Whether it is that new digital tool, new operating model, or new hire, there are always multiple options to consider, all with various benefits and tradeoffs.
But these additive measures, applied in a silo or without proper viability analysis, will not transform a business. Before setting out on any business transformation, organizations need to reflect on where they are in the present moment, across all lenses—people, process, and technology—so they can develop a viewpoint on how and where value can be captured across the business moving forward.
Businesses who begin with transformations—without first understanding their current state—are at risk for making large investments that will likely fall flat upon execution. Relying on existing, outdated, and often inaccurate current state documentation—in addition to legacy mindsets of key resources—can set a program up for failure before it even begins.
Organizations should use value stream mapping to provide clarity of their end-to-end business, which in turn enables a clearer picture of where value can be extracted and enabled for maximum effect. The value stream becomes the baseline for all future measurement activities to showcase program success.
In short: before your business transforms, it may need an intervention.
The best way to assess both value-add and non-value-add activities across an organization’s current state is with a value stream map—a tool which, despite being around for decades, remains drastically underused in strategic transformations.
While value stream maps were initially created to support the manufacturing industry, the tool and concepts are flexible enough to use across industries. Value stream maps are important because they can effectively drive engagement and alignment around core business processes, both current and future states.
The key tactical outcomes of creating a value stream map include:
Identifying and defining customer value; visualizing how day-to-day operations affect customers
Displaying the flow of material and/or information of the processes in scope
Highlighting areas of waste and improvement
Identifying steps that are value-add and non-value add and quantitatively measuring each
Documenting overall process step cycle time and determining opportunities for cycle time reduction
These tactical outcomes then drive the right insights, which in turn, drive strategic outcomes:
Business process optimization or automation opportunities to drive productivity or cost reduction
Greater clarity on role and skillset alignment of your employees to drive efficiency
Organizational redesign efforts to support a new digital solution or capability
Without clearly defined value and a pathway to achieve it, transformations have a harder time building momentum to reach their desired outcomes. Value stream mapping provides an opportunity to capture value creation opportunities, drive alignment with key stakeholders, increase visibility into opportunities for optimization, measure success, and drive sustainable results.
Remember, too, that this effort is specifically not focused on detailed minutia (mapping to capture every nuance, variation, or detailed process step within the business). It is simply used to generate a view of the business that can be leveraged to identify the areas that are ripe for improvement or transformation.
Once this value stream view of the business is generated, the challenges noted upfront suddenly do not seem far from reach:
For a value stream map to be most effective, it is crucial that the activity is performed at the outset of a business transformation. And at that point, business leaders should do the following to enable success:
One of the largest water utilities in the nation was about to embark on a multi-year implementation of a new technology—one that would radically change its services and customer experience. But before technology vendors were selected—and before designing future-state process maps—West Monroe partnered with the utility to develop current state value stream maps for all core business processes. This initiative not only helped the company document and understand its current business processes, but, more importantly, identified several quick wins they were able to realize within just a few months. For instance, West Monroe helped them save over a million dollars a year with meter-to-cash process changes that were implemented with less than a week of effort. In addition to the initial quick wins, value stream mapping also set the stage for a successful implementation of its new meter-to-cash technology.
West Monroe helped a utility save over a million dollars a year with meter-to-cash process changes that were implemented with less than a week of effort.
In another case, West Monroe assisted a medical device manufacturer with a value stream map that evaluated, simplified, and streamlined the contract-to-revenue recognition process. At the outset, the organization was unsure of the root cause of delays—both internally and externally—which negatively impacted customer experience. After mapping the entire process from start to finish, 86 pain points were identified across people, processes, and technologies. The pain points were prioritized by impact-to-cycle time and implementation difficulty—eventually focusing on 13 specific changes that are now delivering $30 million in revenue recognition acceleration (~25%) and $3.3 million in increased revenue per year.
13 specific changes are now delivering a manufacturer $30 million in revenue recognition acceleration and $3.3 million in increased revenue per year.
West Monroe helped a large health insurer use value stream mapping to document the responsibilities, map process workflows, and define activity task listings for employees across six functional groups. Using data analytics on task-level data, the high-impact activities were outlined, which fed into defined performance expectations for activities within job functions. Implementation of the new staffing plans determined through value stream mapping will result in a 20% reduction in labor costs—estimated to be ~$5 million. This will allow the client to repurpose the excess resource capacity to other areas of their business to drive productivity and efficiency. Additionally, implementing the identified process improvement opportunities—including streamlining operations, utilizing robotic process automation and reducing the amount of time allocated non-direct provider support (internal meetings, training, special projects, team touch-bases, email, etc.)—will produce additional costs savings of ~$3 million.
Implementation of new staffing plans determined through value stream mapping will result in a 20% reduction in labor costs for a health insurer—estimated to be ~$5 million.
Finding detailed evidence of value-creation opportunities that drive sustained change within an organization requires more than a high-level glance ‘under the hood.’ It requires a comprehensive value stream map, one that can optimize transformation efforts, align stakeholders across an organization, and provide clarity around where value creation opportunities exist (and where they do not).
In short, a current state intervention, supported by value stream mapping, will result in a clearly defined baseline end-to-end view of the business. This can then be used to identify and measure incremental improvements through the transformation. A simple exercise can save millions of dollars of potential missteps or misaligned investments.
With an economic downturn possibly around the corner, this is more important than ever. Knowing where to prioritize valuable time and resources can help organizations boost productivity, increase efficiencies, and insulate the business from the inevitable risk and uncertainty ahead. And most importantly, it will prevent mistakenly investing in that ‘new shiny object’ that will never live up to reality.