Managing your Value stream

I was having quite a discussion on Value Streams with Dr. Reidenbach founder of Six Sigma Marketing Institute, and author of over 20 books on marketing and market research. In answer to a few of my thoughts he defined how a a Six Sigma Marketer looks at Managing Value Streams. His points are well taken and I included his message with his permission.

Using PLM to Manage Value Streams is a great article written by David Segal of Industrial Equipment (IE) Market Development for Dassault Systemes (www.3ds.com). Here’s his point, and it’s a good one:

Companies can satisfy customers’ increased demands (and improve their own bottom lines) by strategically connecting value stream processes to customer and business needs, which optimizes the end-to-end value streams that run across the enterprise.

He goes on to say:

At the core of lean product development and manufacturing processes is focusing on what the customer wants, identifying anything that doesn’t add value in providing a product or service and eliminating those wastes…It’s challenging because value streams run across departments (from product design to marketing distribution) from suppliers to customers. Effective management of value streams for industrial equipment manufacturing requires a clear view of how each activity and process contributes or reduces value to the end-user, and improves or worsens productivity for the company as a whole.

Let’s take a closer look at what he is saying. You’ve got to love the words – the focus on customers, value, value streams, and the linkage from serving the customer to enterprise well-being. However, as an advocate of Six Sigma Marketing I take issue with a couple points. First, you have to look at more than just customers. Let me give him the benefit of the doubt and accept that when he says customers he also means end users or potential buyers. Becoming best in market requires a focus not only on your customers but also those customers that aren’t yours. This means your competitors’ customers and those new to the market. This is difficult for many companies because it forces them to look into a more chaotic and dynamic environment – the market place because this is the arena in which they have chosen to compete. Understanding how the market defines value is critical.

Second, the focus has to be not only on buyers but also competitors. It is critical to understand the value propositions of your competition. What are their strengths and equally important, what are their weaknesses? Understanding the value gaps that exist between you and your competition provides the basis for value improvement or enhancement depending on whether you are a value follower or value leader. If you are a value follower you will want to make improvements to challenge the leader. If you are the leader you will want to continually enhance your value advantage to sustain best in market status.

Third, value streams run from suppliers to manufacturers to dealers to buyers. Many manufacturers tend to look only at that portion of the value stream that is contained within the manufacturing facility of the organization. This is myopic. It is a fact of life that many manufacturers choose not to deal with. Clearly, it is difficult but the enterprise that can cope with the more holistic nature of value streams and manage them will be the enterprise that is best in market.

Consider a manufacturer of agricultural equipment. They manufacturer tractors in a foreign facility and sell these tractors to dealers who then sell them to buyers. They do not manufacture the tractors or the attachments, such a front end loaders, mowers or box blades that go with the tractor. When the customer pays for the tractor, he or she expects prompt delivery. Making the buyer wait for the tractor because the attachment has not arrived is not a value adding element of the transaction. The manufacturer must make sure that all partners in the value stream understand how buyers define value and align the value delivery system to provide superior value. Value creation and delivery is a coordinated effort managed by the manufacturer. It does little good to limit value creation and delivery simply to the product or the manufacturing floor.

The focus on lean should not be solely on waste but also on value. Eliminating waste may provide economic value to the manufacturer but unless these waste eliminations show up in the form of greater quality or lower prices, they ignore the more important type of value – customer value.

Six Sigma Marketing is a fact-based, disciplined approach for growing market share in targeted product/markets by providing superior value. The Six Sigma Marketing Institute is dedicated to the advancement and deployment of Six Sigma Marketing. At the heart of SSM is a modified DMAIC process that provides the architecture for growing top line revenues and market share.

Disclaimer: Business901 does business with the Six Sigma Marketing Institute.

His most recent books include:
Listening to the Voice of the Market: How to Increase Market Share and Satisfy Current Customers
Six Sigma Marketing: From Cutting Costs to Growing Market Share