Value Stream

For those that are paying attention you will have figured out that I am going through the list of five core things that make up the Lean principles. Last time I talked briefly about Value and this blog is about the Value Stream.

So we defined value as that recognised by your customer. The Value Stream is simply the process or the string of steps in which that value is added in your company. Actually a value stream stretches all the way back through your suppliers and all the way forward to your customers' customers. It is the end-to-end process that "does the work".

Why do we need to study it? Well, because it is normally full of waste. The biggest culprits in service Value Streams are waiting and rework. Waiting in batches between steps and rework due to error, bad or lack of data. In fact between 40% and 80% of a process in a service arena can be waste.

The simplest way to study the value stream is to draw it. Put the steps on a big piece of paper and add the time it takes to complete each step. Remember to include all the waiting and rework steps. Then take each step and ask, "Would my customer be willing to pay for this step?" I.e. is it a value step. Add up the time for the value steps and compare that with the total end-to-end time. The proportion of value adding time in the Value Stream might be a bit of a shock. So sit down, have a cup of tea, and next time I will tell you a bit about Flow.

Best,

Rob

What is value?

What is value? Whose opinion of value is worth listening to?

These are very important questions because the perception and the view point of value will influence how an organisation measures itself and its success. Measures drive behaviour, so if you get the measures wrong, you drive behaviour in the wrong direction and ultimately deliver less or no value.

The only view point on value is that of the customer. The customer is the final user of the product or service. Don't get confused and think that because the work you do goes to the accounts department next in the process that accounts is your customer! They are not. Only the final customer can define value.

How can you know how your customer defines value? Well, you can ask them. You could do a customer survey. But initially I would suggest a different tack. First I would listen to your demand talking to you. Look at all the requests for action or information from your customers. Categorise that demand into "failure demand" and "value demand". (This is an idea I learned from the work of John Seddon of Vanguard Consulting). Failure demand is that which is caused by error or inaction on the part of the company. Value demand is a normal request for service from the company. For example, if you were a mobile phone company, "I ordered a phone, but it has not arrived." would be failure demand, while "Can I upgrade to a new model?" would be value demand. So divide demand in to value and failure and look at the failure demand and you will have a pretty good idea of what customers value. Or at least what they are annoyed enough to contact you about at the moment.

The work now is to remove the failure demand. At this point, this will be the best single way of improving service and cutting cost. Once this is done, you can work on enhancing the creation of value in your processes and making value flow.

Lean Service

This blog is going to be about Lean Service. That is, applying Lean Thinking to service environments. I hope it will include links to stories from around the world, tips and tricks, some theory and a few examples. If readers have any of the above I would love to hear from you and will of course give you a mention as the source should you so wish.

The basic principles of Lean are:

• Value
• Value Stream
• Flow
• Pull
• Perfection

First you define Value from your customers' point of view. Then you track the way that value is created in your organisation, in other words track or map the Value Stream. Womack and Jones often talk of "going for a walk" or "walking the flow". Once you have identified the steps in the Value Stream that add value you can jettison all the non-value steps. Left with only the value adding steps you now make them flow. Following this you ensure that value is pulled by the customer along the value stream. Pulled, as opposed to pushed, which is the normal method of value creation. And last but no means least you pit your company against perfection and embark on a process of continuous improvement. This is a battle you can never win! But it is much more effective than any benchmarking or comparison with competitors. Copying competitors won't make you better than them, only striving for perfection will do that.

There will be more on each of the above tenets of Lean in the future, along with lots more.

Stay tuned!

Best,

Rob Worth