Lean-Agile Portfolio Management for a Modern Strategic Planning

Explore

Scaled Agile Framework - SAFe 5

Operational Value Streams

Content Page. Operational value streams (OVS) are the sequence of activities needed to deliver a product or service to a customer.

⁠

Whenever there is a product for the customer, there is a value stream. The challenge lies in seeing it.

—Learning to See [1]

Operational Value Streams

Examples include manufacturing a product, fulfilling an order, admitting and treating a medical patient, providing a loan, or delivering a professional service.

Most employees work in operational value streams that serve the customer directly, where they may:

Market the enterprise’s products and services

Sell and process orders

Manufacture products

Provide support and deliver related services

Addressing the customer’s needs with the

solutions⁠

they have helps keep the business profitable and healthy. That is the subject of this article.

However, most SAFe’s guidance focuses on helping the systems and software developers, product managers, engineers, scientists, IT practitioners, and others who work in development value streams. That is the subject of the companion to this article:

Development Value Streams (DVS)⁠

. That is where the essential activities of defining, implementing, and supporting innovative, digital data-enabled solutions occur. However, the customers they serve live either in the company or at the end of the operational value stream.

Thus, an understanding of the enterprise’s operational value streams is integral to effective solution design and implementation. Understanding them means knowing your customer, a critical aspect of Customer Centricity and Design Thinking.

As described in the

Development Value Stream⁠

article and Principle 10, Organizing around value, the value stream concept is a critical underpinning of Lean thinking and fundamental to SAFe. Development value streams are the primary organizational model in SAFe. A SAFe portfolio is comprised of them, each dedicated to building and supporting a set of solutions.

Value streams are the most fundamental construct of Lean thinking and are foundational to SAFe. Each value stream represents the sequence of steps an enterprise uses to deliver value to its customer. Each highlights efficiencies and inefficiencies, delays, rework, and bottlenecks. They also illustrate the impact that flow, or the lack of it, has on the people who actually do all the work.

Identifying, visualizing, and optimizing value streams is the primary method a Lean enterprise employs to shorten time to market while improving the timeliness, quality, and value of its products and services. Understanding value streams are the key to unlocking true Business Agility.

Details

‘Lean Thinking’ is one of the foundational bodies of knowledge that inform SAFe’s mindset, values, principles, and practices. It can be summarized as follows: [2]

Precisely specify value by product

Identify the value stream for each product

Make value flow without interruptions

Let the customer pull value from the producer

Pursue perfection

Value streams are integral to this definition, to Lean, and thereby, to SAFe.

Operational Value Streams

Whether it’s obvious or not, every product or service has an operational value stream; it’s the set of steps the organization undertakes to deliver that specific product or service to the customer.

Figure 1 illustrates the structure and flow of a value stream. A ‘trigger,’ usually a request for a product or service, initiates the flow. Each chevron identifies a ‘step’— an activity that needs to be executed to process the order. Each step takes time to execute. The sum of all the processing-step times, plus the delay periods between them, is the ‘total lead time.’ Shortening the lead time reduces the time to market.

⁠

Figure 1. Structure and flow of a value stream

Value streams are persistent, enduring for as long as customers continue to place orders for their products or services. They cut across departments and functions, and each contains:

All the steps necessary to convert the trigger to the delivery of value

The people who perform these steps

The systems they use to do their work

The flow of information and materials that are necessary to satisfy that request

While a seemingly simple concept, each of these four aspects contains much of the hidden information that the enterprise needs to improve its performance. Figure 2 illustrates this expanded view of an operational value stream.

⁠

Figure 2: An expanded view of a value stream

Types of Operational Value Streams

Most generally, operational value streams fall into one of four types:

Fulfillment value streams represent the steps necessary to process a customer request, deliver a digitally-enabled product or service, and receive remuneration. Examples include providing a consumer with an insurance product or fulfilling an eCommerce sales order.

Manufacturing value streams convert raw materials into the products customers purchase. Examples include consumer products, medical devices, and complex cyber-physical systems.

Software product value streams offer and support software products. Examples include ERP systems, SaaS, and desktop and mobile applications.

Supporting value streams include end-to-end workflows for various supporting activities. Examples include the lifecycle for employee hiring and retention, supplier contracting, executing the annual budget process, and completing a full enterprise sales cycle.

Figure 3 illustrates an example of each type of operational value stream.

⁠

Figure 3. Examples of the four types of operational value streams

And although companies need strong, functional departments to build and share knowledge, sales, marketing, purchasing, legal, finance, and manufacturing engineering are not themselves value streams. However, many of the people in these departments participate in one or more operational value streams.

It stands to reason that large enterprises typically offer a wide variety of products and services to their customers. That’s one of the ways they grow. As such, it follows that there are a substantial number of value streams within those enterprises. Figure 4 illustrates how the ‘consumer loan’ value stream is just one of the offerings and operational value streams of a large commercial bank.

⁠

Figure 4. Operational value streams in a commercial bank

Identifying Operational Value Streams

Value streams provide the most essential and fundamental knowledge of how an enterprise serves its customer. There is no substitute, and the Lean enterprise continually improves its business performance by identifying, analyzing, and optimizing its value streams. The purpose of development value streams is to create and advance the systems and products the operational value stream uses. So, understanding those value streams is also indispensable to business performance.

However, unlike the footpath lighting in a dark theater, value streams do not illuminate themselves. They are complex, and no one in the enterprise likely understands any one single flow exactly. This means that SAFe Program Consultants (SPCs) and their Lean leaders often take on the responsibility to understand and help optimize how the organization’s systems support operational value streams.

To assist those doing that work, Figure 5 provides a set of questions that help guide stakeholders through the process of identifying operational value streams.

⁠

Figure 5. Questions to identify operational value streams

Once identified, the template in Figure 6 can capture a particular value stream’s purpose and attributes.

⁠

Figure 6. Value stream definition template with consumer loan example

Operational Value Streams and the Customer Journey

Understanding the operational value streams serves many purposes. Once identified, operations and development teams can apply Customer Centricity and Design Thinking to help discern what the customer is doing, thinking, and feeling while navigating the enterprise’s offering. These ‘journey maps’ (Figure 7) help both operations and development teams find ways to create a better customer experience.

⁠

Figure 7. Customer journey map for the consumer loan value stream

Many developers build and support internal systems that operational value streams use to enact the customer’s journey. Improving these systems improves the external customer’s journey. As such, the people who operate those systems are their customers. Customer centricity and design thinking apply there equally well.

Value Stream Mapping

Finally, value streams enable value stream mapping, a collaborative process in which a group of stakeholders defines a value stream’s steps, handoffs, and delays. This highlights the total lead time needed to fulfill a request while spotlighting areas for improvement.

The example in Figure 8 illustrates a value stream map for a marketing campaign that supports a product launch.

⁠

Figure 8. Value stream map for a marketing campaign

With most such value streams, the wait between steps consumes the majority of the lead time. Indeed, it is not unusual that the total processing time is as little as 5% of the lead time.

To improve lead time, the natural tendency is to reduce processing time, which has its benefits. After all, that’s where the people do the work. And everyone wants to work more efficiently. But excessively focusing on processing time can negatively impact people, culture, and quality. That, in turn, can conversely increase overall lead time and decrease economic outcomes.

But no one likes waiting. So, the better course of action is to focus on reducing the wait time between steps. Much of the guidance in SAFe focuses directly on this problem. For example, Principle #6 – Visualize and limit WIP, reduce batch sizes, and manage queue lengths, guides some of the many practical ways to do this.

Learn More

[1] Rother, Mike, and John Shook, Learning to See. Value Stream Mapping to Create Value and Eliminate Muda, 20th-anniversary edition. Lean Enterprise Institute, 1998-2018.

[2] Womack, James, and Daniel Jones. Lean Thinking; Banish Waste and Create Wealth in your Corporation. Simon and Schuster, 1996-2003.

⁠

Navigation Bar

⁠

Development Value Streams Content Page. Development value streams (DVS) are the sequence of activities needed to convert a business hypothesis into a digitally-enabled Solution.⁠

⁠

Scaled Agile Framework - SAFe 5 Header Page. Here you may find a list of contents with all the Knowledge associated to the Portfolio Level of the Scaled Agile Framework (SAFe 5)⁠

⁠

Value Stream Coordination Content Page. Value Stream Coordination defines how to manage dependencies and exploit the opportunities that exist only in the interconnections between value streams.⁠

⁠

Include this copyright notice with the copied content.

Read the FAQs on how to use SAFe content and trademarks here:

⁠

https://www.scaledagile.com/about/about-us/permissions-faq/⁠

Explore Training at:

⁠

This link can't be embedded.⁠

Operational Value Streams

Details

Operational Value Streams

Types of Operational Value Streams