Defining Value Added
In the lean lexicon there is a lot of talk of removing waste from processes. Waste is anything that is not value added. There is the problem. What is value added?
In my work, I ask people to define value added for me. It seems like a simple question, but I get numerous blank stares and answers rarely match across the team or organization.
So if can’t give a standard definition of value added, then what is waste? How do you look for it? How do you know what to keep and what to eliminate?
Here is the definition I learned long ago and it never fails me:
- The customer must be willing to pay for it
- It changes the form, fit, or function of the product or service
- It must be done right the first time
ALL THREE MUST BE MET TO BE VALUE ADDED!!!
A customer may find something interesting but isn’t willing to pay the extra price for it. An example may be an optional built-in DVD player in the mini-van. Some may find it of value and pay extra for it, while others may not.
A change must be made to the product or service. Inspection stations on an assembly line are a good example of something that violates the definition. It may be needed because that is better than a bad product getting out.
Which leads to the last point. If it isn’t right the first time then it is a defect which is one of the seven types of waste.
Next time you are looking for waste, bounce it against this definition of value added. You may be surprised to find waste that you haven’t considered before.
Engage People Using a Benefits Map
Businesses typically care about only three things: 1) Increasing Revenue, 2) Reducing Cost, and 3) Cost Avoidance. But it isn’t always easy to connect the work to one of these three outcomes.
Reducing scrap. Reducing lead time. Decreasing accidents. Making quicker decisions. These are things it is easier to connect to our work. These are outputs.
So how do the outputs tie to the outcomes? That is where a benefits map can help.
The benefits map takes the deliverables of the work (on the left) and ties them to the outcomes (on the right) by way of the outputs (in the middle).
Properly designed work has known deliverables. Getting to how theses deliverables are going to change known metrics connects them to the outputs. Then it is working with the customer to think about how changing those outputs will create a better outcome for the business.
The last step is to quantify the benefit to the outcome.
There are two positives to this method. The first is the team has to stop and think about how the work will benefit the business. Just the awareness alone creates teams that more in touch with how they are affecting the business.
The second is the people doing the work become more engaged int he work. They can see a visual of how they are making an impact.
Understanding how your work is helping the business is a key component in employee engagement. The Benefits Map is a simple but effective tool to help engage people.
Who is Your Real Customer?
Lean is focuses on adding value for the customer. But, who is your real customer?
Many groups will talk about supporting another group within the organization. The focus is on making the internal customer happy. Delivering what they need and want.
Internal customers are important. As a supplier, the focus should be on delivering what the internal customer wants. But, they are not your real customer. The real customer is still the end user or the consumer of the organizations product or service. That never changes.
Even if a group never touches the value added processes making the product or service, the group should be focused on the end customer. As the group works with the internal customer, questions should be asked if what the internal customer needs/wants lines up with adding value for the end customer.
Common thought is it’s not the support group’s job or position to ask because the internal customer group is assumed to already know what is being asked for is adding value.
Amazon. Zappos. Danaher. Safelite. Organizations that have figured out it is EVERYBODY’s job to focus and ask questions about what adds value to the end customer have a significant competitive advantage.
Are You Stuck in Neutral?
Seth Godin’s blog “The Cost of Neutral” is a short but insightful post. The quote to take away from the blog is this:
Not adding value is the same as taking it away.
This is a driving point to the lean methodology. You can’t stand still or you will get passed by someone who is improving and adding value for the customers.
Leaders and managers may not be directly involved in adding value to the product or service, but that does not mean they aren’t responsible for driving value creation. Leaders add value by engaging employees in ways that will help them continue to add value for the customer.
People and companies can’t afford to be stuck in neutral.
Value Streams Are Misunderstood
I really like seeing more and more organizations trying to implement lean. Seeing organizations start to understand lean and want to improve using the lean mindset and principles is very refreshing. A great step in the right direction.
But not all lean starts are created equally. Or for that matter even get off on the right foot.
I recently saw a company giving a presentation on some HR practices and apprenticeship. They were doing some really great stuff around apprenticeship for a machining shop.
What caught my eye was their comments about lean and aligning to value streams. The company listed their value streams on a slide. The first few sounded more like machining functions rather than a value stream but I don’t understand the business so I could be wrong. Then I saw the bottom half of the list: Accounting, Project Management, Human Resources, etc…
Yikes! These are not value streams. These are functions that support value streams.
Misunderstanding of value streams is quite normal. In order to be a value stream, it has to create value for the customer. To understand what creates value a company has to have a definition of value.
I use one I learned from the Lean Learning Center:
- The customer must be willing to pay for it
- It must change the form, fit or function of the product/service
- It must be done right the first time
In a machining shop, accounting does not create any value for the customer. Nor does Project Management.
Value streams are linked process that create value to a product or service for customer. The are not departments (accounting , project management) or functions (milling, cutting).
Grasping the true meaning of value streams and what your companies value streams are can really open your eyes to the improvement possibilities.
Listen to the Customer Input
The main tenet of lean is to deliver value for your customer. The customer is someone that uses the product or service whether it is internal or external. The customer helps to define if something is value added or not. It is critically important to listen to the customer and understand their needs and how to deliver that value.
Sometimes the designer of the product/service can get too caught up in what they want to deliver to the customer or what they believe they need and miss what the customer needs. When this happens the customer can become frustrated and will not adopt or use the product/service. This leads to less credibility of the designer. Over time people will go around or cut out the designer.
An example. A group of designers build a process without input from the users of the process. When rolled out the users don’t use the new process because it is not a process that can not be executed in reality. The designers should have had the users of the process in the sessions helping to build the new process. During this time, the designers should be listening to the users and asking questions to gain clarity of what would work not trying to convince the users of how they should work based on their thoughts.
There is a fine line (or grey area) though. The designers should ask questions and push for improvement where they think it can happen, but with input from the users. If you are taking the time to improve something then push for all the improvement you can get. The designers should help to do this. It is a fine line to walk but when the designer crosses over it is usually easy to tell.
The customer input is the most important part of designing anything. A product. A service. A technology. A process. Anything. Listen. Ask clarifying questions. Understand the customer needs. Deliver value for the customer.
Definiton of Value – Part 2
A few weeks ago I posted a blog about the definition of value that I use. James Lawther posted a great comment about that post with some good questions. I felt the questions were good enough that it warranted a blog post to highlight the questions and give my thoughts in response.
With James’ permission here is the comment he left:
Not sure I agree
1. It must be something the customer finds valuable and is willing to pay for
2. It must change the form, fit, or function of the product/service
(If it doesn’t why would I pay for it?)
3. It must be done right the first time
(If it wasn’t, why would I be willing to pay for it?)
Am I being a pedant? Don’t I only need one definition? What am I missing?
My thoughts on James’ comment are below.
I see all three points as one single definition with three parts that must be met. I agree with your assessment on points 2 and 3 of “If it doesn’t, why would I pay be willing to pay for it?”
The issue comes up when discussing value added activities during an improvement event or discussion. Having a stringent definition helps make the discussion less personal and more objective. Two examples that I run into are inspection and finance (or any support function).
With inspection, I have heard the argument that people will pay to have the product right. I would disagree but can understand that argument. With the stringent definition though inspection immediately fails point number 2. Inspection does not change the form, fit or function of a product or service. People tend to agree with this and the discussion ends.
When the discussion becomes about someone’s specific job like finance, people can get very defensive. Again, a support job like finance fails point number 2 and does not change the form, fit or function of the product or service. People will argue that it is necessary to run a business. I completely agree with so at this point we start to discuss necessary versus pure waste.
There are things that are necessary like reporting the company’s finances or even transportation but it is still not value added and it should be made very clear. Waste is stuff that can be completely eliminate like extra motion or rework.
Point three about doing it right the first time is part of the definition because sometimes the rework has been so engrained into a process that people think it is normal. This helps to reinforce the notion that anything that is being redone is not value added and should be scrutinized.
What are your thoughts?
The Definition of Value
In the lean vernacular waste is mentioned quite often. From my experiences, waste is the number one concept and idea talked about with lean.
Waste needs to be identified and eliminated or reduced, but that is hard to do if values is not defined. Without a definition of value, the separation of wasteful items and non-wasteful items becomes harder.
Here is the definition of value that I use:
- It must be something the customer finds valuable and is willing to pay for
- It must change the form, fit, or function of the product/service
- It must be done right the first time
All three of the criteria must be met. No Exceptions!
I am very strict in my definition of value When I look to improve a process I want to first work on eliminating or reducing the non-value added steps/actions. Not squeeze the juice out of the value added items. The non-value added actions/steps is the place where the headaches and pain points for the employee occur. It isn’t changing the product/service that cause headaches as much as it is looking for the things needed to be able to do the change to the product/service.
Defining what is value is the first step in being able to eliminate waste. Feel free to use the one above. If not, be sure to have one of your own. You don’t want to eliminate something that a customer may find valuable.
When All Else Fails Eliminate the Value
It is no secret that the U.S. Postal service is in dire straits and getting pressure to improve it’s financial position. I thought I had seen it all until I saw this article last week in the USA Today.
The U.S. Postal Service’s plan to save $2.1 billion a year and fend off possible bankruptcy threatens to end almost all overnight delivery of first-class letters and postcards next year.
Isn’t the way the U.S. Postal Service adding value by delivering letters and packages as quick as possible from Point A to Point B? So instead of addressing waste in the process, they are going to eliminate a value added feature.
This will surely affect businesses.
“Everyone from Netflix to timely magazines to the greeting card industry to political campaigns who still rely massively on traditional mail deliveries will be negatively impacted,” says Adam Hanft, a consumer-marketing specialist who heads Hanft Projects.
Online retailers — not to mention small and midsize businesses — that are dependent on timely shipping could feel the pinch. Nearly one-fourth of local merchants use direct mail as a crucial marketing strategy, according to MerchantCircle, the largest social network of local business owners in the U.S.
This just is just backwards. If you are going to cut something, cut something that is adding little to no value. That would be something that is not being used by your customers. Would an automaker stop putting radios in cars to save money? No. They add value for the customer so it would stay.
Plus, stamps are going up next year again. I’m sure another raise in package rates is right behind it. If a normal, business cuts an item that adds a lot of value for its customers and raised it’s prices at the same time it would not survive.
These moves aren’t going to save the Postal Service. They are going to squash it. What a chance for UPS and FedEx to jump in and increase it’s business.
If the U.S. Postal Service wants to survive, it should focus on the customer needs and eliminate what does not add value. Not what does.
PowerPoint Can Be Wasteful
Have I taken my lean thinking too far? I don’t think so, but there are others that do.
PowerPoint is a useful tool for presentations, but is WAY overdone. Everything needs to be done in PowerPoint in order to have any validity anymore. People put things in PowerPoint that are seen once and never referred to again. Most of the time the PowerPoint slides do not add any value to the conversation.
Anything that does not add value is waste. So why do people spend so much time creating PowerPoint slides?
I have gotten away from the waste of creating needless PowerPoint slides. During kaizen events, the team has the maps on the way and we take the management group out to the floor to see the changes. You can’t get that from a slide. If it is information to digest, I make the original file (Excel, Word, .jpg) as readable and easy to understand as possible and use that to illustrate my point. I love to use pictures to show people.
Unfortunately, not everyone I work with agrees. More importantly the upper management doesn’t agree. I have received feedback from a few that I nail the project deliverables, bring great data analysis to the table, do great work, BUT it doesn’t feel quite finished. When I ask what is missing I get the prettiness factor, the PowerPoint slides.
Really?! I get dinged for that?!
When I ask what value it adds I get the run around.
There are times when PowerPoint is very useful. Training is a great example. I am not encouraging to but a novel on a slide. In should be some bullet points to highlight your point. Adding a visual to re-iterate your point is powerful too. People learn in 3 ways: reading (bullet points), visual (picture), or auditory (hearing the explanation). There is the learning by doing, but there usually is an explanation before the doing and that is what I am referring to.
PowerPoint can add value if you are having to give a presentation in a large room where not everyone can see a flip chart or when you have to give the same presentation multiple times.
Whether you use PowerPoint or not always prepare for the presentation. When you have the chance challenge the value of using PowerPoint slides to convey the message. And if you do need to use PowerPoint, ask yourself if the slide is adding value to the presentation or not.