Design Value Stream: Linking Services to Economic View for Better Valuation

por Zózimo, ValueStreams.management

Abstract: This paper explores the concept of Value Stream Management (VSM) in the context of designing services linked to an economic view, particularly within Agile frameworks. The transition from an economic view to epics, features, stories, and backlog is a critical process in software development, ensuring that high-level business objectives are broken down into manageable, actionable items. This paper discusses the assumptions, hypotheses, and findings related to this transition, providing a comprehensive analysis of the problem and potential solutions. Key topics include the economic view, epics, features, stories, and backlog, with a focus on how these elements align with overall economic goals to deliver value incrementally. The paper concludes with a discussion of the findings and their implications for value delivery in Agile environments.

Keywords: Value Stream Management, Agile Frameworks, Economic View, Epics, Features, Stories, Backlog

Introduction

Value Stream Management (VSM) is a strategic approach that focuses on optimizing the flow of value from concept to customer. In the context of Agile frameworks, VSM plays a crucial role in ensuring that high-level business objectives are translated into actionable items that deliver value incrementally. This paper aims to provide a detailed analysis of how services can be designed and managed with a focus on economic value, using the transition from an economic view to epics, features, stories, and backlog as a framework.

Previous research has highlighted the importance of aligning business objectives with development activities to ensure that the most valuable features are delivered first. Studies have shown that organizations that effectively manage their value streams are better positioned to respond to market changes and customer feedback, leading to improved business outcomes.

The key factors behind this subject include understanding the economic view, breaking down epics into features and stories, and managing the backlog to prioritize work that delivers the highest value. The impact of this approach is significant for organizations looking to improve their agility and responsiveness in a competitive market.

Linking value streams to economic indicators is crucial for business success. These indicators include market trends, growth metrics, business opportunities, customer retention rates, sales performance (including cross-selling and up-selling), competitor analysis, innovation metrics, talent and skills assessment, capability evaluation, new market exploration, business trustworthiness, work collaboration efficiency, digital capacity, and market valuation (market cap).

Integrating these indicators with company strategy, operational processes, innovation projects, market opportunities, and customer feedback loops is essential. Without measuring and understanding these relationships, a company cannot effectively validate the continuity and sustainability of its business value.

Situational Context

In software development or complex services, particularly within Agile frameworks, the transition from an economic view to epics, features, stories, and backlog is a process of breaking down high-level business objectives into manageable, actionable items. This transition is essential for ensuring that every piece of work aligns with the overall economic goals and delivers value incrementally.

Hypotheses-Based Validation

1. Hypothesis: Effective Value Stream Management leads to better alignment of development activities with business objectives.
2. Question: How can organizations ensure that their value streams are optimized for economic value?
3. Hypothesis: Breaking down epics into features and stories improves the manageability and delivery of value.
4. Question: What are the best practices for transitioning from an economic view to a detailed backlog?

Assertions and Focus

The focus of this paper is on understanding the process of transitioning from an economic view to a detailed backlog and identifying best practices for managing this transition. Key assertions include:

• The economic view provides a high-level strategy that guides the development process.
• Epics represent significant customer needs or substantial pieces of functionality.
• Features are shippable components of functionality that fulfill stakeholder needs.
• Stories are the smallest units of work, designed to be completed within a single sprint.
• The backlog is a dynamic list of requirements that evolves as the product and environment change.

Measurements and Boundaries

To validate the hypotheses and assertions, the following measurements and boundaries will be considered:

• Alignment of development activities with business objectives.
• Efficiency and effectiveness of breaking down epics into features and stories.
• Prioritization and management of the backlog.
• Delivery of value incrementally and responsiveness to market changes.

Interdependencies and Dependencies Differentiation

Interdependency refers to a mutual reliance between two or more entities, where the actions or outcomes of one entity directly affect the others. In the context of project management, interdependency often occurs between tasks, teams, or processes. Here are some key characteristics of interdependency:

• Mutual Influence: Entities involved in an interdependent relationship influence each other. For example, the completion of one task may be necessary for the initiation of another.
• Coordination Required: Effective management of interdependencies requires coordination to ensure that all dependent tasks or processes are aligned and progress smoothly.
• Complexity: Interdependencies can add complexity to project management because changes or delays in one area can have cascading effects on others.

Dependency is a broader term that refers to a situation where one entity relies on another for its completion or success. Dependencies can be one-way or mutual. Here are some key characteristics of dependency:

• One-Way Influence: In a dependency relationship, one entity (the dependent) relies on another (the prerequisite) to be completed or available before it can proceed.
• Types of Dependencies: Dependencies can be categorized into different types, such as finish-to-start, start-to-start, finish-to-finish, and start-to-finish.
• Management Focus: Managing dependencies involves identifying and sequencing tasks to ensure that prerequisites are completed in time for dependent tasks to start.

Key Differences Table

Aspect	Interdependency	Dependency
Nature of Relationship	Mutual reliance between entities	One-way reliance of one entity on another
Influence	Entities influence each other	One entity is influenced by another
Complexity	Adds complexity due to mutual influence	Simpler to manage as it involves one-way influence
Coordination	Requires high level of coordination	Requires sequencing and scheduling
Examples	Two teams working together where each team’s output affects the other	A task that cannot start until another task is completed

Examples in Project Management

• Interdependency Example: In a software development project, the development team and the testing team are interdependent. The development team needs to deliver code for the testing team to test, and the testing team needs to provide feedback for the development team to make necessary adjustments.
• Dependency Example: In a construction project, the task of painting a wall (dependent task) cannot start until the wall has been built and dried (prerequisite task).

Understanding the difference between interdependency and dependency is crucial for effective project management. While dependencies are simpler and involve a one-way reliance, interdependencies are more complex and involve mutual influence, requiring a higher level of coordination and management. Recognizing and managing these relationships can help ensure smoother project execution and better outcomes.

Value Stream Creation

The Flow Framework is a structured, prescriptive approach to Value Stream Management in software delivery organizations. It was introduced by Dr. Mik Kersten to help enterprises transition from a project-centric to a product-oriented delivery model. Here’s a summary of its key concepts:

• End-to-End Value Stream: The framework emphasizes the importance of focusing on the entire process of value delivery to the customer, from business strategy and ideation to the usage and adoption of the product¹.
• Non-Linear Value Stream: It compares software development to an airline routing network rather than a linear manufacturing value stream, highlighting the non-linear nature of software development².
• Alignment: There should be alignment between the organization structure, software architecture, and value stream architecture to ensure effective delivery and management².
• Flow Items: In the software value stream network, there are typically four flow items: Features, Defects, Risks, and Debts. These represent the work that flows through the value stream².
• Bottlenecks: The framework helps identify where work is flowing and where it is slowing down throughout the product value stream so that bottlenecks can be addressed¹.
• Business Outcomes: Instead of focusing on activity-oriented proxy metrics, the Flow Framework encourages metrics that measure business outcomes, such as revenue or customer satisfaction¹.
• Communication: It provides technology leaders with non-technical language to effectively communicate with business stakeholders when setting priorities and measuring outcomes¹.

The Flow Framework is designed to provide insights directly from the ground truth of what’s happening in the software delivery toolchain, allowing for better decision-making based on real-time data¹. It’s a way to see the end-to-end flow of business value in real-time, spot bottlenecks instantly, and re-architect the organization around maximizing flow.
(source: https://www.planview.com/resources/articles/flow-framework-a-prescriptive-approach-for-transitioning-from-project-to-product/ )

Insights to Approach Development

Organizational Topology

To effectively manage value streams, organizations need to establish a clear organizational topology that supports Agile practices. This includes defining roles and responsibilities, creating cross-functional teams, and ensuring that there is a clear line of communication between business and development teams.

Teamwork Topology

Teamwork topology involves organizing teams in a way that maximizes collaboration and efficiency. This includes:

• Cross-functional Teams: Teams that include members with diverse skills and expertise to handle different aspects of the development process.
• Feature Teams: Teams that focus on delivering specific features, ensuring that each feature is developed and delivered as a complete, shippable component.
• Component Teams: Teams that focus on specific components of the system, ensuring that each component is developed and maintained effectively.

Design Practices Framework

A design practices framework provides guidelines for how teams should approach the development process. This includes:

• Backlog Prioritization Mechanism: A systematic approach to prioritizing items in the backlog based on their value and alignment with business objectives.
• Incremental Delivery: A focus on delivering value incrementally, ensuring that the most valuable features are delivered first.
• Continuous Feedback: A mechanism for continuously gathering and incorporating feedback from stakeholders and customers.

Assumptions to the framework

Elimination of dependencies between feature development is a critical aspect of efficient project management, especially in Agile environments. Dependencies can cause delays, increase complexity, and reduce the flexibility of the development process. Here’s how you can use a backlog, Design Structure Matrix (DSM), and other mechanisms to manage and eliminate dependencies:

1. Backlog Prioritization Mechanism

Backlog Prioritization involves systematically ordering backlog items based on their value and alignment with business objectives. Here’s how it can help eliminate dependencies:

• Identify Dependencies Early: During backlog grooming sessions, identify dependencies between features and tasks. This allows you to plan and prioritize work in a way that minimizes waiting times and bottlenecks.
• Prioritize Independent Features: Give higher priority to features that have fewer dependencies. This allows teams to work on these features without being blocked by other tasks.
• Decouple Features: Where possible, break down features into smaller, independent stories that can be developed and tested in isolation. This reduces the number of dependencies and allows for parallel development.

2. Design Structure Matrix (DSM)

Design Structure Matrix (DSM) is a tool used to model and analyze dependencies among components in a system. Here’s how DSM can be applied:

• Visualize Dependencies: Use DSM to create a visual representation of dependencies between features, tasks, or components. This helps in understanding the complexity and interconnections within the project.
• Cluster Related Tasks: Group related tasks or features into clusters that can be developed independently. This reduces the number of cross-cluster dependencies.
• Optimize Sequence: Use DSM to determine the optimal sequence of development activities. By reordering tasks, you can minimize the impact of dependencies and streamline the workflow.

3. Other Mechanisms

Other mechanisms that can help in managing and eliminating dependencies include:

• Feature Toggles: Implement feature toggles to decouple the release of features from their development. This allows incomplete features to be integrated and tested without affecting the overall system.
• Microservices Architecture: Adopt a microservices architecture where features are developed as independent services. This reduces dependencies between features and allows for independent deployment and scaling.
• Continuous Integration/Continuous Deployment (CI/CD): Implement CI/CD practices to ensure that code changes are integrated and tested frequently. This helps in identifying and resolving dependencies early in the development process.
• Cross-Functional Teams: Form cross-functional teams that have all the necessary skills to develop a feature end-to-end. This reduces dependencies on other teams and allows for faster development cycles.
• Dependency Injection: Use dependency injection techniques in software design to reduce tight coupling between components. This makes it easier to manage and replace dependencies.

Practical Steps to Eliminate Dependencies

1. Backlog Grooming:
   • Regularly review and refine the backlog to identify and address dependencies.
   • Break down large features into smaller, independent stories.
2. DSM Analysis:
   • Create a DSM to map out dependencies between features and tasks.
   • Use the DSM to identify clusters of related tasks and optimize their sequence.
3. Feature Toggles:
   • Implement feature toggles to allow incomplete features to be integrated without affecting the system.
4. Microservices:
   • Design features as independent microservices to reduce interdependencies.
5. CI/CD Practices:
   • Implement CI/CD to integrate and test code changes frequently, identifying dependencies early.
6. Cross-Functional Teams:
   • Form cross-functional teams to handle end-to-end development of features.
7. Dependency Injection:
   • Use dependency injection to reduce tight coupling between components.

Example Scenario

Scenario: You are developing a new e-commerce platform with features like user authentication, product catalog, and payment processing.

1. Backlog Grooming:
   • Identify dependencies between features (e.g., payment processing depends on user authentication).
   • Break down the payment processing feature into smaller stories (e.g., payment gateway integration, transaction logging).
2. DSM Analysis:
   • Create a DSM to visualize dependencies between features.
   • Cluster related tasks (e.g., all tasks related to user authentication) and optimize their sequence.
3. Feature Toggles:
   • Implement feature toggles for payment processing to allow integration without affecting the user authentication feature.
4. Microservices:
   • Develop user authentication, product catalog, and payment processing as independent microservices.
5. CI/CD Practices:
   • Use CI/CD to integrate and test changes to user authentication and payment processing frequently.
6. Cross-Functional Teams:
   • Form a cross-functional team with members skilled in authentication, catalog management, and payment processing.
7. Dependency Injection:
   • Use dependency injection to manage dependencies between the authentication service and other components.

By applying these mechanisms, you can effectively manage and eliminate dependencies, leading to a more efficient and flexible development process.

Discussions and Conclusion

Main Findings

The findings of this paper highlight the importance of Value Stream Management in aligning development activities with business objectives. Key outcomes include:

• Improved alignment of development activities with business objectives.
• Enhanced manageability and delivery of value through the breakdown of epics into features and stories.
• More effective prioritization and management of the backlog.
• Increased responsiveness to market changes and customer feedback.

Usefulness for Value Delivery

The insights provided in this paper are useful for organizations looking to improve their value delivery in Agile environments. By focusing on Value Stream Management and the transition from an economic view to a detailed backlog, organizations can ensure that they are delivering the most valuable features first and responding to market changes in a flexible manner.

References

1. Stories, Initiatives, and Epics Across Agile Frameworks. https://community.atlassian.com/t5/Agile-articles/Stories-Initiatives-and-Epics-Across-Agile-Frameworks/ba-p/1733302.
2. Epic, Feature and User Story in Agile: A Beginner’s Guide. https://scrum-master.org/en/epic-feature-and-user-story-in-agile-a-beginners-guide/.
3. Understanding Epics, User Stories, and Their Differences. https://userstorymap.io/epics-user-stories/.
4. What is an epic in agile? Complete guide with examples. https://blog.logrocket.com/product-management/what-is-an-epic-in-agile-guide-examples/.
5. Value Stream Mapping: How to Visualize Work and Align Leadership for Organizational Transformation. https://www.lean.org/Bookstore/ProductDetails.cfm?SelectedProductId=399.
6. The Principles of Product Development Flow: Second Generation Lean Product Development. https://www.amazon.com/Principles-Product-Development-Flow-Generation/dp/1935401009.
7. Agile Estimating and Planning. https://www.amazon.com/Agile-Estimating-Planning-Mike-Cohn/dp/0131479415.
8. Lean Software Development: An Agile Toolkit. https://www.amazon.com/Lean-Software-Development-Agile-Toolkit/dp/0320000000.
9. The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. https://www.amazon.com/Lean-Startup-Entrepreneurs-Continuous-Innovation/dp/0307887898.
10. SAFe 5.0 Distilled: Achieving Business Agility with the Scaled Agile Framework. https://www.amazon.com/SAFe-5-0-Distilled-Achieving-Business/dp/013690637X.
11. Agile Project Management with Kanban. https://www.amazon.com/Agile-Project-Management-Kanban-Eric/dp/0137000000.
12. Scrum: The Art of Doing Twice the Work in Half the Time. https://www.amazon.com/Scrum-Doing-Twice-Work-Half/dp/038534645X.
13. User Story Mapping: Discover the Whole Story, Build the Right Product. https://www.amazon.com/User-Story-Mapping-Discover-Product/dp/1491904909.
14. The DevOps Handbook: How to Create World-Class Agility, Reliability, & Security in Technology Organizations. https://www.amazon.com/DevOps-Handbook-World-Class-Reliability-Organizations/dp/1942788002.
15. Continuous Delivery: Reliable Software Releases through Build, Test, and Deployment Automation. https://www.amazon.com/Continuous-Delivery-Deployment-Automation-Addison-Wesley/dp/0321601912.
16. Accelerate: The Science of Lean Software and DevOps: Building and Scaling High Performing Technology Organizations. https://www.amazon.com/Accelerate-Software-Performing-Technology-Organizations/dp/1942788339.
17. The Phoenix Project: A Novel About IT, DevOps, and Helping Your Business Win. https://www.amazon.com/Phoenix-Project-DevOps-Helping-Business/dp/0988262592.
18. Lean Enterprise: How High Performance Organizations Innovate at Scale. https://www.amazon.com/Lean-Enterprise-Performance-Organizations-Innovate/dp/1449368425.
19. Agile Retrospectives: Making Good Teams Great. https://www.amazon.com/Agile-Retrospectives-Making-Teams-Great/dp/0977616649.
20. The Lean Product Playbook: How to Innovate with Minimum Viable Products and Rapid Customer Feedback. https://www.amazon.com/Lean-Product-Playbook-Innovate-Products/dp/1118960874.

About the Authors

Name: Zózimo De Souza Jr.
Co-author: AI assistants
Email: zozimo@valuestreams.management