Friday, 6 July 2012

Investment Stream Mapping

Value Investment Steam Mapping

If you'd prefer to listen to this then click here for the Audio boo.

Value Steam Mapping (VSM) easily slips into the “map is the deliverable”, instead of being a record of where we are and an aid to where we are off to. In this and the following pieces, lets re-visit the approach.

First of all lets consider the term Value and throw it out. When you start to map the stream that delivers to a customer, you must properly understand what your end product/service means to that customer. To use that term one last time before we replace it, what do they value?

Your customer, in giving you money for your efforts (let’s stick to that rather than considering non-monetary transactions for now), have also invested:

  • Time and effort, travel, in finding and buying your product.
  • Association with your brand/image/product: an emotional investment. Their friends will know they have bought you.
  • Bought into your method of delivering the product to their use.
  • Bought into your way of paying for it.
  • Accepted your warranty/service support/upgrade policy.
  • Purchased directly or indirectly your packaging methods.

These investments of thought, trust, time and emotion are in addition to the money they pay out for the explicit functions of your product.

So what does this mean? It means that the first step in Value Investment Steam Mapping (ISM) is to properly understand from your customer’s point of view what they are about to invest in you. When you understand what they invest in you, and which investments are the most important to them, you can begin the mapping.

What is the advantage of such an approach? It means that as you consider waste reduction/efficiency improvements you always do it through the lens of that understanding, rather than just cost.

For example, decisions on where and who does a manufacturing step (low cost child labour?) can impact on their moral investment in your brand (“I won’t buy that because of how it’s made”). Mis-read that and however much value you deliver, if you miss the importance of that investment you are mis-designing your business.

In the next item we consider the complexity of multiple customers.

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