Optimizing Value Flows

Using scenarios to improve network performance: 

a detailed case study

Process engineering has been a foundational management approach in business since the 1980s. However, many companies are realizing diminishing returns from this approach as they try to carry it forward into more complex activities.

Part of the challenge is that process engineering strives to drive out variation and to standardize business processes. However, in complex environments variation is not only a given - it is desirable. Variation and experimentation allows people to adapt to changing conditions and supports the continuous innovation required for competitive advantage. Value flow optimization helps in supporting effective value flows or workflows where there are many different possible pathways.

A large heavy-shipping port was increasing safety and security inspections from two to five per day. Inspecting ships is very complicated. There are many regulatory and safety compliance requirements where there must be tightly controlled documentation processes. At the same time, different ship models and situations have different types of vulnerabilities and require different kinds of responses from maintenance crews.

Inspecting two ships at once could be managed with process engineering approaches, although it would be very challenging. However, with five per day - each with unique starting conditions and challenges - the process approach was simply too slow and cumbersome. 

VNA was used to define the roles and interactions that would provide for the greatest consistency while allowing the necessary variation and flexibility. Value flow optimization provided a new way for the shipyard to think about how ships moved through the inspection activity.

From a completed value network map you can run different scenarios to help define the different possible pathways a work package such as a product, or a service delivery might travel. Then use the scenarios to address different issues that affect the function of each of these pathways. Issues can relate to role execution, transaction speed or channels, quality or value of deliverables, and how different flows intersect or work together.

Note that all of these different flows could be addressed separately using process engineering approaches and structured technology support systems. However, the difficulty is that those methods are almost always conducted from the perspective of a single role or small group of roles - or a single isolated process - and almost never from a "whole system" or "whole network" perspective. Further, looking at flows as separate activities misses the interdependencies between them and the conflicting resource demands that might result. It is too easy to overlook critical hand-offs between roles or needless redundancies.

The first step in optimizing value flows is to have people discuss their experiences and identify key issues. Because value networks involve many variables, there is no standard formula for optimizing them and their interdependent value flows. More often the optimization strategy takes the form of a combination of small improvements that collectively create a sharp improvement in overall efficiencies.

This example shows how insights for business results can emerge from a single mapping exercise. The basic map and all the key insights and action steps were achieved in a one-day mapping workshop. Each of the problem-solving groups continued to work over the next few weeks for answers to their questions and to make improvements.

A large utility company wanted to improve their ability to handle complex technology repairs and improve their service delivery. The implications for coordinating flows across multiple organizations within the company were significant. VNA provided a different foundation for thinking about technology support - that goes far beyond simply processing trouble tickets or problem reports.

The project team convened a one-day workshop to map out the technology service activity and begin a VNA.  

Figure 1 is the original map showing both tangible and intangible deliverables. The temptation was to show the "official" repair service process. However, in order to address the real issues the group used a Sequencing approach to map where the technology repair became problematic and escalated to a "worst case" scenario. If people are already engaged in an activity, you always want to initially map the way it really works - not the way it is supposed to work.

From this "As Is" map the group identified several different value flows where they could make improvements. In the following figures the orange lines and comments show where the group identified gaps in their own understanding of the activity and questions that needed to be addressed to improve the flows.

Figure 2 shows the "Happy Path" scenario, where the trouble is reported and handled as it should be and the customer is satisfied. Even in this happy path the project team was able to identify issues and improvements. Note that even in an ideal situation some intangibles are still present. 

VNA is especially valuable for addressing "hand-offs" where responsibility for the activity shifts from one role to another. The Happy Path team found a number of these hand-off areas where one role would assume something was being taken care of but there was no way of actually knowing. They also needed to better understand certain communication flows.

Figure 3 depicts the Service Level Agreements (SLAs) activity. The Service Coordinators, Field Technicians, and Field Managers must reference this information frequently to respond appropriately to different customers. Yet they found that the information was often missing or not complete. In some cases a particular SLA had been created in a way that made response either difficult or needlessly labor intensive.

They realized that for the technical repair activity to work well, they needed to be much more involved in developing and managing SLAs. This team realized they needed a much better understanding of the activity and how they could best contribute to improving it.

Figure 4 shows the Escalation flow. This is what happens when things are not going well. Note the number of informal requests for information and updates passing between the Customer Technology Manager, Field Manager, Field Technicians, and Service Coordinator. Intangibles of this type are frequently found where there are "work-arounds" because something is broken. Here the informal interactions were simply mirroring formal processes and were not only needlessly redundant but were causing confusion and duplication of effort. 

Results: This example shows just how many improvement insights can emerge from a single mapping exercise. In this case the project team divided into smaller groups, each dedicated to optimizing one of the value flows. They achieved outstanding performance improvements in just a few weeks of work with the issues. Perhaps more importantly, by engaging with other roles involved they improved communication and collaboration significantly across organizational boundaries.

1. Does value gained by one role extend to or "flow" to other roles or strategic partners within the organization?

If a group of roles belongs to the same organizational entity, then value that is gained by one role from an external stakeholder should flow either directly or indirectly to other roles in that organization.

2. Are there bottlenecks, constraints, or instabilities in the flows of value?

Network patterns can be affected by control mechanisms and decision making. When one role unduly constrains or controls key deliverables it can inhibit value flow. Missing links, dead links, and broken value flows are indicators of missed opportunities for maximizing value.

Within the flows in the network it is possible to optimize individual transactions and groups of transactions. The first step is to sequence the deliverables. There are two other valuable assessments: 1) the speed of individual transactions, and (2) the most appropriate channel for the transaction.

Transaction speed is an indicator to consider when thinking about optimizing value flows. Calculate the speed of the flows by averaging the speed of all transactions in the flow. Once you identify the "slow downs" you can do a root cause analysis to identify what is impeding the flow. Speed can be an absolute number such as actual time to execute the transaction (or wait time) for the deliverable generated by a role. The speed can also be a subjective measure such as slow/medium/fast.

Channel usage patterns are helpful for assuring that appropriate technologies and infrastructure are in place to support the different value flows.

Below is an example of how data can be collected to more deeply analyze transaction speed and channels.

Resilience indicators are very useful for asking about whether flows need to be more or less formally structured. Use the ratio of tangible/intangible transactions to ask about the appropriate ratio of formal exchanges vs. informal informational or support exchanges.

Value Creation indicators help understand which roles are playing key informational roles that are often overlooked in process improvement.

Asset Management indicators also help identify low-value transactions and deliverables, or those that provide little benefit for the cost involved. Use these indicators to assess which value flows accelerate value creation and which ones are creating a greater drain on assets than necessary.

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