According to isixsigma.com, a value stream is all of the actions (both value-added and non-value added) currently required to deliver a product or a service. It is the work activity and information flow occurring as raw material and/or information becomes a product/service that is delivered to a customer. In other words, a value stream is all the components of Man, Machine, Material and Information necessary to bring a product or service from its initial request or creation to final delivery to the customer. A value stream map (VSM) is the visual representation of these steps.
The map may be of the actual process, or it may be a map of the future state of the process; preferably both are mapped during the value stream analysis process so that needed changes are understood.
In order to complete a value stream analysis, the following steps are completed by the business:
Step 1: Identify the product or product family — the decision must be made as to which product or service is to be mapped. The product/service: 1) may be the one with the highest volume output, 2) that has been identified by our customers or 3) we expect/hope to do more business in the future.
Step 2: Create a current VSM — map all the current processes, regardless of value add or not, to complete the delivery of the product/service. It is important to note that this process is not a simple flowchart of the process but includes significantly more information. All steps that include man, machine, material, and information are included. It is important to determine the value (or not) the customer is receiving from each component at each step.
Step 3: Create a future state VSM — Once the current map is completed, a streamlined map of the future state is drawn, keeping in mind the value-added steps.
Step 4: Create an action plan — Create a plan to implement the improvements in the process that have been identified.
VSM is a powerful method to ferret out waste and is often used by the business to identify additional needs in any process.
Why would IT Finance care about this business process tool?
This powerful tool should be used in alignment with our ITFM reporting to determine where IT can increase or decrease services being offered to the organization. By keeping the focus on the value-added steps in producing our products or services, the organization can prioritize its resources in areas that add the most value to the customer. Remember that in step 2, the business is giving value to all components- including the information component. Those information components are frequently IT Business Services. By leveraging this mapping, IT can get insight into the value they are providing to the business.
With this understanding, it can also be used for continuous improvement, allowing IT to strategically look for places where they can have the largest impact on the business bottom line.
VSM and ITFM work well together to strategically align IT services with the organization’s values. Feeling like this is your next maturity step, but not sure where to start? Our advisory packages can help you jump start your value journey.