Organisational Value Flows: The What, Why and How to pragmatically improve...

In the competitive landscape of modern business, organizations face relentless pressure to deliver value efficiently, sustainably and short term. Whether that value is directed toward customers, employees, or key stakeholders, one truth is universal: value does not move itself. It requires orchestrated change—change with different types of flow whether of work, information, or resources—that travel through an organization. Improving these flows is a critical pathway to achieving strategic goals and thriving in an ever-changing market environment in a systemic way.  

This article builds on the basic concept that to fully appreciate the relationship between value and change, we must understand that while value requires change to materialize, not all change inherently generates value.  This includes organisational value flows which can take the shape of the primary value chain activities, support functions or structural flows that enable strategy execution at different levels of granularity within the organisation. 

This article explores the concept of organizational value flows: what they are, why they matter, and how to pragmatically improve them through the holistic management of change. Furthermore, by building organisational change maturity we further enhance the effects only mature and adaptable value flows can realise. By combining insights from foundational frameworks like Eliyahu Goldratt's Theory of Constraints, Michael Porter’s book on Competitive Advantage and Toyota's Lean principles with emerging tools and methods, we aim to offer CXOs and change managers practical steps to streamline value delivery across all organizational layers.  

Understanding Value Flows: What, Why, and Why Now 

What Are Value Flows? 

A Value flow is the movement of benefits—tangible or intangible—through an organization in a particular stream or cycle. They can be directly part of the key driving value chain of the organisation or part of the supporting flows vital for enablement. These flows connect all aspects of operations, from sourcing raw materials to delivering end products or services. Many are interdependent and when mapped create a systemic view of how the organisation functions while giving insights into how we can positively impact one or multiple value flows simultaneously. 

They can be horizontal, as in operational workflows, or vertical, cascading from strategic objectives to tactical execution. They can also be networked offering alternative views of the organisation and how value flows through. Value can take the form of a stream linear in nature, or cyclical where flow refers to change or movement, but also something that can be measured as a quantifier for success.  

Value flows are inherently dynamic and depend on continuous change to evolve and deliver. However, not all change generates value. Distinguishing between value-adding change and wasteful change is crucial to ensuring efficiency and can be done by asking the simple question 'Does this activity feed the organisations purpose and strategic goals in an aligned and integrated way?'. Furthermore, we can map value generation, potential value realisation and waste in the form of non-aligned change. 

This question can be broken up into more parts as follows to truly understand what's behind it: 

• If activities are not aligned to Purpose and achieving strategic goals they are automatically waste. 

• Aligned in the question refers to working with others in the organisation to ensure that more people aren't trying to fulfil the same goals with different initiatives that also create hidden waste. 

• Integrated refers to the fact that we can do many seeming great actions that are fully aligned to strategic purpose and goals, but if they aren't integrated in such a way as to actually be able to realise this value, then they are waste. 

Benefits of Enhancing Value Flows 

By improving value flows, organizations unlock numerous benefits: 

1. Operational Excellence 

Streamlining workflows reduces delays and redundancies, enabling smoother operations. Techniques like Lean’s waste elimination (muda) and TOC's bottleneck identification are pivotal in achieving this goal. 

2. Organizational Agility 

Efficient value flows enable organizations to pivot quickly in response to market shifts, regulatory changes, or technological advancements. Agile methodologies, such as SAFe, are particularly effective in fostering adaptability. 

3. Cost Savings 

Eliminating inefficiencies reduces costs across the board, from supply chain logistics to administrative overhead. For example, value stream mapping helps identify non-value-adding steps in production, driving down expenses. 

4. Employee Satisfaction 

Clarity in workflows reduces workplace friction, allowing employees to focus on meaningful tasks. Tools like the HR Value Chain align employee activities with organizational goals, fostering engagement. 

5. Customer Satisfaction 

Faster delivery and improved service quality directly enhance customer experiences. For instance, CRM platforms like Salesforce enable seamless integration of customer lifecycle management with supply chain operations. 

Deep Dive: Types of Value Flows 

Below you will find a taste of the different types of value flows within organisations. They can be categorised by flows that are governed by function houses, level of strategic to operational importance, level of granularity and a few more besides. The way of formulating flows should be designed with the organisation in mind, but it is important to establish the strategic level (1st line flow) we want to operate at with associated sub-flows (2nd line flow) where the actual improvements can be initiated. The organisations goal framework like OKR can be used as a mechanism for flow generation which keeps all activity aligned to  value generation. The basics include: 

Strategy execution flows: Different lens are possible here including but not limited to: 

• McKinsey 7S: Holistic view of different lateral organisational areas  

• Stanford Strategy execution framework: Focused on driving strategy into outcomes, a top down approach 

• Mintzberg's organisational configurations: strategic flow assessment that incorporates different organisational designs and operating models which will influence the weighting of all further below flows.  

Primary Value chain flows:  

• Inbound logistics 

• Operations 

• Outbound logistics 

• Marketing and sales 

• Service Delivery 

Supporting Value chain flows: 

• Procurement 

• Information Technology management 

• Human resource management 

• Organisational infrastructure: General management, planning, finance, accounting, legal and compliance. 

Value & Change optimisation flows (ChangeOps):  

• Transformation 

• Program and project outcomes  

• Embed value into all appropriate flows 

• Continuous improvement. 

Each of the four flow categories can be broken down into sub flows taking us to the tactical and operational level of execution where we can tangibly work on improvements. It's important to see all levels of flow granularity as part of one system that inevitably influences other sometimes seemingly unassociated areas of the organization. In fact, a truly lean and agile organisation should see the impacts of flow improvements surfacing all over the organisation and the tip here is to make sure these are positive impacts by doing thorough assessments in the outset.  

Mapping Flows for development: 

It's important to map the relationships between different levels and types of value flow. Without awareness of dependencies and influencing relationships, we can inadvertently do more damage than good. For this reason it is advised to start with some kind of mapping assessment like the simple one below and of course you can add to this with further categories that are specific to the situation you might be working with.  

Example: 

Flow Name (1st line flow): The specific flow we want to improve in line with strategic business goals. 

Associated Sub flows (2nd line flows): Those flows that form the first level flow and allow practical application of best practices to impact results.  

Associated dependent flows: Those flows that will be impacted or depend on certain elements that should be taken into consideration when implementing changes to ensure that unintended side effects don't occur. 

Associated influencing flows: Those that will determine scope and strategic goals to be realised with value as the outcome.  

An example is the Human resource management flow which is a supporting flow of the primary value chain and takes elements of the strategy execution flow into projects and operations where it can create positive impact. Mapping the Human resources management flow can be as simple as the following 

Flow Name (1st line flow): Human Resources management flow 

Associated Sub flows (2nd line flows):  

• Recruitment and selection 

• Onboarding and integration 

• Performance management 

• Learning and development 

• Career development 

• Compensation and benefits 

Associated dependent flows: All flows requiring people resources or outcomes from the above sub flows list. 

Associated influencing flows: 

• Strategic Execution flow 

• Primary value chain flow 

Further suggested mapping areas could include the following depending on the type of flow being mapped: 

• Stakeholder groups impacted 

• Associated strategic goals one is trying to achieve 

• Potential areas for development within the flow 

• Improvement success criteria with KPIs and baseline information set 

• Risks involved with changing the targeted flow 

• Etc... 

Examples of Flow within organisations and potential metrics 

Below you will find a list of some of the major flows within an organisation, but it's good to remember that while these are a good starting point, value flows can be defined in whatever way that makes strategic sense for 1st line flows and whatever will support practical improvements on the 2nd line level. This becomes particularly important when looking to improve flows in different organisational designs with the associated operating model, modus of governance and culture. 

When we look into ways of measuring flow rates of particular value flows, we start to recognise common key metrics used to gage the success of organisational units and the associated realisation of strategic business goals. See below for some of the potential metrics we can use to gage Flow rate and success: 

1. Strategic Execution Flow 

Strategic execution connects high-level objectives to actionable outcomes. The Stanford Strategy Execution Framework aligns organizational activities with strategic goals, ensuring cohesive execution. 

Metrics:  

• Objective Achievement Rate: Percentage of strategic goals met within a specific timeframe.  

Strategy: Use OKRs (Objectives and Key Results) to align execution with strategy.  

• Project Throughput: Number of completed initiatives contributing to strategic goals.  

Strategy: Leverage portfolio management frameworks like Hoshin Kanri for prioritization.  

• Alignment Score: Degree of alignment between strategic objectives and team-level goals.  

Strategy: Regularly update the strategy execution framework to reflect changes in objectives. 

2. Horizontal Flow: Operational Value Chain flow 

Operational value flows encompass the journey from raw materials to finished products. Frameworks like the Supply Chain Operations Reference (SCOR) model help organizations map and optimize these flows for better efficiency and collaboration. 

Metrics:  

• Cycle Time: Time taken to transform inputs into outputs.  

• Strategy: Use Lean principles to reduce cycle time by eliminating waste (muda) and addressing bottlenecks with tools like the Theory of Constraints.  

• First Pass Yield: Percentage of products or services delivered without rework.  

Strategy: Apply Six Sigma to minimize defects and improve quality.  

• Cost of Goods Sold (COGS): Total cost of production relative to revenue.  

Strategy: Implement value stream mapping to identify and eliminate non-value-adding steps.  

• Supplier Lead Time: Time taken by suppliers to deliver materials.  

Strategy: Optimize supplier relationships and integrate just-in-time (JIT) inventory management. 

3. Human Resource Value Flow 

From recruitment to retention, HR value flows ensure that people are effectively integrated into the organization. Applying models like the HR Value Chain links talent management activities directly to organizational outcomes. 

Metrics:  

• Time-to-Fill: Duration required to fill critical roles.  

Strategy: Streamline recruitment processes using HR automation and predictive analytics.  

• Employee Turnover Rate: Percentage of employees leaving within a given period.  

Strategy: Apply retention strategies informed by employee engagement surveys.  

• Training ROI: Impact of training investments on productivity and employee performance.  

Strategy: Use training value chains to align learning objectives with organizational goals.  

• Internal Mobility Rate: Frequency of employees transitioning to new roles within the organization.  

Strategy: Foster career development paths supported by competency frameworks. 

4. Finance Value Flow  

The finance value flow focuses on the movement and optimization of financial resources to maximize organizational efficiency, investment returns, and strategic goals. By integrating financial planning, budgeting, and performance analytics, this flow ensures that capital allocation aligns with value-creation objectives, supporting sustainable growth and innovation. 

Metrics:  

• Cash Conversion Cycle (CCC): Time taken to convert investments into cash flow.  

Strategy: Align finance operations with operational value chain improvements.  

• Return on Investment (ROI): Profitability of specific initiatives.  

Strategy: Focus on high-ROI value flows identified through value mapping.  

• Budget Variance: Difference between planned and actual expenditures.  

Strategy: Employ rolling forecasts to adjust budgets in real-time. 

5. Transformation Value Flow 

Whether digital, structural, or cultural, transformation initiatives drive significant change. McKinsey's Transformation Framework offers guidance on aligning these efforts with overarching goals while managing resistance effectively. 

Metrics:  

• Change Adoption Rate: Percentage of stakeholders effectively using new systems or processes.  

Strategy: Utilize change management frameworks like Kotter’s 8-Step Model for structured adoption.  

• Time-to-Benefit: Speed at which transformation initiatives yield measurable results.  

Strategy: Deploy Agile methodologies to deliver incremental benefits.  

• Stakeholder Sentiment: Satisfaction level of those impacted by transformation efforts.  

Strategy: Conduct regular pulse surveys to monitor stakeholder feedback and adjust as needed. 

6. Project and Program Value Flow 

Projects and programs represent deliberate, structured change efforts. Tools like PRINCE2 and SAFe emphasize iterative value delivery and stakeholder alignment, ensuring successful outcomes. 

Metrics:  

• Schedule Variance (SV): Difference between planned and actual completion timelines.  

Strategy: Use tools like PRINCE2 to monitor project health and mitigate delays.  

• Cost Variance (CV): Budgetary performance of projects.  

Strategy: Apply Earned Value Management (EVM) to balance scope, cost, and schedule.  

• Customer Acceptance Rate: Percentage of project outputs accepted without significant rework.  

Strategy: Embed user feedback loops into iterative project phases. 

7. Continuous Improvement Value Flow 

Continuous improvement processes like Kaizen drive incremental, ongoing enhancements. These efforts foster innovation while maintaining operational stability. 

Metrics:  

• Kaizen Events Completed: Number of improvement initiatives executed.  

Strategy: Schedule regular Kaizen events to address inefficiencies systematically.  

• Improvement Implementation Time: Time required to implement incremental changes.  

Strategy: Foster a culture of continuous improvement using Lean’s Kaizen philosophy.  

• Cost Avoidance: Savings achieved by preventing issues before they arise.  

Strategy: Use root cause analysis (RCA) to identify and mitigate recurring problems. 

8. Customer Lifecycle and Supply Chain Flow 

Mapping the customer journey and integrating it with supply chain management ensures value delivery is consistent and market-responsive. Technologies like Salesforce facilitate this integration. 

Metrics:  

• Customer Lifetime Value (CLTV): Total revenue generated from a customer over their lifecycle.  

Strategy: Enhance CRM processes to personalize customer interactions and increase retention.  

• Order Fulfillment Cycle Time: Time from customer order to delivery.  

Strategy: Optimize supply chain flows using tools like SCOR.  

• Net Promoter Score (NPS): Customer willingness to recommend the organization.  

Strategy: Regularly refine customer journey mapping to enhance satisfaction. 

9. Dual Operating System Flow 

Organizations can leverage informal structures and social networks to enhance value delivery. Network analysis techniques uncover hidden collaboration opportunities, enabling better decision-making and innovation. 

Metrics:  

• Collaboration Index: Frequency and quality of interactions across formal and informal networks.  

Strategy: Apply social network analysis to identify influential nodes and foster collaboration.  

• Knowledge Flow Efficiency: Speed at which information moves across networks.  

Strategy: Use tools like Slack or Microsoft Teams to facilitate real-time knowledge sharing.  

• Innovation Rate: Number of new ideas implemented via informal networks.  

Strategy: Encourage cross-functional collaboration to drive innovation. 

To measure the success of value flows in an organization, a variety of metrics can be applied, each corresponding to specific strategies for increasing the efficiency, speed, and impact of these flows. Below is a categorized list of metrics, linked to strategies for enhancing value flow performance: 

Aggregate Success Metrics Across Flows 

• Flow Efficiency Ratio: Value-added time as a percentage of total time. 

• Lead Time Reduction: Aggregate decrease in time across all flows. 

• Waste Elimination Index: Percentage of waste eliminated across the organization. 

Tracking these metrics with the appropriate tools and frameworks ensures that efforts to improve value flows are not only well-targeted but also yield measurable results, enabling sustained organizational success. 

Practical Steps to Improve Value Flows 

Improving value flows requires a structured, strategic approach. 

1. Identify Key Value Flows 

Use tools like value stream mapping to visualize and prioritize flows critical to organizational success. 

2. Analyze Interdependencies 

Understand how different flows interact. A change in one area can significantly impact others, so consider interdependencies when designing improvements. 

3. Set Clear Success Criteria 

Define metrics for improvement, such as cost reduction, faster time-to-market, or higher employee engagement. 

4. Align Stakeholders 

Involve key leaders and domain owners to ensure buy-in and alignment. Co-create roadmaps that connect high-level strategies with specific flow improvements. 

5. Establish Governance 

Set up a governance framework, such as a Center of Excellence (CoE), to oversee flow improvements and ensure they remain aligned with strategic objectives. 

6. Execute Strategically 

Launch initiatives with a clear vision of the desired end state. Use iterative feedback to refine processes and adapt plans as needed. 

Conclusion 

Improving organizational value flows is both an art and a science. By viewing value as an active process rather than a static output, leaders can design systems that are efficient, adaptable, and aligned with strategic goals. Practical techniques inspired by frameworks like Goldratt’s The Goal and Toyota’s Lean methodology provide actionable pathways to eliminate waste and enhance throughput. 

For CXOs and managers of change, the opportunity lies in applying these principles pragmatically. Through clear prioritization, stakeholder alignment, and consistent governance, organizations can not only meet today’s challenges but position themselves for sustainable success. 

References 

1. Goldratt, Eliyahu M. The Goal: A Process of Ongoing Improvement. North River Press, 1984. 
2. Womack, James P., and Daniel T. Jones. Lean Thinking: Banish Waste and Create Wealth in Your Corporation. Free Press, 2003. 
3. Kotter, John P. "Accelerate! How the Most Innovative Companies Capitalize on Today's Rapid-Fire Strategic Challenges." Harvard Business Review, Nov. 2012. 
4. McKinsey & Company. The Organizational Agility Report, 2022. 
5. Stanford University. The Strategy Execution Framework. Stanford Business School, 2019. 
6. “The State of Agile Report.” VersionOne, 2023. 
7. Toyota Motor Corporation. "The Toyota Production System." Toyota Global, 2023. 
8. Porter, Michael E. Competitive Strategy: Techniques for Analyzing Industries and Competitors. Free Press, 1980.