Chapter 1 begins Part 1 of Project to Product (there are 3 parts to the book). This part of the book introduces the Flow Framework, the core of the book.  The graphic showing the whole model is the first thing you see when you open this part of the book which anchors the importance of the model for the rest of the book.

As a point of context, Kersten draws on his observations and interactions with Rene Te-Strote as he visited the BMW Group plant in Leipzig. The story is more interesting in 2021 at what we all hope is the tail end of the COVID Pandemic because it is the outcome of several in-person interactions. I wonder how Project to Product would have evolved in the far more arms-length environment 2020 granted us. 

Early in the preface to Part 1, the author makes the point that “enterprise IT organizations have no formalized notion of value streams or measurement of how business value is delivered.” The concept of value chain (and value streams) are not foriegn concepts to most in IT, however, they are used or at least used well in most organizations. This happens for many reasons, two that I find most telling are:

  1. While not foreign, the concept of value chains is not well understood from a practical point of view AND there are a lot of well meaning but misinformed consultants selling value chain analysis.
  2. IT often pursues a silo’ed business model focused on technology not the business, therefore they speak a different language. The gap between IT and the business it enables has existed for as long as I remember. The more silo’ed IT is on the org chart the worse higher the barrier. There are exceptions, but they only serve to prove the general rule. The outsourcing model used by many companies is an example of business models that make the relationship between IT and the business difficult. 

Over the years I have been involved in many successful and unsuccessful adoptions of methods and frameworks (some agile and some not). One common thread in successful long term transformations is integration with the groups adopting the model or framework and the business. The organization knows who and what parts of the organization are on the value chain and which parts are there to enable those on the value chain (not everyone is part of the value chain). That knowledge, almost always indicates the people involved in change will understand enough business and technical language to work together well. 

In Chapter 1, titled the Age of Software, Kersten uses the example of the amount of code in a BWM to make the case that software is ubiquitous and is becoming the core component of nearly every product. The rate of change generates disruptions. Firms that can’t bridge the language gap and focus on how they provide value will fail. This is not just a factor of embracing change, but rather embracing the right kind of change. I have observed that organizations in which everyone understands their part in delivering value to the market are far less fragile. In discussion with colleagues this behavior is not a factor in startups, but might be better attributed to a startup mentality that can exist in firms of any size. Any organization with a rigid hierarchical structure and silo’ed functions is ripe for disruption. 

The chapter concludes with Dr. Kersten’s three epiphanies from his BMW observations (page 48). Boiling them down, software value chains are not as clear-cut as manufacturing value chains. Because many leaders are looking for a simple answer, this is another reason value chain analysis tends to be done poorly in many organizations. As software scales (and arguably ages at different rates) waste increases due to “disconnects between the architecture and the value stream.”  Every time I read Chapter 1 it drives home the point that it is critical to be able to map out value is delivered to the market (true any type of firm). With a clear view of how value is delivered, it is easy to locally optimize parts of the value chain at the expense of the whole organization.

Previous Instalments

Week 1: Foreword and Introduction 

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