Value?
Value is fundamental to everything that an organization does. The primary reason that an organization exists is to provide value to one or more stakeholders. It is the foundation of a firm’s business model, which describes the rationale for how a business creates, delivers, and captures value. [Value Streams, Open Group, 2017]
Value Stream?
A key principle of value streams is that value is always defined from the perspective of the stakeholder – the customer, end user, or recipient of the product, service, or deliverable produced by the work. [ArchiMate 3.1, Open Group, 2019]
Value Stream Modelling can be used for defining a Business Model: how the organization delivers value? In addition, value stream modelling can be used for identifying business capabilities, and connecting them to value stream stages. With business capabilities, in turn, the organization can define what activities are required within the value stream. Value stream modelling is a beneficial tool to analyze which capabilities participate in value creation, and to which value stream stages they are assigned to. Value Stream Modelling can be used together with other tools and techniques such as Business Model Canvas (BMC), Capability-Based Planning (CBP), Resource-Based View (RBV) of the firm and Business Model Innovation (BMI).
Value Chains, Value Networks and Value Streams can be modelled with ArchiMate Value Stream -element (introduced in ArchiMate 3.1 link). The value stream concept can be used for defining intra-organizational value streams, but also for defining inter-organizational value streams (value networks) such as ecosystems.
A Value Chain (as Michael Porter introduces it in his book “Competitive Advantage, 1985″) is a high-level view of an organization: how it delivers value, what capabilities are required, and how they are organized to support the value chain. A Value Stream (commonly known as a Lean concept) is a more detailed-level view, and can be defined for each of the organization’s main service- or product lines: how a specific service or product is produced to deliver value to customers. “Value streams provide valuable stakeholder context into why the organization needs business capabilities, while business capabilities provide what the organization needs for a particular value stage to be successful [Togaf 9.2].”
The distinction between the Value Chain and the Value Stream is not always crystal clear. “With its primary focus on activity costs and margins, the value chain perspective is mainly concerned with understanding how economic value is created” [Value Streams, Open Group Document G170, 2017].
An example Value Delivery Chain modelled with ArchiMate Value Stream elements is illustrated in the figure below. Value can be associated with transitions between the value stream phases (a.k.a. stages). Capabilities can be linked to the value streams accordingly. As such, value stream modelling can be used for Capability-Based Planning (CBP) purposes. Mapping a value stream to capabilities shows what are the most important capabilities when an organization delivers value to the customers.
Note:
- Capabilities are “serving” the value stream stages
- Capabilities can be grouped as “Capability Areas”, that are based on classifications such as supporting
- Specific groups of capabilities are linked to certain value streams
- Resources can be assigned to Capabilities and Value Streams.
This example above is included in the reference implementation that is created with Sparx EA, which can be found here: link. Navigate by clicking “Idea to Production” value stream in the middle of the landing page of the Lean Enterprise Architecture Framework (LEAF).
The idea of Value Stream and Value Chain is occurring in the IT4IT (link) and new ITIL 4 too.
Value Stream
Togaf (9.2) defines a value stream as follows:
“A representation of an end-to-end collection of value-adding activities that create an overall result for a customer, stakeholder, or end-user“.
Again, Togaf suggests identifying capabilities that support each value stream stage. This can be achieved by modelling a capability map per each value stream stage, as shown in figure 1 above. Togaf continues: “the most substantive benefits come from mapping relationships between the stages in a value stream to business capabilities“.
According to SAFe (link) there are two types of value streams: 1) Operational value streams and 2) Development value streams. Operational value streams (1) are used to deliver end customer value, and those define how organization makes its profit or fulfills its mission. Development value streams (2) are used to develop new (or modified) products, services, systems or capabilities, those of which enable operational value streams.
Value Stream pattern 1
This pattern 1 below is a simplification of the basic value stream diagram. A value stream defines how a certain end result, an outcome, that is valuable to the stakeholder, is created. As such, a value stream defines how the value is delivered, and what capabilities are participating in value creation. The outcome is what the stakeholders want to actually achieve, and the value is the overall perception after all: the experience that remains.
Value Stream pattern 2
Pattern 2 below focuses on customer value creation and delivery. This value stream is initiated by the demand of a customer, and the end result of the whole value stream is an outcome, which is the ultimate goal that the customer wants to achieve. The outcome is realized by the value stream. The outcome is associated with the ultimate value for the customer. The outcome can be e.g. insurance, product or service etc. This pattern illustrates exactly what is the incremental value-add of each value stream stage from the customer’s point of view. This pattern uses ArchiMate association, triggering, influencing and realization -relation types.
Value Stream pattern 3
This pattern 3 below associates the concerned stakeholder directly with the value stream. The whole value stream is taken from that specific stakeholder’s point of view. All the value stream stages and related values are visible and concrete to the concerned stakeholder. For example, the stakeholder can be e.g. customer, and the value stream can be e.g. a customer journey path, which reflects the customer’s steps and incrementally added value within an end2end flow of actions.
Value Stream pattern 4
This pattern 4 below associates two stakeholders to the value stream as follows: 1) the provider/producer stakeholder (A) and 2) the stakeholder in end user / customer role (B).
Value Stream and Value Stream Stage
Note:
- Value Stream can consist of sub-value streams called “stages”, those of which are modelled with the same value stream symbol (figure below).
Value Stream (Business Model) and Business Process (Operating Model)
The Value Stream represents the Business Model (the WHAT organization does), whereas the Business Process represents the Operating Model (the HOW organization operates, the implementation of the Value Stream). In that case, the value stream and process describe the same “thing”, but at different abstraction levels.
The figure above is a simplification of the relation between the value stream and the business process, just to illustrate their usage in different levels of the business architecture. Typically each value stream stage can be defined and modelled in more detail in a business process.
“A Business Model should also provide a very high-level view of the key parameters that together combine to produce the value proposition. An Operating Model explains the configuration of the enterprise resources considered optimal by the leadership team for the realization of the business model. In other words, how will the business model be realized by some suitable combination of People, Process, and Technology (PPT)”. [Ed Walters, Modeling the Business Model Canvas with the ArchiMate® Specification, Document No.: W195, Published by The Open Group, May 2019.]
An example operating model, represented as a process diagram, is shown below. This generic operating model can be adjusted according to the value stream, and what is appropriate in the organization. An operating model defines in more detail how the value stream, the business model, is to be implemented – how the organization works in practice. The operating model can be applied to the frameworks that are used in the organization.
As such, the value stream and related process are the different sides of the same coin: these can be used for planning and execution purposes. The organization first defines its strategic goals and actions to be taken, then identifies the capabilities that are required, and organizes them within a value stream. Based on those business model analyses, the organization then defines an operating model for execution. The operating model is the technical view of the organization in motion, which is influenced by the social aspect, the human factor, known as “culture”. When the organizational culture is encouraging Lean and agile practices, the culture can be an accelerator, otherwise an obstacle to optimal performance…
Value Conceptual Data Model
Here is an example conceptual data model covering the concept of Value. Value is the most essential concept in the organizational context! It has been said that “values are our most natural motivators”. As such, it is important to define and classify, how the value concept can be identified and used in the organizational context. The figure below introduces certain fundamental classifications, specializations and associations of the value concept.
In the organizational context, a value can be (shall be) linked to the following intra-organizational things:
- to each and every behavioral or functional act that an organizational actor does, (we should always ask ourselves when doing something: what is the value of doing this? Is this valuable to the customer, directly or indirectly?)
- to all the services or products an organization provides to its customers.
From the stakeholder (e.g. customer) point of view, value is linked to things such as:
- to end result(s), the outcome(s), a stakeholder gets when using, choosing, contributing or funding a certain service or product (in some phase of its life-cycle)
The value that can be linked to a stakeholder, is the most optimal combination of factors that can be evaluated as values. Examples of valuable factors are quality, price, the sum of properties or benefits, the balance of pros and cons, impression, intuition, usefulness, easiness and the “story”. The end result of reasoning, the calculation is a sum of identified advantages and disadvantages. The decision the customer makes to choose a certain service or product is a result of reasoning of weighted factors. The best service or product doesn’t always get selected, even if it has the highest score in specific quality factors such as usefulness. There are other motives influencing such as ease, speed and overall expenses that force the customer to make a move.
Value concept and Value Streams are handled in very detail in Open Group documents such as:
- Value Streams, Open Group Document G178, 2017. (link)
- ArchiMate 3.1 specification, Open Group, 2019. (link)
Value as a concept
What is “Value”?
According to the Open Group Value Streams -document:
The word “value” originates from the Old French valoir: ‘be worth’. It is the regard that something is held to deserve; the importance, worth, or usefulness of something. Within the context of Business Architecture, it is important to think of value in the most general sense of usefulness, advantage, benefit, or desirability, rather than the relatively narrow accounting or financial perspective that defines value as being the material or monetary worth of something. Non-monetary examples of value in the business world include such things as the successful delivery of a requested product or service, resolving a client’s problem in a timely manner, or gaining access to up-to-date information in order to make better business decisions. [Value Streams, Open Group, 2017]
Value is fundamental to everything that an organization does. The primary reason that an organization exists is to provide value to one or more stakeholders. It is the foundation of a firm’s business model, which describes the rationale for how a business creates, delivers, and captures value. The Business or Enterprise Architect should be able to model, measure, and analyze the various ways that the enterprise achieves value for a given stakeholder. This includes the ability to decompose the creation, capture, and delivery of value into discrete stages of value- producing activities, each of which is enabled by the effective application of business capabilities (see The Open Group Business Capabilities Guide). This Guide provides an approach and examples for modeling business value. [Value Streams, Open Group, 2017]
According to ArchiMate (3.1) specification:
Value represents the relative worth, utility, or importance of a concept.Value may apply to what a party gets by selling or making available some product or service, or it may apply to what a party gets by buying or obtaining access to it.
Value is often expressed in terms of money, but it has long since been recognized that non-monetary value is also essential to business; for example, practical/functional value (including the right to use a service), and the value of information or knowledge. Though value can hold internally for some system or organizational unit, it is most typically applied to external appreciation of goods, services, information, knowledge, or money, normally as part of some sort of customer-provider relationship. [ArchiMate 3.1, Open Group, 2019]A value can be associated with any concept. To model the stakeholder for whom this value applies, this stakeholder can also be associated with that value. Although the name of a value can be expressed in many different ways (including amounts, objects), where the “functional” value of an architecture element is concerned it is recommended to try and express it as an action or state that can be performed or reached as a result of the corresponding element being available. [ArchiMate 3.1, Open Group, 2019]
Definitions
Value =
- Represents the relative worth, utility, or importance of a concept [ArchiMate 3.1, Open Group, 2019].
- The fundamental to everything that an organization does [Value Streams, Open Group, 2017].
- The primary reason that an organization exists is to provide value to one or more stakeholders [Value Streams, Open Group, 2017].
Value Stream =
- Represents a sequence of activities that create an overall result for a customer, stakeholder, or end user [ArchiMate 3.1, Open Group, 2019].
- A key principle of value streams is that value is always defined from the perspective of the stakeholder – the customer, end user, or recipient of the product, service, or deliverable produced by the work. [ArchiMate 3.1, Open Group, 2019]
- A diagrammatic representation of the sequence of activities required to design, produce, and deliver a good or service to a customer (the Lean Value Stream) [Value Streams, Open Group, 2017].
Value Chain =
- A value chain is a business model that describes the full range of activities needed to create a product or service.
- Disaggregates a firm into its strategically-relevant activities in order to understand the behavior of costs and the existing potential sources of (competitive) differentiation (Michale Porter) [Value Streams, Open Group, 2017].
Value Network =
- Describes the social and technical resources that exist within and between businesses (e.g. in ecosystems)
Note! Value Stream Modelling is close but not exactly the same as Value Stream Mapping (VSM). Value Stream Modelling can be done with standard ArchiMate modelling language with an appropriate EA modelling tool (such as BIZZdesign Architect, Sparx EA, QPR EA, Archi etc.), whereas Value Stream Mapping is another concept provided by another toolset.
See also an excellent document covering Value Stream modelling by Christine Dessus from here: link.
For more ArchiMate examples see: