Leadership and their Role in Value Delivery

Many process methodologies and frameworks have fundamentally proven components which can identify and promote activities necessary for optimal value, flow and quality delivery within an organization.  There are an assortment of ways these methodologies define value, but all methodologies have one commonality, which they share for long-term sustainable success.  Leadership and leadership support for value based change initiatives are the number one variable for success or failure of any such initiative.   This paper will explore how leadership can promote successful change initiative in your organization and how with thoughtful planning and support you can avoid the most common points of failure.

Traditional command and control structured organizations are often not adequately designed for allowing leaders to adequately promote value delivery.  Traditional organizational structures are also not conductive at turning managers in to effective leaders.  Neither are they designed at empowering their workforce, rather they tend to focus on hierarchical decision making which promotes a command and control mentality.

Value or value creation can be viewed three ways. The customer must value it and be willing to pay for it, It must change the product or service, must be done right the first time.   Many frameworks do a great job focusing on these three areas.  Although frameworks are great tools at enabling value delivery they can only be utilized if the culture and environment fosters and promotes value delivery at every level in the firm, including the individual.  Using Pareto’s law we can deduct that tools/frameworks only represent 20% of the ability to deliver optimal customer value while leadership empowerment and support comprises the additional 80%.  In successful value focused firms 80% of the effort is expended on changing leaders' practices and behaviours, and ultimately their mind set.  Senior management has an essential role in establishing conditions that enable the effort to succeed. Their involvement includes establishing governance arrangements that cross divisional boundaries, supporting a thorough, long-term vision of the organization's value-producing processes, and holding everyone accountable for meeting value driven commitments. This is accomplished through regular, direct involvement and understanding their role in empowering their employees (intellectual capital).   Without this vision any value driven initiative (Lean, Six sigma, Theory of Constraints, agile) will only be seen as the flavour of the month.

Asking yourself “is your customer is willing to pay for the activity you are engaged in” can provide tremendous introspective when leading.  Defining value in any other terms can undermine the potential of value delivery for the firm.  Leadership often takes too much credit in the value of the organization when they often have created little direct value.  The majority of the value delivered is through the product, services or placement of your firm’s competitive advantage.  This means your greatest potential for value creation often resides in the employees who produce your competitive advantage.  Historically to gain the ranks of manager one had to experience learn and work in multiple domains and layers of your organization and rise the ladder through the learning curve of the multiple layers.  This allowed managers to gain knowledge and experience which could be used to effectively lead and make intelligent decisions.   Today management still rises through the ranks but often they lack the domain knowledge they would have previously gained.  Rapid Technology changes make it difficult for management to have the same depth of knowledge as those they manage.  The pace of change today has created a model where leadership is in stark departure from leadership over the last century.  Traditionally organizational structure is a product starting with the industrial revolution with influence from military modelling, which has proven successful between 1900-1960.  A command and control model focuses on management making strategic and tactical decisions for their employees to follow without question.  This method worked fairly well in highly controlled production environments which had little variability in their process.

Peter Drucker the father of Management predicted and then noticed a shift in the early 60's which indicated successful firms are putting more decision in the domain of their employees who work with the product.  Product complexity and efficiency were creating an environment where productions lines where much more complicated and variable.  With the emergence of service based industries it quickly became apparent that traditional management methods were out dated (although this had become equally apparent in manufacturing earlier).  Successful organizations today understand the majority of tacit knowledge with tremendous potential resides in the knowledge worker.  This is the same worker who under earlier models lacked decision making authority and operated as order takers.

 What is the primary role of a leader today then? This question is asked far too infrequently, and when it is asked, the answers are predictable and often wrong. But it is a vital question, as without leadership, empowered employees will never get off the ground. Common replies include setting the vision, establishing priorities, and providing motivation. These are important responsibilities they are out dated.  The essential purpose of a leader is to do one thing: create and empower change. Without a good leader, nothing changes. If a lean program, or any other program for that matter, is failing, it is probably not the fault of the tools. It is failing because of lousy leadership. As you embark on your journey, learn all you can about the concepts, practices, principles, and tools of your choosing. But remember, above all, the goal of these tools is value – and value hinges on leadership who promote and empower that change.

The knowledge workers need to be in control of achieving and promoting change. Therefore, the leader must convey to the worker that they are the ones who own the processes. Leaders need to empower people to have everything in place in order to perform.  Only when they know and are empowered what to do will they feel accountable and take ownership of the processes. In organizations with traditional leadership behavior, there are frequently policy deployment directions from senior management. The mindset of these leaders is not to involve the people at all. Therefore, people can’t relate to the KPIs (Key Performance Indicator) that cascade down because they can’t understand their contribution or the relevance of the KPIs. People in these companies can’t engage themselves in supporting their senior management in delivering results. Consequently any initiative which does not empower or utilize the input of the employee are more likely to fail.


Leaders must focus on commitment to continuously invest in people and promote a culture of continuous improvement.  There is no destination for value delivery models, there's only the journey.  As a leader you should never consider your “Lean” or “Agile” program as complete.  Once you make this mistake you start down the path of contentment and will lose focus on empowering continuous change.  If leader provides a full and continuous investment in their employees then they will in turn see dedication.  All too often when talking to senior management about learning and multi-skilling of employees, they tell us they worry about efficiency.  When people are learning, they are slower and less efficient is often communicated.  Therefore, the view is that it is more efficient to have the specialist work on the specialist things (there are times and places for specialists but that’s for another paper). This might make sense from a traditionalist, but from a product-development-as-knowledge-creation perspective, this kind of thinking is plain wrong and even dangerous. Learning is the major value added activity in product development and knowledge transfer. In the long run, reducing learning will only result in loss in market share and a less valuable staff.  Often management use the excuse that they have to assign resources to satisfy the customer first, which leaves them little or no time to make real change. Their bosses find it hard to argue the point (or use it as a convenient excuse themselves). Value based culture requires you to make the time to make the change—long-term planning and results versus short-term results with little planning.

All leaders have the ability to adapt to the new value driven leadership mindset.  However, not everyone will be capable of doing it without intensive coaching and support from their own leader or experienced external coaches. Even though initially some of these leaders will not feel comfortable in being a leader in this new system, not many of them leave or are forced to leave because, over time, most will understand the value and  adapt to the new leadership system.

Not every leader nor every company culture is ready for this change in leadership mindset. Despite this, many companies have implemented value based tools and techniques for years with tremendous success (Toyota, Boeing, GE) . For example using a lean framework, ‘Center for Ledelse’ interviewed 400+ companies concluding that only 7% had realized more than 80% of their expectation in their Lean program. This only confirms that these companies need to take action now in adapting Lean leadership behaviour and mindset in to their company culture.  Every  leader deserves a chance, but remember you will have to fight a lot of skepticism down that road. You will likely need to convince the team members by showing them what is in it for them personally. People will change when they realize that their leaders really want to empower them. Leaders need to be consistent in what they ask for. They should not reduce their requirements. They should not change their communication. Consistency it required and we must accept the fact that it takes time sometimes many years for this change to fully reflect in the culture.

Dedication is required of each team member to strive for self-improvement. Commitment is needed for each team member to ensure the values and principles will be followed and the team will hold itself accountable. Courage, because the emotions that empowerment invites,  will be unlike anything the employee has ever professionally experienced.  Avoid non-dedicated team members or “partial allocation.” A team member who is in multiple teams does not have the same commitment and shared responsibility as the other members. Part-time people equate to part-time commitment. Part-time commitment leads to team failure. To the maximum amount possible, all members are 100 percent allocated—fully dedicated to their team. The amount of management waste that disappears is amazing.

What you do from this point forward is exciting.  The possibilities for your firm are endless.  There are many sceptics who think value based programs cannot work for them.  They are right, if they keep that mind-set then it can’t.  There is no doubt the concepts presented in this paper can work for you.  From the world’s largest auto maker to the smallest organization you can make this work.  It can work for you, your vendors and even your customers.  Take the time to explore your leadership potential and realize that anything is possible.

Why Do We Underutilize Human Potential?

Large and small corporations, both in high-tech and traditional industries, now owe most of their value to investments in knowledge. These investments, creating value from the intangible assets of intellectual capital, have a better return on investment (ROI) than physical assets.  In our knowledge-based economy, effectively developing and applying intellectual capital is the key to creating value. Intellectual capital is defined by businessdictionary.com as the "Collective knowledge (whether or not documented) of the individuals in an organization or society. This knowledge can be used to produce wealth, multiply output of physical assets, gain competitive advantage, and/or to enhance value of other types of capital. Intellectual capital is now beginning to be classified as a true capital cost because (1) investment in (and replacement of) people tantamount to investment in machines and plants, and (2) expenses incurred in education and training (to maintain the shelf life of intellectual assets) are equivalent to depreciation costs of physical assets. Intellectual capital includes customer capital, human capital, intellectual property, and structural capital." 

One of the fundamental tenets of lean is the reduction of underutilized human potential. What exactly does this mean? Systems2win defines the underutilization of human potential elegantly:

Restricting employee's authority and responsibility to make routine decisions. Having highly paid staff do routine tasks that don't require their unique expertise. Not providing the business tools needed to perform and continuously improve each employee's assigned work. Not trusting your people to stop production to stop and fix a problem (jidoka). Not trusting your people to be responsible for the cleanliness, maintenance, and organization of their own work area. Not trusting people with a flat organization structure of largely self-directed teams. Not expecting (and measuring) every person to contribute to continuous improvement.

The intriguing concept in this statement is the inability to trust. This lack of trust speaks to the ecosystem of current organizational structures. Peter F. Drucker stated that the organization hierarchy in most organizations today developed as a result of World War II and the attempt to create efficiencies by structuring the firm like the military. While this organizational structure may have made sense 50 years ago, the command and control model is one which does not support the facilitation of human capital to better your organization. Through my research I would argue the military type structures in place today are ineffective in developing and applying intellectual capital and need to change.

Turf wars, politics, red tape, budget nepotism, envy, ego, greed, cronyism, short-term thinking, and rapid changes in strategic direction for no apparent reason must be removed from the culture and replaced with the fuel, the tools, the resources, and the attitudes that drive the innovative process. Any organization, whether a for-profit business, a nonprofit organization, a government agency, or an academic institution, that has a culture where there is a direct or indirect, explicit or implicit, stated or whispered vested interest in keeping things exactly the same to produce continuity and to win the elusive prize of job security will surely die a slow death and will never be a place where creativity is cherished or innovation is harvested. Cultures of innovation are places where creativity is celebrated, rewarded, and cherished at all levels in the organization. When teams are truly inspired and passionate about their work, they are much more likely to discover and to dream without the fear of “extra effort” or discretionary time (e.g., time and effort expended in the workplace beyond what is typically expected) that innovation can flourish and valuable crops can grow.

Leveraging Knowledge

In my experience, about 80% of a company's knowledge is undocumented or unshared and thus lives in the tacit knowledge world while the remaining 20% of explicit knowledge lives in documents or procedures which in that are often ignored. Think about that ratio in terms of your organization. If you are only utilizing 20% of the knowledge of your employees, what is the opportunity cost to your firm for what you miss out of your intellectual capital? If 80% of your organization's capital resides in the knowledge of your workers, managers are hobbled in their ability to make decisions regarding how those assets are utilized.

CEO's are frequently asked "What is the most important asset to your organization?" The standard response is, "Our people." While this is often the general response, it is rarely true. When asked to further define why people are an organization’s most important asset, most managers will resort to primitive answers such as, "They make our products," or "Without them we can't do anything." While these responses are certainly correct, they are a subtle gauge of a lack of trust because they only refer to the physical output of the employee.  After all what's one the first items to be cut when cash flow goes red?

This line of thinking is not only broken, it's dangerous for the future of your organization. Regardless of your product or service, your greatest asset is your people; not in what they do but in what they know. Their intellectual capital (tacit knowledge) is something that can move you from being a good company to being a great company. With knowledge empowering people, your organization can develop products your competition simply can't given the same resources.

The failure to leverage employees’ knowledge creates the opposite result. We have seen companies falter when people retire from firms that have failed to create an environment of successful knowledge transfer.

Creating Transformation

This problem is not easy to tackle. How do you transform an organization with a culture that doesn't adequately value intellectual capital into one which lives off it? What components must be in place in order to facilitate this change? It starts with management. Once management truly supports an investment in intellectual capital, significant advances can be made by following a few recommendations. As with all change, these take time and effort but they can turn your organization into a world-class institution:

A culture of innovation begins at the top but must permeate and trickle through all levels and all functions within any organization. The work ethic, transparency, simplicity, humility, integrity, and accountability of most farmers offer insights and leadership lessons for all of us, particularly leaders interested in fostering a culture committed to intellectual capital agrarianism. Norms must be put into place and enforced that foster cooperation, teamwork, candor, a sense of a common purpose, and a commitment to a set of institutional core values that transcends individual agendas and priorities. These shared values must be truly embraced by everyone, not just appear on a page on the company’s website. People are more likely to innovate and truly want to improve their workplace when they identify with and want to be governed by a set of shared institutional and consistent values and when they are confident that the fruit of their innovation labors are aligned with overall companywide strategies and goals.

As executives, dedicate yourselves to supporting substantial efforts to prevent lost knowledge but culturally and physically.  Create a culture of lean which empowers knowledge workers. Empowerment is a book in itself but to create this environment you must create what Forrester calls HERO (highly empowered and resourceful operatives). Creating a process of improvement through value streaming and Kaizen where management recruits intellectual capital accepts the recommendations for change.  Emphasize teamwork over teams. Teams refer to small groups of people working together toward a common purpose. Teamwork refers to an environment in the larger organization that creates and sustains relationships of trust, support, respect, independence and collaboration. Creating highly empowered teams that work without titles can create the shift of culture to one that prizes intellectual capital.  Focus on knowledge capture and allowing knowledge transfer. Several methods can entice team members to transfer knowledge, including mentoring, paired teams, work shadowing and simulations.

Utilizing human potential is a complex topic. Although many organizations view capturing the remaining 80% of tacit knowledge as a lost cause, it is certainly worth the effort. In reality, most firms do little to try to capture and use their human potential. However, doing so can provide exponential returns and will enable your organization to achieve greater success with minimal additional resources. I encourage delving into some of the lean communities for more advice on how to utilize human potential within your organization. 

IT Must Adapt or Die: This Story Brought to You by the Third Party Providers Trying to Make You Irrelevant.

Five years ago, less than 25% of business leaders rated their organization’s IT function effective at delivering the capabilities they needed. Today the number hasn’t changed. IT functions have strived tirelessly to understand demand, set priorities, deliver effectively, and capture value, yet the results still disappoint. Business and IT leaders alike feel they should be getting more—more efficiency, more innovation, more value—from technology. Unasked QuestionsAmong all the talk of engagement, alignment, and “being part of the business,” one assumption is never challenged—that for information technology to grow in strategic importance, so must the IT function. But what if this is not the case? What if a dedicated, standalone IT function is no longer the best option and the function’s resources and responsibilities were better located elsewhere?

Lets face it traditional IT is under assault.  Frankly if you can't compete with these threats then you deserve to lose the battle.  Look at the change in who can provide value to your organization without any involvement from IT.  Today third party providers can create shadow IT footprints all over your organization.  There's little to stop them when they are providing more value to your customer then you are.  There are a tremendous number of consultants out there who will attempt to prepare you to compete against these firms.  In order for anyone to be successful though I have posted the five greatest shifts your IT organization must make in order to stay competitive and continue to provide value to your customer.  

Evolution 1: Data/Information Over Process – The rise of technology delivered as a service, or the cloud, will significantly reduce sources of competitive advantage from information technology. In theory, a start-up could use the cloud to obtain the same functionality, scale, and quality as an industry leader. Thus reducing barriers to entry which will certainly even the playing field.   Differentiation will lie in how IT manages change, integrates its service portfolio, and critically, exploits the information the services generate.The nature of demand for information technology also is changing. Most employees are now knowledge workers. Social media is becoming vital for customer and internal communication, and data volumes continue to rise. As a result, in the business areas that drive growth—innovation, marketing, sales, customer service—up to According to Marty Pine (Marty Pine is a recognized thought leader and an internationally known Global Business Services Professional who has worked as a senior executive in customer, provider and advisor companies.) 80% of IT enablement opportunities relate to business intelligence, collaboration, or the customer interface. At the heart of each of these opportunities is the need to capture, integrate, and interpret information, both structured and unstructured.

Evolution 2: Eliminate the IT Silo and Embed in the Business – Traditional corporate structure is on its last leg. All corporate functions have the same problems: their capabilities overlap; they do not control the outcomes they enable; and after many cuts, they are struggling to find the next big efficiency. And for organizations growing in emerging markets, no corporate function has the scale or expertise to provide sufficient local support.The IT function shares these problems. It has skills in strategy, program management, business process design, and sourcing. All are valuable, but none are needed solely for delivering technology, and so they can all exist elsewhere.  I have discussed this before when defining organizations as vertically managed.  There is no visibility across the value stream because firms are not set up to execute that way.  Creating an IT organization which can 

Second, no amount of alignment and partnership changes the fact that the IT function enables business outcomes that someone else controls. Much value has disappeared down the hole that this situation creates. Finally, cost pressures mean many CIOs face the unwelcome choice of cutting delivery resources needed to “build things right,” or management resources that ensure IT “builds the right things.”

The need for efficiency and joint accountability for execution and outcome will change the IT function’s delivery model and organizational location. Technology will be consumed as part of business services as the IT function merges into a business shared services group alongside other corporate functions.

Evolution 3: Rogue IT – Externalization of applications development, infrastructure operations, and back-office processes continues, gradually eroding the “factory” side of the IT function. The pace will accelerate as the cloud enables the externalization of up to 80% of application lifetime spend. As this occurs, internal roles will shift from being technology providers to technology brokers.

Evolution 4: Greater Business Partner Responsibility – Technologies for collaboration, business intelligence, and customer interface all require experimentation and iteration, use non-linear, user-driven workflows, and offer value from diversity across the organization. None of this is easy for a central function to fulfill.A generation of business leaders and end users is emerging with greater technology knowledge and confidence. They see advanced, user-friendly technology as an everyday occurrence, and can recite stories of companies gaining industry leadership through technology. At the same time that business leaders’ expectations, and their ability to articulate those expectations, are quickly rising, the cloud gives them access to unprecedented technology scale and expertise. The fact that cloud services cannot be extensively customized levels the playing field; business units cannot customize cloud applications but neither can the IT function.Together, these trends point to a greater role for business partners in areas where the value of differentiation outweighs the need integration. This is not a return to local control of IT resources, rather it is a shift in responsibility for technology decision making.

Evolution 5: Diminished Standalone IT Role – As IT roles migrate to business services, evolve into business roles, or are externalized, the scope of the IT function will diminish and its headcount fall by 75% or more. Strategy, architecture, risk, program management, user support, and relationship management will exist at the business services level, not within the IT function. The CIO position will expand to lead this broader group or shrink to manage technology procurement and integration. Roles remaining in the IT function will organize around build and run, and adoptan agile operating model to allow rapid value delivery and resource mobility.Organizations that do not make these shifts will be left behind as they struggle to effectively exploit technology and manage an inefficient IT function and an underperforming corporate center. For IT leaders too,the shifts present risk and opportunity. Those who do not adapt face a much diminished role in a group with little strategic impact. But the opportunityis also significant. Leading a business shared services organization offersnew levels of resource and accountability for business outcomes. Another option is a leadership role in a newly empowered business unit that thriveson exploiting technology for competitive advantage.

These five shifts should move your group to one which can compete with third party providers. Research consistently shows that in most companies strategic intent is not clearly articulated, and this leads to a disconnect between strategic goals and daily activities. The better an organization communicates strategy in clear, actionable, and measurable terms, the more successfully the Lean transformation can focus on driving change where it matters most. There are many perspectives and approaches to strategy, but it all comes down to a few simple questions. How does an organization define and differentiate itself in such a way that customers prefer it over their competitors? What are the activities the organization must engage in to achieve this status? And how do they sustain competitive advantage over time, as their competitors constantly try to capture market share? More important, in our opinion, than the details of an organization’s strategy at any point in time is how well everyone in the organization understands the strategic intent, and how this understanding guides their daily thoughts, behaviors, and decisions.

What Makes Your Product Valuable? Journey on the Value Stream - Part 3 on Organizational Improvement

In our previous discussions I introduced concepts around how to start organizational change from a 
combined bottom up/top down approach. We have discussed how to introduce an initiative which focuses on improving the organization in terms of value delivery.  We have also discussed how to mind map the organization to find troubles, constraints and a true picture of your company.  Once your problems have been identified it can be easy to try to simply "fix" the problem.  What I mean is that human tendency is to correct what we think is the biggest perceived symptom.  Approaches of this nature commonly lacks greater vision and likely only moves the problems or defers to another bottleneck.  When this shortsighted plan just defers to the next constraint the whole effort  is often construed as a failure.  What must be considered when facing organizational change is the value stream as a whole. Understand as many constraints or non-value added activities as possible when mapping the stream.  In all my consulting experience I have never seen an organization who begins a value stream map exceeding 6% of value added activity.  Setting expectations with leaders from the start to have patience is a key to organizational improvement. 

Example: 

I was working with a development team who believed they needed to hire more developers because it was taking six months to get code released (forget agile for the moment)to production.  This was their problem statement (and their perceived solution).  After creating a value stream map of the development cycle we learned that the cycle time was almost 900 working hours.  Four hours of that time was spent developing.  Roughly 80% of that time was wait time.  Had the team hired more developers they could have attempted to double their productivity and take two hours out of their total cycle time.  Wow what an expensive solution.  Or they could have eliminated several management meetings which were simply rubber stamp approvals to move forward.  Reducing the meetings took 300 hours off of the total cycle time, and it cost nothing to implement.  To get that efficiency gain by hiring developers is simply impossible yet this is most commonly the first solution to reduce development value stream times. 

The concept of value stream mapping has been written very extensively and while there are many good posts most simply introduce the concept but fail at plugging the concept in to something actionable. Or they prescribe perfect ways to change your value stream without providing a lesson on why focusing on the value stream is relevant. I will refer to many smarter practitioners through this blog but it's important to define what value stream mapping can accomplish in terms of starting organizational change.  The LSS Academy has put it best at defining a value stream as "A value stream can be defined as all the steps – both value added and non value added – required to take a product or service from its raw materials state into the waiting arms of a happy customer."  Again the concept of value in this scenario is simply what your customer is willing to pay for.  We know that there are Value Added (VA) activities which the customer finds worth to pay for.  Non-Value Added (NVA) activities are usually where great debate begins.  This work is often very overwhelming and it's not a bad idea to look for an outside consultant to help you.  This is really the only time where I encourage going outside to make this success. 

Again it's important to remember why we are doing all these activities. Shigeo Shingo said, “The four goals of improvement must be to make things easier, better, faster, and cheaper.”  Note the sequence of this list; Lean focuses on adding value and eliminating waste through simplification, quality improvement, and lead time reduction; cost reduction is a natural outcome. According to Gartner, “One of the biggest mistakes companies make with Lean is focusing too heavily on driving cost out of the business. If you approach Lean with that attitude, you’re bound to fail. Building a huge data center may give you great economies of scale, for example, but it may also reduce agility and flexibility.”(Bell, Steven C. (2012-01-04). Lean IT: Enabling and Sustaining Your Lean Transformation)

Consider your own organization, you are likely structured in the form of departments which scale and report vertically. Who is responsible for the product from inception to cash?  A value stream is the horizontal flow of your product from that inception to cash.  This will feel odd to your organization because they rarely care about their products in that manner. 

The best analogy is to compare the value stream to a story.  A product begins its journey in marketing and end in accounts payable.  The key to creating an excellent current state VSM is to document what you actually see with your own eyes. We are not interested in how the process is supposed to work, or was designed to work.  Instead, we are interested in how the process is performing today. Will the process change a bit tomorrow? Sure. But that’s OK. In fact it's encouraged.   There a many different ways to create a value stream map and my personal opinion is that you use one that works for you.  As long as the result of the exercise is to identify your waste or NVA activities in your stream.  Below is a good example I found from ASQ on a simple value stream map.  

Now lets get started.  The teams created for the prior steps in this journey should also be used to value stream map.  They will understand the mapping and problems in the organization best and it's encouraged you stick with those team members.  They are likely the only people who have ever looked at the organization horizontally versus vertically.  For example I once worked with a large insurance organization who were structured in to operating companies.  No big surprise there but each OP Co. was designed to support certain business segments (home insurance, life insurance, investments).  Within each segment we also saw turf wars where they hesitated in helping other departments.  Activities as easy as sharing customer information or transferring phone calls from the customer were almost impossible to accomplish.   Where's the value in this line of thinking?  Well it's easy to keep that mind set when you only look within you own department.  Encourage your people to think across the value stream and you will see very different outcomes. 

Steps

1. Draw the current state value stream map with all of the steps, delays, and information flows required to deliver the target service. IF you're interested in some templates please contact me. 

2. Assess the current state value stream map in terms of flow and waste. Collect all missing data (e.g., value added, cycle time, etc.).
3. Calculate the total lead time and value added time.4. Identify and list all areas of waste (e.g., inventory, transportation, etc.).
5. Develop a list of opportunities for improvement based on these observations.

Below is a great example of mind mapping a development process (From the blog Wide Awake Developers, http://www.michaelnygard.com/). This can show a good example of how Agile and Lean can fit together in the IT world.  Think of an agile activity as something which could exists more at an execution level in each activity while the Lean Value Stream focuses on the end to end process. 

I’m going to use the prescribed method from the LSS Academy below.  Now this has a manufacturing focus but can easily be replaced with services or code.

Walk the process front to back. Quickly walk the process with your team in order to understand the general flow. It’s important to also define the start and stop point of the process. Don’t attempt to take on too much. Remember, we eat an elephant one bite at a time.

Draw in the customer box / details. In the top right hand side of the paper we draw the little saw topped box representing our customer.

We also note their monthly and/or daily demand along with the takt time as calculated in step

Go to the end! Next, we start at the END of the process and begin drawing the map back to front. And don’t forget about that eraser. You will need it. Nominiate a scribe and have them draw the map for the team.

Another trick is to ask each person on the team to map it out so you can compare and consolidate when you get back to the room. Yet another trick is to have the team divide and conquer as you send some off to map the beginning section, some to the middle, and some to the end.  There are many ways to do this. Experiment and do what works best for your situation.

Focus on the flow first. Focus on the flow side of things first (bottom portion of the map). This includes the process boxes and data boxes.  Regarding the data boxes, if you don’t have all the data perfectly collected on the day of the mapping exercise just do the best you can. You can always assign homework to go back and validate the figures later. In fact, even if you think you have solid data, the six sigma side of me urges you to validate your measurement systems to make sure we can trust the data. If you want to get really tricky state both a measure of central tendency and dispersion. You won’t see this advice in most lean VSM books… I guarantee it!

After studying the KB&R manufacturing process for an afternoon we learned that each process step is staffed with 1 operator. We also collected cycle time information at each step. Additional “homework” will be to collect information such as defect rates and changeover times.

Add the Inventory/Wait Times. Once you have all the process and data boxes in, it’s time to add in inventory and/or waiting times.   For inventory, we simply count the number of components in between the processes and note them under the triangle.

We also want to convert these components into days’ supply. To do this, we divide the number of components by the average daily demand (which we used to calculate takt time).

So, if your average daily demand is 10 components and you count 20 components of inventory in between process step A and process step B you have 2 days’ supply (20/10) in between the two processes. We will note this number on our timeline (to be added in a future step).

Lastly, don’t attempt to map every part number! Choose one or two key components to start with. You can always add more to the map later. In our example, we chose to simply count two components of bread as one subassembly since they move together down the production line.

Also, we are not accounting for the peanut butter and jelly “raw material” at this point since KB&R’s expert supply chain team negotiated a killer consignment stock deal with Sam’s Club so this inventory is quite low on the line. During the study, we learned that, as one example, there were 486 sub-assemblies (972 components of bread) in between the jelly application and packaging stations. This equates to 0.69 days’ supply (486 units / 700 daily demand).

Lastly, during the walk through of the process we noticed that each process step seemed to be working in isolation. In other words, the lady working at the peanut butter application seemed to produce as many units as she could and then pushed them along to the jelly application process.

This “push” process is found in just about every mass production process known to mankind. When we see this pushing action we note it on a VSM with a dashed line through the yellow inventory symbol.

Draw in the information flow. This step is what really separates a VSM from traditional process maps in my opinion. You see, in addition to learning about how material flows we also want to understand how information flows.

For example, we want to know it is moves about electronically? If so, we use a lightning bolt looking arrowed line. Is it communicated manually? If so, we use a straight arrowed line.

During this step we also draw in our production control box. For many, this box will include the letters “MRP” in it. In most mass production systems we typically see several manual information (straight) lines coming out of the MRP box aimed straight at each process step box.

In our example, we learned that production schedules each process step in isolation. In other words, each work station gets its unique production schedule. We draw this using straight “manual” information lines.

We also add in the information flow from our customers as well as to our suppliers. In our example, we learned that PB&J’s customer sends 30 days electronic forecasts as well as electronic daily orders. Conversely, PB&J sends its bread supplier an electronic weekly forecast.

Add in the timeline. We can now add the timeline to the bottom of the value stream map. This saw tooth looking line helps us separate the value added cycle time (taken from data boxes) from the non-value added time (days’ or hours’ supply info).

The last step in the process is to sum up all the “value-add” cycle times and note them at the end of the timeline. Likewise, we also sum up the “inventory” times and note that on the timeline.

Points to keep in mind. 

Prepare for the High Cost of Participation.  While value steam mapping can be an effective process improvement tool, the cost to use it can be high. Like racing a top fuel dragster, value steam mapping requires the presence of highly skilled support team members who practice frequently. Because of the need for considerable detail, team members will spend hours, even days, to develop a comprehensive value steam map.

Unlike drag racing, where direct costs can be measured, value stream mapping involves the risk of opportunity costs that are difficult to quantify. Simpler, more productive tools that are easier to learn might be available to make describing the current process faster and more effective. Many organizations forget to consider these opportunity costs for using value stream mapping.

This take times.  Remember if you looking for a quick fix you might find it here but will quickly be disappointed when the entire effort fails.  This is not only a change to your process but more importantly it’s a change to your culture.  People take time to change.  If your leaders aren’t supporting this from the top down and in the long run then you’re just going to spin your wheels.

Other Problems will appear.  If you’re familiar with the Theory of Constraints then you know that anytime one bottleneck is identified and eliminated another one will appear.  That bottleneck as always been there but has not been your primary constraint.  Don’t be discouraged if you find a mind field of bottlenecks.  It’s proof that what you’re doing is working.