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Drawing a Value Stream

Value Stream is meant to show you how your business creates value and generates cash. The idea is to visually connect clients and key business functions in a way that shows the full lifecycle of your ‘product’. A good diagram should facilitate meaningful discussions, starting with the Value Proposition and an understanding of the purpose of existence of your business. It can also help you visually depict the roles that different functions play and show where you have most pressing issues and how they impact your cash generating ability. Finally, a Value Stream is the foundation for building a Key Performance Indicator (KPI) Framework and will be an irreplaceable tool for measuring your project ROI.

For ease of demonstration I have decided to pick an example that all of us can relate to. Let me walk you through the process of creating a Value Stream for a bank (a general one) and I will show you the information this picture packs.

The first question to ask is - how does a bank make money? The answer is simple – it re-sells money at a profit. Money comes in to the bank in a form of deposits, borrowed funds, loan payments, etc. and goes out in the form of loans and investments. While there are other revenue streams, such as various service fees, this re-selling of money is the primary revenue stream. This process has time and cost associated with it and they need to be measured and understood.

Now we need to add a little bit more meat to the bone. Let’s look at how money comes in, more specifically how a bank gets deposits as it is the cheapest and largest source of funds.

When a bank wants you, a potential client, to open a deposit account, it turns to its Marketing team to come up with ways to attract your attention. Coupons, ads – are just some of the ways to peek your interest in giving your money to the bank. Once Marketing has done its job, you, a potential client, are starting to digest the information. You may do some research, you may visit the site, a branch – these are the activities you do before you take the action of opening the account. Once you decide to actually do it, a bank offers multiple channels for you to onboard as a client – in person, on the website, via a mobile device, all depending on the product and bank’s technological abilities. When you onboard, you take your check or cash, let’s say a $100, and you open an account. Your information and transaction details are processed by an operations team that places you and your money into a particular product – an account you chose. Now your $100 goes into an “inventory” from where a certain portion can be sold. The entire process has certain quality characteristics from your, client perspective, and various touchpoints can collectively be called Onboarding Client Experience.

Once you become a customer, you continually interact with the bank. You set up you direct deposit, bill payment, alerts, etc. The more money you keep in the bank, the greater the amount that goes into the “inventory”. Your ongoing interaction can be classified as a Servicing Client Experience. It needs to be mapped out, measured and understood as this is what generates the largest pool of "cheap funds" into the inventory.

Once our bank has money to sell, the Marketing team gets into gear and starts promoting all of the wonderful ways the bank can sell us money. For the sake of this example we will focus on loans, rather than investments. So, the same process applies – marketing campaigns, client research and selection, interaction with the bank via different channels, account opening and processing and here we are – we have a loan! After that we begin paying down the loan. The quality of the entire borrowing experience can be divided into Onboarding and Servicing Experience as they are quite different. Again, mapping those out in detail, measuring various touchpoints and understanding their impact on the overall experience are critical for selecting the right change at the right time.

Now we have a high-level visual representation of how the bank obtains and sells its products, in this case – money. This, however, does not yet paint the full picture. Our bank has a lot more departments that do important work behind the scenes, so we need to show them as well.

All businesses need to be monitored and controlled. That is why everyone has Accounting or Finance departments. Banks are highly regulated, so they may have a stronger monitoring function than other businesses, but the picture below should be quite universal. Finance, Audit, Legal & Risk teams and even Vendor Management – are all meant to monitor the performance of the bank and control its operations to make sure performance meets required standards and expectations.

The same can be said about other important business units that operate behind the scenes and are not directly part of the Value Stream, but are critical in supporting the entire system. These include HR, IT, Customer Service, Facilities and other similar functions. Their role is to enable the creation of value. HR ensures we have the necessary people to operate the system, IT provides employees and clients necessary tools to perform our activities, while Facilities ensures that there is an adequate physical space for this whole enterprise to function. In some instances Customer Service team may be a direct contributor to the value creation, but in this case, I felt it was most appropriate to treat it as a Support role, a team that supports the desired Onboarding and Servicing Client Experiences.

Now we have a nearly complete picture of a bank with its primary revenue generation mapped out and key supporting and monitoring functions identified. The last piece of the puzzle is a function that is present in pretty much any organization – a Project Management Office (PMO). I categorize it as a separate and unique role in the organization as its purpose is to identify, prioritize and execute change in the system. In the picture below, notice the yellow boxes that show issues in different sections of the Value Stream. A PMO needs to help business units across the system identify and prioritize issues, which in turn, help prioritize solutions, or projects. To take it further, a KPI framework can be layered over this Value Stream to help measure such things as Onboarding Client Experience of Support efficiency.

The same approach can be taken with any business. Once you have such Value Stream mapped out, your view of your company and the changes that need to happen will transform. I recommend using Microsoft Power Point as it provides a ‘natural’ constraint, preventing you to go into too much detail. Try it!

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