Upgrading Value Streams to Profit Streams

We can design sustainable business by leveraging the Software Profit Streams framework to upgrade the concept of Value Streams.

In today’s world of disruptive innovation, Product Management of Software Enabled Solutions is about taming the exponential complexity of technology into something that helps customers. Rooted in industrial manufacturing, the concept of Value Stream Mapping is still foundational to understand how solutions work and interact with internal and external stakeholders, end to end.

Designing Profit Stream starts with understanding Value Streams

A value stream is the sequence of activities that organizations undertake to design, produce, deliver, maintain and/or extend a product or service to customers. Agile and Lean Software Development methodologies in the late 1990s and early 2000s adapted the principles of lean manufacturing to the software development process with a focus on continuous delivery, efficiency, and adaptability.

Source: Scaled Agile, Inc.

Value Stream Mapping (VSM) became a tool not just for analysing operational processes but for understanding the flow of value through stages of software development from concept to delivery. DevOps and Continuous Delivery practices apply VMS to visualize and identify bottlenecks to optimize development through automation and collaboration. SAFe and other scaling frameworks use Value Stream concepts at the enterprise level, aligning teams and resources around the delivery of value through complex systems and across large organizations.

Yet the domain of software enabled solutions with all its technological complexities, non-linear dynamics and integration dependencies can escape many value mapping approaches.

Source: Scaled Agile, Inc.

Modelling Profit Streams is about commercially capturing the upside of solutions

Now, the Software Profit Streams™ framework flips the script, away from identifying delays and other operational downsides, towards the business upside of solution profitability management. The concepts of Development and Operational Value streams remain, however the VSM focus on lifting cost efficiencies and process bottlenecks is augmented with a big attention to monetization derived by Operational Value Streams.

As explained in Quantifying Value to Maximize Profit, a Profit Stream is achieved once solutions generate revenue in excess of the costs required to serve users over time. This revenue is generated through a chosen profit engine and defined by the top layer of the Profit Streams canvas. For a good reason, the framework starts with the customer quadrant of solution sustainability to identify and quantify all dimensions of value that have the potential to generate revenue as the upshot.