Let's start with few key definitions.

A generic Value Stream is a series of steps that start with a Trigger or a Need (e.g.,a business opportunity or an unsolved problem) and end with the opportunity getting realized or problem solved.

A Value stream delivers tangible value to the customer and business.

Illustration of a Generic Value Stream

Value Stream Mapping involves visualizing the Value stream, as illustrated above. This is typically done in a discussion/workshop, facilitated by the Product/solution manager or consultant.

The first step is to identify and involve the required people (typically a cross-functional group of key stakeholders & SMEs from business, product, technology/engineering, operations...) for the Value Stream mapping workshop.

The next step is to visualize the sequence of steps from start (Trigger/Need) to end (Value to customer, Business), as illustrated above.

This also involves identifying

People/personas involved in each step - especially those who are responsible (for the work involved) and accountable (for the results and outcomes) of a given step.
Systems & solutions that enable each step

The next step would be to collate measures, to understand the current state of the value stream.

Key Measures for each Step

An Example from Lending

We've mapped here the Value Stream from the point of view of the lending business.

The trigger for this Value Stream is the need for a loan.

Step 1- Engage Customer

The Lending representatives from the business would reach out and attempt to engage potential customers in need of a loan.E.g., the potential loan customer could be an existing customer, who has a savings account with the bank.

The systems/solutions leveraged at this step would be the Customer Relations Management (CRM) system, Credit check system and so on.

Note: The measures shown below are purely hypothetical, just for the purpose of illustration. And we've used days, as the time unit for Process time & Lead time in this example.

The Process time is 1 day - as it's mostly an automated process

%Complete & Accurate is low - 70% - due to false/incorrect leads being passed on to the next/future step (Note that %C&A for a given step, needs to be from the point of view of the next/future step)

The Lead time is relatively high - 5 days - due to delay for potential customers to respond / communicate their interest in getting a loan

Step 2- Submit Application

The Lending representative from the business would help the interested customer (engaged from the previous step) to submit a formal application requesting loan.

The systems/solutions used for this step would be the Loan Origination system.

Step 3- Set Loan Terms

For a loan application accepted from the previous step, the loan underwriter would draft the loan agreement with the detailed terms and conditions.

The systems/solutions used for this step would be the Loan Origination system.

Step 4 - Grant Loan

The Loan officer would review the Loan agreement from the previous step for eligibility and approval, and grant (or reject) the loan.

The Loan Origination and Core banking systems/solutions would be used for this step.

Step 5 - Collect Payments

Once the loan is granted in the previous step, the loan is setup for repayment as per the loan terms and conditions.

The Core banking and Collection systems/solutions would be used for this step.

(As before, the measures for this step, as shown below, are purely hypothetical - just for the purpose of illustration)

The Process time is 12 days - as repayments are processed monthly over a year (1 day of processing per month)
%Complete & Accurate is low - 70% - due to mismatch/discrepancies found later at the time of loan closure
The Lead time is relatively high - 390 days - due to waiting time of over a year for the loan to be fully re-paid (with additional delays due to late or missed payments)

Step 6 - Close Loan

Once the payments are flagged as collected, the loan is reviewed for closure.

The Core banking and Closure & Audit systems/solutions would be used for this step.

End-to-End Measures for the Value Stream (as a whole)

Total Process Time- Sum of the Process Times for all the steps in the Value Stream
Total Lead Time- Sum of the Lead Times for all the steps in the Value Stream
Activity Ratio (also referred to as Flow efficiency) - Ratio of Total Process Time to Total Lead Time
Rolled up % Complete &Accurate - Product of the %C&A for all the steps in the Value Stream Below table shows the end-to-end measures for the Lending Value stream example

The low Activity Ratio (flow efficiency) in this example, shows that the time for value-add work is just 5% of the end-to-end flow time

The low Rolled-up Complete & Accurate% (35%) illustrates the cascading effect of even minor gaps from each step, to become a major gap across the Value Stream

The %C&A for each step in the example was in the range of 70% to 99%, but the rolled up %C&A is only 35%

To sum-up, Value Stream Mapping is a powerful technique that helps to gain shared understanding & provide valuable insights into the current state of the Value stream. The same technique can be applied to map out the desired/future state of the value stream, with target measures. This would help to drive improvements & innovation in the Value Stream, and in turn deliver more value to the customer and business.