Value Chain vs. Value StreamAug 29th, 2012 by Rick Haynes.
A past MBB asked me to discuss the differences and similarities between the IEE Value Chain and a Lean Value Stream Map (VSM). This question fit well to a discussion from a consulting job from a few weeks ago.
A value stream map is used to document a process that provides value to a item or transaction. The business performs tasks that increase the value. I look at these tasks as a repetitive function within the business.
The IEE value chain is a diagram the shows the key business functions and then assigns performance metrics that are related to a successful execution of the function. The value chain functions are independent of the item or transaction that the function is applied to.
This concept sort of places the Value Streams (products or services crossing multiple functions. In this view every VSM is a combination of Value Chain functions that are used to generate value. The following graphic takes a shot at a visualization of this thought
How does this thought resonate for you?
In my prior consulting effort, I was working at a company that was organized by Value Stream. Each organization created a specific deliverable for the customer. Each organization was independent and expected to complete all their assigned work with minor outside help. During our Workout wet talked over the value chain concept and had them identify functions that repeat throughout the organization and generated an organization structure based on functions.
In the end they recognized the weakness in each of the organizations and as we left they were considering a more matrixed organization structure with VSM managers and function managers. Which is a form that most successfule manufacturing and service companies use.
This company was the first that I have worked at that was so highly VSM organized. Most companies are overly functionally organizaed, where people with similar skills are combined together. It was a refreshing workshop where I found that all organizations can be successful.