Value redux (more on business value added)

In a previous article, Mishkin portrayed three kinds of added value that can be considered when analyzing a value stream: Customer Value Added (CVA), Business Value Added (BVA), and Non-Value Added(NVA). I recommend peeking at this article before reading this one.

The second flavour mentioned is Business Value Added. This is, to quote the above, “activity that is required to operate the business but the customer is unwilling to pay for.” I wanted to look at this a bit closer.

Why would we separate this kind of value? On one hand, if the customer wouldn’t pay for it, is it really value? Management and executive would say, “Yes”, since it amounts to operational infrastructure or overhead necessary to the business. By this view, without certain “horizontal” functions, the entire enterprise to which the lean analysis is being applied would not be possible – therefore it’s of immense value to the customer, however indirect. On the other hand, if it isn’t of value to the customer – ie. the customer cannot see the value, then why is it there at all? This is a tough question.

A fanatical Lean interpretation would be to say that this kind of value doesn’t exist. Either a reasonable customer would be willing to pay for it, explicitly, if indirectly, or it simply is not value added. In essence, business value added can be seen as something of an allowance – a departure from the sharp scalpel of lean value-stream analysis. Its purpose is to provide to those who do these “BVA” functions some explicit value, since these are often those whom lean analysts must convince of the accuracy of their analyses. By this interpretation, BVA is strictly a cop-out. It doesn’t provide value to the product/service produced, and is therefore a target for waste elimination.

There are very good reasons to look at BVA from either side. The discipline of waste elimination on one hand, and validating necessary if unprofitable work on the other. As in most things, a balanced view is wisest here, and perhaps BVA is merely a short-hand for such a view. BVA, like NVA is waste. However, there are some necessary and unavoidable wastes.

Traffic lights are on all night, even when cars aren’t available, because no one has figured out an efficient way of turning them off until cars appear. It’s necessary infrastructure. But it is waste. It’s power being consumed without result.

A full highway is a jammed highway. Having about 15-20% capacity under-used actually tends to optimize the on-ramp-to-off-ramp cycle time. Here is unused roadway, where clearly one could fit on more cars. Yet, according to queueing theory, this localized “waste” is necessary in that it optimizes the whole system. Such system-supporting overhead is counterintuitive, but bears itself out in many natural systems.

The process of tracking project progress does not improve the final product, but it aids in the organization of the corporation/entity that is providing the initial funding, and satisfies necessary requirements that are not direct from the customer. It may result in better resource allocation, for example. The daily meeting is time not spent on the product, but those 5-15 minutes can unjam horrible project roadblocks. Eliminating this “NVA” or “BVA” step would be catastrophic for the whole system.

Because BVA, like NVA, is waste, it should always be examined for reduction and elimination. Unlike other NVA, however, I would argue that BVA is that minimum NVA activity that cannot be trimmed, without unduely sacrificing the effort as a whole. By calling it NVA we keep it in perspective. Perhaps it might be better called “unavoidable non-value added” (UNVA) activity. It’s value is not direct, and it is effort and resources taken away from the customer. Where possible, it should be eliminated as NVA. However, those who perform these functions can rest assured that, once the process is leaned-out, what they are doing is unavoidable and necessary work.

BVA (UNVA) can be a very useful tool for clarifying process, so long as the analyst doesn’t get sloppy about treating it as waste.

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