Architecture Process: Identifying Value Streams
A Practical Guide for Architects and Engineers to Navigate Business Boundaries
In the previous article, we discussed how every business is fundamentally built upon the exchange of value. For a deeper dive into the value-exchange concept, see our earlier post:
But what exactly do we mean by a "value stream," and how can identifying these streams transform your business architecture?
Let’s clearly define what a value stream is.
What is a Value Stream?
A value stream is every step your organization takes to deliver value, from the initial trigger to the customer-ready result.
But this definition misses a crucial aspect. A value stream isn’t just a set of processes. It’s a structured unit of business defined by what value you deliver and who receives it. This distinction matters because it shapes how your business organizes teams, technology, and resources to deliver value effectively.
Let's explore this through the example of a car manufacturing company.
Top-Level Value Streams: Aligning to Customer Value
Imagine you own a car manufacturing company. Your primary value streams might include:
Electric Vehicles (EVs) — targeting environmentally-conscious consumers. Example: "Delivering a compact electric car to customers."
Trucks and SUVs — catering to work-related and luxury needs. Example: "Delivering a luxury SUV to dealerships."
Fleet Sales — providing standardized vehicles to corporate customers. Example: "Supplying commercial fleet vehicles to business partners."
Each represents a distinct flow of value with unique customers, products, pipelines, metrics, and risks. Even if there's significant overlap in parts used, the core value delivered—and to whom—varies significantly.
Supporting Value Streams: The Backbone of Delivery
Now, let's look closer. Your top-level value streams rely on several supporting streams. These streams may not directly generate revenue, but are critical to overall delivery. Examples include:
Engine Production
Battery Cell Assembly
Software Updates for In-Vehicle Systems
These internal or enabling value streams provide essential capabilities shared across product lines. They ensure the successful delivery of customer-facing streams.
Revenue Streams vs. Value Streams
A common confusion arises between revenue streams and value streams. Here's the key difference:
A revenue stream captures value for your business.
A value stream delivers value to your customers.
While many value streams directly generate revenue, others—like compliance or internal support—do not. Yet, these streams remain essential to sustain your business.
You can also reverse-engineer your value streams by analyzing revenue streams. By following the money, you discover what customers pay for and how it's delivered. That reveals value streams that might be under-recognized or under-resourced.
Example: Emerging Value Streams in Car Manufacturing
Returning to our car company example, suppose your finance team identifies a fast-growing revenue stream in subscription-based software services:
Real-time navigation
Premium audio streaming
Remote diagnostics
Over-the-air updates
Initially, this revenue doesn't fit neatly into traditional streams like EVs or Trucks. However, since it involves distinct technology stacks, teams, and customer interactions, it emerges as its own value stream—Digital Experience and Connected Services—a segment growing 35 % YoY, according to McKinsey’s 2024 automotive software report.
Value Streams Are Not Static
Value streams evolve as markets change, customer needs shift, or technology advances. For example, simple car add-ons (like premium sound or sport packages) might evolve into standalone value streams with dedicated teams and processes.
Monitoring how your value streams change keeps your architecture flexible and responsive.
💡 Review your value-stream map every six months or after any major market shift to keep architecture aligned with reality.
Final Thoughts: Aligning Architecture to Value
Ultimately, recognizing value streams means looking beyond technical dependencies and focusing on how value flows through your business. Keep these points in mind:
Identifying a value stream is just the beginning—it requires dedicated teams, transparent governance, and focused metrics.
Don't create separate value streams unnecessarily; carefully consider if distinct governance or delivery is genuinely needed.
Value streams change. Stay attentive to shifts in your market and internal capabilities.
Architects and engineers typically don't create or manage value streams directly. However, understanding value streams provides crucial boundaries for technical architecture decisions. Recognizing these streams helps architects:
Align technical solutions clearly to business outcomes.
Avoid designing architectures misaligned with value delivery.
Ensure technology investments support fundamental business objectives.
By grasping the concept of value streams, architects and engineers can build more resilient and business-aligned systems.
In the following articles, we will explore how value streams impact software architecture in more detail.
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