks and automating the flow of work across the value stream is one of the lowest-hanging fruits of removing waste.

There are three inhibitors to flow that can be easily alleviated by automating workflows and traceability across tool boundaries. These include:

• Lost productivity: Precious time is spent on non-value-adding work like duplicate data entry between tools, manual handovers, status meetings, and endless emails back and forth with no traceability.
• Burdensome traceability: Many of the world’s leading companies operate in highly regulated markets like financial services, automotive, healthcare, pharmaceuticals, and government. To remain compliant, they must produce reports that trace every original requirement to its implementation (e.g., code, test, build). Often, this is done manually, usually through spreadsheets—a process that’s both expensive and error-prone.
• Frequent disruption: Upheavals like mergers, acquisitions, divestitures, and reorganizations can be very damaging to flow. Enterprises often find themselves incapable of rapidly absorbing additions to their technology ecosystem. Many transformations have been thrown off track by such changes, which disrupt any positive flow momentum the organization had going, making it challenging to meet business results.

Based on the Flow Framework, value stream networks require an information backbone that connects the tools and orchestrates near real-time data synchronization between them. This backbone, referred to as the Integration Model, defines the routes that business value can flow through the value stream network.

The Integration Model connects the tools and routes the work as it progresses from team to team, discipline to discipline, and specialized tool to specialized tool. All the while, it normalizes, relates, and synchronizes the individual work items (‘artifacts’) across tool boundaries, eliminating silos, information bottlenecks, and all the manual, non-value-adding work.

Furthermore, the Integration Model also provides the tool network with the elasticity to expand, contract, evolve, change, absorb newly acquired networks, experiment with new tools, and gradually wean off old ones.

Use flow metrics to derive actionable insights

Traditional businesses have been implementing digital transformations for nearly two decades in an effort to achieve parity with digital natives. But they’ve only partially delivered.

Naturally, with the stakes so high, there is zero tolerance for another failed transformation. Software delivery organizations in any traditional business or government agency must become as efficient as software startups and digital natives if they are going to survive.

Organizations have commonly pinned their transformations on proxy metrics. For example, measuring process, activity, and operational efficiencies that are indicative of siloed, local optimizations.

Unfortunately, proxy metrics are misleading as they do not directly tie to business outcomes and cannot be relied upon to present an accurate picture. An IT team could be deploying a hundred times per day but if they’re only deploying bug fixes or technical stories and never a complete feature, the results will not materialize for the business, either.

Measuring flow is the way to go. Flow Metrics give an overall picture of how value flows from inception till its final destination. They provide a clear indication of whether flow is healthy, trending positively, and can support the targeted business results.

Learn how the Flow Framework can guide your organization’s transition to product value streams. Download the whitepaper Transitioning from Project to Product with the Flow Framework.

Visualize your metrics

Every CIO and VP of Software Delivery hears their department heads and managers saying they have too much work and too few resources. And at the same time, there is relentless pressure from the business to deliver faster.

Visualization is the most powerful way to facilitate conversations with other stakeholders and communicate any friction or bottlenecks within the software delivery lifecycle. If product value streams can be presented in a visual form, teams can rally around the dashboards and problem-solve together.

The data in tool repositories is the source of truth when it comes to software delivery, with each work item reporting its location and status in real-time. Similar to live traffic apps like Google Maps and Waze, the flow of value can be visualized and analyzed as it traverses the value stream network of tools and practitioners. Value stream management solutions can collect and compile all those data points and draw a map of how value flows through teams.

The ideal value stream visualization tool gathers the individual work item statuses in real-time and reframes them in business terms so people can see how business value is flowing – not just work.

According to the Flow Framework, software delivery value streams must be visualized from the business’s perspective. Otherwise, IT and the business will never bridge the crippling divide between them.

The Product Model is crucial here. From each relevant tool, the Product Model carves out the subset of data pertaining to a specific product value stream and includes only that data in the value stream’s Flow Metrics. Meaning, it overlays the business lens on top of whatever technical, architectural, or tool-related reality exists.

With access to this real-time objective data from value stream management solutions, you can kickstart impactful discussions with your software delivery organization and business counterparts to identify your bottlenecks and next steps. Whatever the issue, you can bring the right group of experts “into the room” to view a real-time diagnosis and find a solution to what’s slowing you down. No more theories, wishful thinking, or rolls of the dice; your teams have the truth to carry out data-driven investigations that will fix issues faster. And, crucially, help cultivate a stronger culture of collaboration and continuous learning between business and technology to supercharge your responsiveness and adaptability.