What Is Value Stream Management?

In traditional organizational structures, individuals are organized into functional teams, and then temporary teams are formed to meet the demands of specific projects, borrowing individuals (or percentages of individuals’ time) from those functional teams.

Because the teams are temporary, they are not motivated or incentivized to practice continuous improvement, which is where the drive for efficiency and productivity is rooted. They also don’t acquire the invaluable shared knowledge and experience that comes from lasting, working relationships.

Finally, it’s difficult to understand patterns, because the structure and function of the teams change so frequently. Inefficiencies are inevitable and understanding where blocks, dependencies, and slowdowns in delivery occur are nearly impossible to identify and/or remedy.

As such, it’s difficult to measure the true value of the organization’s work, because the definition of value is a moving target, decided by project: The performance of the team is measured based on its ability to deliver the specific deliverables or outputs outlined for that project, not value to the customer or the business. And delivery is certainly not optimized for efficiency when execution of work is the main goal.

For all these reasons, many organizations are making the shift away from temporary project teams and towards long-lived, cross-functional product (aka: value streams) teams. With established value streams and long-lived teams of teams, people are assigned to one cross-functional team for the life of a product.

Many organizations are making the shift away from temporary project teams and towards long-lived, cross-functional product teams.

But orienting by product is just the beginning. True value comes when teams deliver a predictable flow of value with a meaningful impact to the business – an outcome that’s nearly impossible to arrange without the practice of value stream management. Here are two reasons why:

First, value stream management enables software development organizations to understand how value is flowing across teams of teams and value streams. By understanding how value flows, you can also see where there are breakdowns in flow, which in turn will help teams investigate and fix those breakdowns, so teams can (you guessed it) get value flowing again.

Second, value stream management is designed to increase efficiency across all value streams and accelerate value delivery to the customer in the shortest amount of time possible. This approach to measuring and optimizing flow helps organizations understand their end-to-end software delivery process better by enabling them to identify areas of improvement throughout their established delivery pipeline.

Now that you’ve learned what value stream management is and why it’s important, let’s dig into understanding the essential building block of value stream management – a single value stream – and discover the two types of value streams that can exist within an organization.

A value stream is, put simply, the steps by which a business takes an idea and turns it into realized value. In traditional organizational structures, it’s very difficult to answer the question of how value comes to be – the process by which the organization responds to customer needs.

Organizing by value stream both forces organizations to define their value streams and then dares them to optimize those value streams.

What are the types of value streams?

In most organizations, value streams fall into one of two distinct functions: Operational value streams and Development value streams.

Operational Value Streams

• Represent the flow of business and nature of the business
• Deliver end-customer value indefinitely so long as an organization continues to offer a given product or service
• Are supported by the development value stream
• Are the starting place for proper OKR measurement and alignment

Development Value Streams

• Build and operate the systems and capabilities that enable operational value
• Can be customer-facing systems or internally facing systems
• Improve systems and capabilities that the operational value stream needs to function

Both of these types of value streams result in the creation of value for a customer, whether that is an external customer or an internal stakeholder.

Value can come in the form of products, services, or a combination of both – identifying the types of value your organization delivers can be a helpful first step in identifying your value streams.

Value stream management, then, is the process of aligning, coordinating, and optimizing the efforts of one or more value streams, to improve flow efficiency, increase product quality, and increase customer value.

Although their origins are in the manufacturing of physical goods, value stream mapping and value stream management have been utilized in software delivery for many years. Aligning around value streams helps software delivery organizations optimize the flow with which they deliver value to their (internal or external) customers.

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

What flows through a software delivery value stream?

The value that flows through a software delivery value stream is less tangible than the value created in, say, an automotive manufacturing value stream.

However, that’s not to say that this value cannot be managed or even measured. This is actually the real value of value stream management in software delivery: It enables teams to align around a shared, tangible view of their workflow and then work together to optimize that workflow based on their goals. There are countless ways that Agile teams measure value, and how value flows through their value streams.

Managing by value stream can help Agile organizations not only improve their business outcomes, but also improve how they achieve those outcomes.

By organizing into and measuring the performance of their value streams, software organizations can identify which steps add value and which do not; where there are delays, risks, or defects being created; and where they can improve their processes to become more agile.

Organizing into value streams is certainly not without its challenges, but it’s definitely worth it. Hundreds of Agile organizations around the globe have realized the benefits of effective value stream management, which we would summarize as the following:

• Connect: Break down functional silos and connect multiple teams, tools, and processes.
• Visualize: Create a shared, accurate, real-time view of how value flows through your organization.
• Measure: Automate the collection of performance metrics to pinpoint areas for improvement and monitor team and organizational progress over time.
• Stay Connected: Experience the long-term benefits of aligning organizational structures with the needs of your customers.

Whether your goals for your software organization are to improve product quality, increase release velocity, implement DevOps, or even execute Agile at scale (through Scaled Agile Framework® [SAFe®] or other scaling methods), organizing into value streams (as you learned earlier in this article) is a critical first step. Subsequently, value stream management is the only way to get a true picture of your software development and delivery workflow within your value streams from an end-to-end perspective.

From there, you can begin to capture, analyze, and act upon DevOps/DORA metrics, flow metrics, and other meaningful insights to your Agile transformation.

DevOps/DORA metrics

Collecting performance metrics is a key part of any implementation of Agile, giving teams a sense of how efficiently and effectively they are realizing their goals. Value stream management enables teams to actually gather the metrics they need to do this accurately, that is because they are able to collect, consolidate, and collate multiple data sources for a clear view of what is happening across the value delivery pipeline.

DevOps teams specifically rely on DORA metrics to assess their performance based on four metrics:

• Deployment frequency measures how frequently the organization is releasing new software to production.
• Lead time for changes measures how long it takes teams to implement and release changes.
• Mean time to recovery refers to the time between an interruption due to deployment or system failure and full recovery.
• Change failure rate measures how often a team’s changes lead to failures (rework) after the code has been released.

You can learn more about Agile metrics here.

Flow metrics

Flow metrics are used to measure how value moves from one end of the software development value stream to another. Flow metrics provide a measure of how effectively the value stream is able to achieve the intended business outcomes.

The Flow Framework® defines four flow metrics for measuring value streams:

• Flow velocity measures whether value delivery is accelerating by measuring the number of work items completed in a specific period.
• Flow time measures time to market – from when the work is started to when it is completed, including both active and idle times.
• Flow efficiency measures the ratio of active time to idle time.
• Finally, flow load measures how well-utilized the value streams are. Value streams that are under- or over-utilized can lead to reduced productivity.

You can learn more about flow metrics here.

Process improvement starts with assessing where you are and then identifying opportunities for how to get to where you want to go. The complexity of modern businesses makes this nearly impossible unless organizations commit to organizing around how value is created.

Value stream management is the next evolution in software development. Defining, organizing, and optimizing value across multiple tools, systems and solutions is the only way for software organizations to truly get a complete understanding of their end-to-end development and delivery workflows.

With an understanding of how value stream management works, enterprises can begin to understand their system as a whole, without attempting to compare or contrast data from different tools or parts of their delivery ecosystem. The deep insights that result from analyzing a wide and diverse data set allow organizations to make data-driven decisions and innovate faster.

Luckily, a value stream management solution can help you simplify and facilitate the inherently complex process of defining, managing, and optimizing by value streams.

It can enable organizations to break down functional silos and connect multiple processes, teams, and tools to provide visibility into how value actually flows through the organization.

The right tool will provide automated ways to quantifiably measure team and organizational performance in real time, so you can easily and accurately pinpoint areas that need attention.

It will also give you access to invaluable data about team and organizational performance over longer periods of time, so you can monitor the progress of your Agile transformation and prove its ROI.

For more information about value stream management (VSM) and how to determine if you need a VSM solution, please contact us.

Or, you can check out these value stream eBooks for more insightful information: The 2 Types of Value Streams: Aligning the organization around value and How to Identify Your Value Streams: The value behind the business.