value-stream-mapping

Value Stream Mapping And Why It Matters In Business

Value stream mapping uses flowcharts to analyze and then improve on the delivery of products and services. Value stream mapping (VSM) is based on the concept of value streams – which are a series of sequential steps that explain how a product or service is delivered to consumers.

Understanding value stream mapping

Value stream mapping enables businesses to analyze each step and whether it is adding value. Importantly, value stream mapping also allows intelligent, holistic refinement of the whole process.

In other words, it assigns value to a step on the condition that the value it obtains does not come at the expense of another step.

All VSM initiatives have start and end points known as fenceposts, which differ according to predetermined goals and objectives.

As a result, VSM can be utilized for any individual product or service for any type of business.

For example, the process of a car dealership delivering a new car to a customer might have 35 steps.

After mapping out the process using VSM, company executives found that only 10 added any real value to the consumer.

By focusing on the 10 steps in more deal, the dealership was able to streamline its delivery process and reduce consumer wait times.

Three components of every value stream map

Each map typically consists of three sections:

Information flow

This component illustrates the communication of information or the transmission of data crucial to the process.

In the case of the car dealership, a sales manager may accept applications for financing and then forward approved requests to the finance company.

Product flow

This component documents the steps required to take a product or service from concept to delivery.

However, value stream mapping can also be used to “zoom in” on particular steps of the product development process.

Indeed, there is no limit on the level of detail that can be analyzed for each step.

Time ladder

Although rather simplistic, the time ladder provides a visual representation of the value stream timeline.

Time ladders denote the time that a product spends on each step, known as the process time.

They also denote waiting time, or the amount of time a product has to wait before proceeding to the next step.

Ultimately, both are used in the calculation of lead time – or the total amount of time it takes between receiving a consumer order and the fulfillment of that order.

Advantages and disadvantages of value stream mapping

Advantages

Value stream mapping is still relatively new in the business world, so there is potential that early adopters gain a competitive advantage. 

It’s also a powerful method for identifying wastage in a process. Wastage often refers to manufacturing, but in VSM it more generally refers to any step that does not add value to the consumer.

With a focus on providing consumer value, the business can align with its core values and brand identity.

Value is of course something that consumers are willing to pay for, so businesses should utilize the incremental improvement capability of VSM wherever possible.

Disadvantages

There is somewhat of a learning curve to creating a VSM framework. It often requires a substantial investment of time and money initially, and if not prepared correctly can become a source of wastage in itself.

As with most things, the potential rewards of virtual stream mapping must outweigh the risks.

Smaller businesses with less capital and less complicated processes may derive little to no benefit from using VSM principles.

Value stream mapping vs. process mapping

Like value stream maps, process maps are a planning and management tool that visually describe the flow of work and the individual steps involved.

In other words, both are used to optimize processes and increase efficiency.

But there are also several important differences between the two approaches. We have outlined some of these in the following sections.

Level of detail

Value stream mapping offers businesses a broader, more holistic view of a process.

They are better suited to analyzing major functions and tend to be executed as part of a strategic improvement over a period of six months or so.

Process mapping, on the other hand, provides a more detailed view of the process.

This makes it ideal for specific tasks or steps within a function. Process mapping is a tactical management tool that is typically executed over a period of one to two months.

Each map shows decision points and points where the process crosses departments or functions.

Level of difficulty

Compared to process mapping, the level of difficulty in implementing value stream mapping is much higher.

When a VSM is interpreted or assessed incorrectly, there can be negative long-term ramifications for the business.

This is not to say that the creation of a process map is easy, however. One of the most significant challenges a business will face with process maps is the absence of precise objectives.

For an initiative to be effective, the business must identify the strengths and weaknesses of a methodology early on.

Application

As we touched on earlier, VSM is used to analyze major functions. This makes it better suited to production environments where businesses are looking for growth in multiple functions such as machinery and inventory.

Value stream mapping can also offer a broad view of the product life cycle from production to customer and can detail the wait time between major functions.

Conversely, process mapping is more of a decision-making tool that evaluates information flow across various departments.

This makes it the tool of choice for businesses that are focused on decision-making optimization and information handoffs within an office environment.

Level of involvement

Since value stream mapping is more of a strategic management tool, it is commonly implemented by senior-level executives with the power and requisite experience to make important decisions.

The relatively less complicated process map tends to be used by frontline employees or low-level managers to solve daily problems in a single process or a single group.

Process mapping may also be used whenever standard work does not exist.

Though we have listed some of the major differences between value stream mapping and process mapping, there is no reason why both cannot be used at the same time or combined for maximum effectiveness.

Many organizations, for example, identify a process bottleneck using VSM and then incorporate a process map for the affected step(s).

Key takeaways:

  • Value stream mapping is a visual flowchart strategy that provides a thorough analysis of the steps leading to the delivery of a product or service.
  • Value stream mapping is a holistic evaluation of delivery processes with a focus on consumer value and a reduction of time or resource wastage.
  • With its focus on value, VSM encourages businesses to channel their efforts toward serving their customers. This increases consumer satisfaction, brand loyalty, and company profitability.

Connected Strategy Frameworks

Porter’s Five Forces

porter-five-forces
Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces

Ansoff Matrix

ansoff-matrix
You can use the Ansoff Matrix as a strategic framework to understand what growth strategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growth strategy can be derived by whether the market is new or existing, and the product is new or existing.

Blitzscaling Canvas

blitzscaling-business-model-innovation-canvas
The Blitzscaling business model canvas is a model based on the concept of Blitzscaling, which is a particular process of massive growth under uncertainty, and that prioritizes speed over efficiency and focuses on market domination to create a first-scaler advantage in a scenario of uncertainty.

Business Analysis Framework

business-analysis
Business analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.

Gap Analysis

gap-analysis
A gap analysis helps an organization assess its alignment with strategic objectives to determine whether the current execution is in line with the company’s mission and long-term vision. Gap analyses then help reach a target performance by assisting organizations to use their resources better. A good gap analysis is a powerful tool to improve execution.

Business Model Canvas

business-model-canvas
The business model canvas is a framework proposed by Alexander Osterwalder and Yves Pigneur in Busines Model Generation enabling the design of business models through nine building blocks comprising: key partners, key activities, value propositions, customer relationships, customer segments, critical resources, channels, cost structure, and revenue streams.

Lean Startup Canvas

lean-startup-canvas
The lean startup canvas is an adaptation by Ash Maurya of the business model canvas by Alexander Osterwalder, which adds a layer that focuses on problems, solutions, key metrics, unfair advantage based, and a unique value proposition. Thus, starting from mastering the problem rather than the solution.

Digital Marketing Circle

digital-marketing-channels
digital channel is a marketing channel, part of a distribution strategy, helping an organization to reach its potential customers via electronic means. There are several digital marketing channels, usually divided into organic and paid channels. Some organic channels are SEO, SMO, email marketing. And some paid channels comprise SEM, SMM, and display advertising.

Blue Ocean Strategy

blue-ocean-strategy
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.

Other strategy frameworks:

Additional resources:

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