Learning to Share Your Value Streams

Northeast Shingo Prize ConferenceWorcester, MA

James P. Womack, Chairman, Lean Enterprise Institute

September 25, 2012

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Who Am I?

• Founder and now Senior Advisor, LEI

• Long-time gemba walker along many value streams.

• Looking for ways to maximize value while minimizing resource use and waste ( = lean.)

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Who Are You?• Line managers? (Of departments,

functions, whole enterprises?)• Consultants?• Members of improvement teams?

For the whole enterprise?In operations?In product development?In purchasing?In sales?

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Some Simple Observations• All value is the result of a process – a

value stream – with many steps.

• Value streams flow horizontally across departments, functions & enterprises.

• Value streams are shared, whether managers realize this or not.

• Departments, functions & enterprises are organized vertically, facing the top of the organization chart.

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Stamp/Market/Raw Material Supplier

Weld/ Engineer/Parts Supplier

Paint/ Purchase/ Assembler

Assemble/ Manufacture/ Distributor

Inspect/ Sell/ Retailer

CEO (The Boss) Vertical Orientation

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The Paradox of Optimization

• Each department, function, and firm tries to optimize its portion of the value stream.

• Indeed, senior managers often incentivize department and function managers to optimize their portion of the stream, with KPIs for each.

• This often – usually – causes the whole stream (which is what the customer cares about) to be sub-optimized.

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Authority Versus Responsibility

• Lots of vertical authority for departments, functions, and enterprises.

• No horizontal responsibility for optimizing the flow of value across organizations.

The lack of responsibility is particularly pronounced for the end-to-end flow of value across independent organizations, where there can be no “boss”.

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Sum-Up of the “Current State”

• Most managers face a “prisoner’s dilemma”:

They would like to optimize the value stream for the benefit of the customer and their enterprise.

But they have no means to do so – they are locked in the “cell” on the org chart.

• What can we do about this?

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A Way to Get Started

• Pick a value stream for a product family.

• Form a team from every “vertical” the value stream crosses.

• Make someone responsible for determining the current state and leading a discussion about a better future state.

• Take a walk as a team.

• Draw a map together.

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Current-State Value Stream Map

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Future-State Value Stream Map

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Future States Require Change• To move one plant’s operations to the Future

State, many things had to happen effecting departments, functions & firms:

The supplier had to make frequent deliveries to kanban signals.

The welding and assembly departments had to be combined and cellularized.

Production control had to switch from push scheduling to pull replenishment.

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What About Extended Value Streams?

• These cross the boundaries between independent enterprises – raw materials supplier, parts maker, assembler, distributor, retailer, etc.

• They are typical in the today’s world.

• No one has – or can have – authority for the whole.

Current-State Extended Value Stream Map

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What Will You Find?

• A cross-function, cross-enterprise value stream walk always shows enormous opportunities for creating more value with less resources and waste.

• In the extended value stream example, activities in all of the firms will need to be reorganized.

• Many activities will need to be relocated.• Some firms will need to be replaced.

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What Can You Do?• Have a discussion involving every firm about

the right thing to do for the value stream to optimize value while minimizing resource use and waste.

• See if it is possible for everyone involved to be made whole by winners compensating losers.

• Ask what KPIs will be needed for each department, function, and firm to motivate behaviors optimizing the stream.

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What Else Will You Need to Do?

• Develop a role for value stream leaders who will continually assess the state of every stream by periodic walks to develop action plans for creative sharing.

(A great job for improvement teams!)

• Create a means for value stream leaders to compare methods and results.

• Repeat value stream analysis, forever!

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Final Thought• Do many (any) organizations practice

shared analysis of their value streams today?

• Formal analysis is very hard to find!

• Someone must start somewhere.

• How about you? How about now?

• Sharing is not natural. But it is necessary to escape the prisoner’s dilemmas we all face everyday.