To understand the value realized from your end-to-end transformation efforts, you need first to understand how value flows through your business processes.
Organizations define their value according to their customers, purpose, mission, and strategy. Other elements such as business model, ownership, and funding also drive how each company defines what it considers to be of value.
To really understand your value stream, we must first look toward the pioneering work done in the manufacturing industry over the last century. Manufacturers Toyota and Motorola focused very heavily on ways to reduce waste and improve quality. Thanks to the industrial revolution and the partial automation of many sub-processes within these manufacturing plants, these companies were able to fine-tune their ways of working to understand what works, and what doesn’t.
You’ve probably heard the terms of this before; being lean (reducing waste) and six sigma (improving quality, reducing variability). The joint concept is known as Lean Six Sigma, and is in use across the world, throughout a range of sectors.
Some of the core elements of Lean Six Sigma are:
- Identification and elimination of waste
- Identification and elimination of errors
- Reduction in process/output variation
- Improvement in quality of outputs
Why is this important?
One of the key exercises in a Lean Six Sigma improvement project is Value Stream Mapping (also known as VSM). By reviewing a process and understanding what adds value and what doesn’t, organizations can explore ways to remove waste. Less waste = less time, effort, and costs invested in production. This, in turn, leads to increased profits, improved consistency, and a reduction in waste (this could be time, materials, people, skills, as well as money).
So, what is value?
As we mentioned earlier, value is defined by each company and based on customers. Value is typically the product or service provided to the customer. The supplier executes a process of steps to produce that final output. These steps can be broken down into three categories:
- Value-add – adds value to the business or process, that customers are willing to pay for.
- Non-value-add – steps that do not add value to the business or process; waste.
- Essential non-value-add – as above, but steps that are needed for the process to function.
Let’s use an example to explore these. Let’s imagine we’re manufacturing a mobile phone. An example of a value-add step would be transforming raw materials into other components, forming the final output. Like drilling holes in the chassis to mount internal electronics. Non-value-add would include redoing any work because of defects or quality issues. Finally, an essential non-value-added step may be the inspection of the final products. Whilst this doesn’t add value to the customer directly, it is needed as there is an expectation from the customer around quality.
Each step in your business process can be categorized in this way. Did you know that around 95% of steps in a typical business process do not add value?
Following the value stream
Look at your business processes and categorize them. Challenge yourself to really decide if a step adds value or not. Those that do not add value are the ones that should be reviewed first; can they be removed? Can they be altered to reduce waste? What can you do elsewhere in the process the minimize this waste?
Here are some examples to get you started. If you’d like to find out more about the distinct types of waste, check out our blog on Tim Woods!
Innovation
Are you over-processing your ideation process by capturing more data than is needed for a decision? Perhaps you’ve captured more ideas than you can feasibly manage, overproducing, contributing to inventory waste?
Business Cases
What is a business case? A business case is a way of justifying ideas, projects and opportunities. But do you find that your business cases take a long time to refine and prepare for submission, so you’re spending a lot of time reworking the submission? This defect waste means more time per business case, and less value per submission. What about your approvals process? Too many unnecessary steps contribute to transport waste, as your submission is physically or virtually moved around.
Project Management
Efficient projects allow teams to work together effectively towards a common goal. Project plans created in isolation, without engagement from all stakeholders, can often lead to waiting waste; produced by bottlenecks in the process. Waiting your turn to complete a task because someone before you is late means fewer projects delivered on time, and more time spent managing the process.
