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


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.


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.


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 Analysis Frameworks

Failure Mode And Effects Analysis

A failure mode and effects analysis (FMEA) is a structured approach to identifying design failures in a product or process. Developed in the 1950s, the failure mode and effects analysis is one the earliest methodologies of its kind. It enables organizations to anticipate a range of potential failures during the design stage.

Agile Business Analysis

Agile Business Analysis (AgileBA) is certification in the form of guidance and training for business analysts seeking to work in agile environments. To support this shift, AgileBA also helps the business analyst relate Agile projects to a wider organizational mission or strategy. To ensure that analysts have the necessary skills and expertise, AgileBA certification was developed.

Business Valuation

Business valuations involve a formal analysis of the key operational aspects of a business. A business valuation is an analysis used to determine the economic value of a business or company unit. It’s important to note that valuations are one part science and one part art. Analysts use professional judgment to consider the financial performance of a business with respect to local, national, or global economic conditions. They will also consider the total value of assets and liabilities, in addition to patented or proprietary technology.

Paired Comparison Analysis

A paired comparison analysis is used to rate or rank options where evaluation criteria are subjective by nature. The analysis is particularly useful when there is a lack of clear priorities or objective data to base decisions on. A paired comparison analysis evaluates a range of options by comparing them against each other.

Monte Carlo Analysis

The Monte Carlo analysis is a quantitative risk management technique. The Monte Carlo analysis was developed by nuclear scientist Stanislaw Ulam in 1940 as work progressed on the atom bomb. The analysis first considers the impact of certain risks on project management such as time or budgetary constraints. Then, a computerized mathematical output gives businesses a range of possible outcomes and their probability of occurrence.

Cost-Benefit Analysis

A cost-benefit analysis is a process a business can use to analyze decisions according to the costs associated with making that decision. For a cost analysis to be effective it’s important to articulate the project in the simplest terms possible, identify the costs, determine the benefits of project implementation, assess the alternatives.

CATWOE Analysis

The CATWOE analysis is a problem-solving strategy that asks businesses to look at an issue from six different perspectives. The CATWOE analysis is an in-depth and holistic approach to problem-solving because it enables businesses to consider all perspectives. This often forces management out of habitual ways of thinking that would otherwise hinder growth and profitability. Most importantly, the CATWOE analysis allows businesses to combine multiple perspectives into a single, unifying solution.

VTDF Framework

It’s possible to identify the key players that overlap with a company’s business model with a competitor analysis. This overlapping can be analyzed in terms of key customers, technologies, distribution, and financial models. When all those elements are analyzed, it is possible to map all the facets of competition for a tech business model to understand better where a business stands in the marketplace and its possible future developments.

Pareto Analysis

The Pareto Analysis is a statistical analysis used in business decision making that identifies a certain number of input factors that have the greatest impact on income. It is based on the similarly named Pareto Principle, which states that 80% of the effect of something can be attributed to just 20% of the drivers.

Comparable Analysis

A comparable company analysis is a process that enables the identification of similar organizations to be used as a comparison to understand the business and financial performance of the target company. To find comparables you can look at two key profiles: the business and financial profile. From the comparable company analysis it is possible to understand the competitive landscape of the target organization.

SWOT Analysis

A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.

PESTEL Analysis

The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.

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.

Financial Structure

In corporate finance, the financial structure is how corporations finance their assets (usually either through debt or equity). For the sake of reverse engineering businesses, we want to look at three critical elements to determine the model used to sustain its assets: cost structure, profitability, and cash flow generation.

Financial Modeling

Financial modeling involves the analysis of accounting, finance, and business data to predict future financial performance. Financial modeling is often used in valuation, which consists of estimating the value in dollar terms of a company based on several parameters. Some of the most common financial models comprise discounted cash flows, the M&A model, and the CCA model.

Value Investing

Value investing is an investment philosophy that looks at companies’ fundamentals, to discover those companies whose intrinsic value is higher than what the market is currently pricing, in short value investing tries to evaluate a business by starting by its fundamentals.

Buffet Indicator

The Buffet Indicator is a measure of the total value of all publicly-traded stocks in a country divided by that country’s GDP. It’s a measure and ratio to evaluate whether a market is undervalued or overvalued. It’s one of Warren Buffet’s favorite measures as a warning that financial markets might be overvalued and riskier.

Financial Analysis

Financial accounting is a subdiscipline within accounting that helps organizations provide reporting related to three critical areas of a business: its assets and liabilities (balance sheet), its revenues and expenses (income statement), and its cash flows (cash flow statement). Together those areas can be used for internal and external purposes.

Post-Mortem Analysis

Post-mortem analyses review projects from start to finish to determine process improvements and ensure that inefficiencies are not repeated in the future. In the Project Management Book of Knowledge (PMBOK), this process is referred to as “lessons learned”.

Retrospective Analysis

Retrospective analyses are held after a project to determine what worked well and what did not. They are also conducted at the end of an iteration in Agile project management. Agile practitioners call these meetings retrospectives or retros. They are an effective way to check the pulse of a project team, reflect on the work performed to date, and reach a consensus on how to tackle the next sprint cycle.

Root Cause Analysis

In essence, a root cause analysis involves the identification of problem root causes to devise the most effective solutions. Note that the root cause is an underlying factor that sets the problem in motion or causes a particular situation such as non-conformance.

Blindspot Analysis


Break-even Analysis

A break-even analysis is commonly used to determine the point at which a new product or service will become profitable. The analysis is a financial calculation that tells the business how many products it must sell to cover its production costs.  A break-even analysis is a small business accounting process that tells the business what it needs to do to break even or recoup its initial investment. 

Decision Analysis

Stanford University Professor Ronald A. Howard first defined decision analysis as a profession in 1964. Over the ensuing decades, Howard has supervised many doctoral theses on the subject across topics including nuclear waste disposal, investment planning, hurricane seeding, and research strategy. Decision analysis (DA) is a systematic, visual, and quantitative decision-making approach where all aspects of a decision are evaluated before making an optimal choice.

DESTEP Analysis

A DESTEP analysis is a framework used by businesses to understand their external environment and the issues which may impact them. The DESTEP analysis is an extension of the popular PEST analysis created by Harvard Business School professor Francis J. Aguilar. The DESTEP analysis groups external factors into six categories: demographic, economic, socio-cultural, technological, ecological, and political.

STEEP Analysis

The STEEP analysis is a tool used to map the external factors that impact an organization. STEEP stands for the five key areas on which the analysis focuses: socio-cultural, technological, economic, environmental/ecological, and political. Usually, the STEEP analysis is complementary or alternative to other methods such as SWOT or PESTEL analyses.

STEEPLE Analysis

The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.

Activity-Based Management

Activity-based management (ABM) is a framework for determining the profitability of every aspect of a business. The end goal is to maximize organizational strengths while minimizing or eliminating weaknesses. Activity-based management can be described in the following steps: identification and analysis, evaluation and identification of areas of improvement.

PMESII-PT Analysis

PMESII-PT is a tool that helps users organize large amounts of operations information. PMESII-PT is an environmental scanning and monitoring technique, like the SWOT, PESTLE, and QUEST analysis. Developed by the United States Army, used as a way to execute a more complex strategy in foreign countries with a complex and uncertain context to map.

SPACE Analysis

The SPACE (Strategic Position and Action Evaluation) analysis was developed by strategy academics Alan Rowe, Richard Mason, Karl Dickel, Richard Mann, and Robert Mockler. The particular focus of this framework is strategy formation as it relates to the competitive position of an organization. The SPACE analysis is a technique used in strategic management and planning. 

Lotus Diagram

A lotus diagram is a creative tool for ideation and brainstorming. The diagram identifies the key concepts from a broad topic for simple analysis or prioritization.

Functional Decomposition

Functional decomposition is an analysis method where complex processes are examined by dividing them into their constituent parts. According to the Business Analysis Body of Knowledge (BABOK), functional decomposition “helps manage complexity and reduce uncertainty by breaking down processes, systems, functional areas, or deliverables into their simpler constituent parts and allowing each part to be analyzed independently.”

Multi-Criteria Analysis

The multi-criteria analysis provides a systematic approach for ranking adaptation options against multiple decision criteria. These criteria are weighted to reflect their importance relative to other criteria. A multi-criteria analysis (MCA) is a decision-making framework suited to solving problems with many alternative courses of action.

Stakeholder Analysis

A stakeholder analysis is a process where the participation, interest, and influence level of key project stakeholders is identified. A stakeholder analysis is used to leverage the support of key personnel and purposefully align project teams with wider organizational goals. The analysis can also be used to resolve potential sources of conflict before project commencement.

Strategic Analysis

Strategic analysis is a process to understand the organization’s environment and competitive landscape to formulate informed business decisions, to plan for the organizational structure and long-term direction. Strategic planning is also useful to experiment with business model design and assess the fit with the long-term vision of the business.

Related Strategy Concepts: Go-To-Market StrategyMarketing StrategyBusiness ModelsTech Business ModelsJobs-To-Be DoneDesign ThinkingLean Startup CanvasValue ChainValue Proposition CanvasBalanced ScorecardBusiness Model CanvasSWOT AnalysisGrowth HackingBundlingUnbundlingBootstrappingVenture CapitalPorter’s Five ForcesPorter’s Generic StrategiesPorter’s Five ForcesPESTEL AnalysisSWOTPorter’s Diamond ModelAnsoffTechnology Adoption CurveTOWSSOARBalanced ScorecardOKRAgile MethodologyValue PropositionVTDF FrameworkBCG MatrixGE McKinsey MatrixKotter’s 8-Step Change Model.

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