Value Chain Mapping: Value Chain or Process Map?

Value Chain Mapping shows the big picture

What is the difference between a Value Chain Map and a Process Map? A Value Chain Map provides a high-level view of a company’s flow of goods or services from raw material to customer. It is a lean technique that has it origins in manufacturing. The raw material for an organization that ships software will be knowledge and effort with shiny DVD’s or software as a service (SAAS) as the final product. A Process Map, on the other hand, focuses on the sequence of a process, including the tasks, activities and parameters. The Process Map is generally constrained to a specific set of activities within a broader organization.  Therefore, a Value Chain Map generally differ from Process Maps in two areas:

• Level of Focus or Granularity
• Measures

The first difference between the two mapping methods is the level of focus.  Value Chains represent the big picture of an organization.  Models such as Porter’s Value Chain break the organization down into approximately ten components that represent all of the processes within the company. A rule of thumb that I use for whether I have the scope right for a Value Chain is whether the sub-group within the organization has its own profit and loss statement. However, this can sometime be a red herring, as organizations sometimes create mock P&L statements to get leaders to run their portion of the organization more entrepreneurially.  Process Maps are a deeper dive in to the organization. They detail tasks, activities and, most tellingly, decision points. A rule of thumb for Process Maps is that individual processes tend to include decision steps and generally do not have a P&L statement.

Measures represent a second area of distinction between Value Chain Maps and Process Maps. Value Chain metrics are focused on cycle times (e.g. time to market or order to delivery time), delivered defect rates, and wait times that effect delivery, headcount, inventory levels and P&L.  These measures are focused on the flow of work through the entire process.  For example, if an order was placed on June 1^st and delivered on June 30^th, the order-to-delivery measure would be 30 days even if the order sat in someone’s inbox for 29 days and was only acted on for a single day. Measures derived from Process Maps tend to focus on the effectiveness and efficiency of a step or group of steps (e.g. the effectiveness of software development).  These measures tend to focus on capturing and comparing the inputs and outputs of the step.

Stephen Parry, author of Sense and Respond and guest on SPaMCast 220, when asked, “What are the biggest misconceptions of Value Chain Maps?” tweeted the following: “what purports to be a Value Chain map is rarely a value stream, it’s usually a process map for a business unit, and it NEVER includes the customer’s consumption steam.” Stephen’s comment is an indication that most Value Chain Maps do not embrace the whole value chain. Remember, Value Chains represent how an organization transforms its raw material into value for their customers at a high level. Process Maps provide a representation of the inputs, outputs and decisions that occur at the task or activity level.  Both views are required because typically changing the effectiveness of the overall value stream will require understanding and making changes at the process level.