Value

Lean Six Sigma value, a key part of lean thinking, may be defined a number of equivalent ways, depending on context.

In order to achieve Lean thinking, you must start by defining the value of the product or service in the eyes of the customer. Value is only relevant at a specific price and point in time. Value represents the need of the customer, the voice of the customer.

The problem most organizations have in specifying value is that they tend to concentrate on what they are able to deliver, rather than what it is that the customers really want, the fallacy of 'we know their needs better than they do.' Of course, when they then try to improve the design or delivery process, the result can be more efficient muda (i.e. waste), but muda none the same. The use of hubs by the airline industry is a great example of this, cited frequently by Womack and Jones (Lean Thinking, Jones & Womack, 1996, Simon & Schuster). The hubs serve the airlines need to use their existing resources well, but do not provide what the customer really wants: a hassle free journey directly from point A to point B.

There are three categories of activities:

• Value-Added: An activity is value-added if a customer is willing to pay for; it changes form, fit or function of a product or service; it converts input to output; it is not waste.
• Non-value Added (NVA): sometimes called Type II NVA. These activities are unnecessary: they provide no value for internal or external customers, and can be immediately eliminated.
• Business Value Added (BVA): sometimes called Type I NVA. These activities provide no value to customers (as defined above), but are necessary given current process limitations. Common examples are inspections, management approvals, most quality assurance activities; technical support activities.

Categorizing each activity in a process to determine if it creates value, or is waste, is a key aspect of Value Stream Analysis

Learn more about the Lean Six Sigma principles and tools for process excellence in Six Sigma Demystified (2011, McGraw-Hill) by Paul Keller, in his online Lean Six Sigma DMAIC short course ($249), or his online Green Belt certification course ($499).