Value Chain vs. Value Stream

Value chain vs. value stream: In Integrated Enterprise Excellence (IEE), an IEE value chain describes what an organization does and how it measures what is done from a high-level process-output response (i.e., 30,000-foot-level) point of view; a value stream map (VSM) describes work flow for functions in the IEE value chain.

A past Master Black Belt (MBB) asked about 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 previous consulting job.

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 successful 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 organized, where people with similar skills are combined together.  It was a refreshing workshop where I found that all organizations can be successful.

A system for structurally integrating organizational value streams with its overall value chain is  Integrated Enterprise Excellence (IEE).

Application of IEE to Creation of a Long-lasting Business Process Management (BPM) and Management Information System (MIS) Implementation

How to benefit from the IEE system with its Enterprise Performance Reporting System (EPRS) software (which provides predictive scorecard reporting and a process improvement system so the big picture benefits) is described in:

• How to Avoid Commonplace Business Management System Software Problems
• How to Avoid Commonplace Management Information System Software Problems
• How to Avoid Commonplace Business Process Management Software Problems
• How to Avoid Commonplace Lean Six Sigma Problems

Contact Us through an e-mail or telephone call to set up a time for a discussion on how your organization might gain much from an Integrated Enterprise Excellence Business Process Management system. Or, a Zoom meeting can be schedule directly:

E-mail ([email protected]) or call us (+1.512.918.0280), if you encounter difficulties setting up a Zoom session directly or want to schedule another time that is not available in the Zoom-meeting calendar.