Understanding Strategy Maps

Many companies write extensive strategy documents and never get it implemented properly. It is a fact that most executives and engineers understand pictures, graphs and flow charts better than long winded descriptive explanations.

As a result of this, the trend to utilize diagrams to reflect the principal strategic goals being pursued by an organization was published in several books and articles during the late 1990 by Dr. Robert S. Kaplan & David P. Norton as well as Olve and Wetter in their book "Performance Drivers" that was published during1998/9

Creation of the Strategy Map

The experts believes that a good strategy map is one that is a simple, visual depiction of key parts of current strategic plan, that has a way of grouping the company's highest-level objectives by areas, or perspectives, that comprised of objectives that indicate the company's desired outcomes, that provides an explanation of the cause and effect relationships between the hierarchical levels and that creates a good foundation for scorecards and effective strategy implementation.

When creating a strategy map for an organization it is important to clearly understand the four dimensions present in each of the traditional strategy maps. These include the financial perspective, the customer perspective, the internal business process perspective and the learning & growth perspective. Mixing these perspectives up when drafting the strategy map will probably result in a very ineffective strategy or a strategy that will not provide the correct outcomes. It should be clear that each company may require more or different perspectives to accurately represent all of your stakeholders however the fundamental principles contained in the traditional strategy map should remain intact.

The Four Perspectives

The main focus of the financial perspective is that of growth and productivity that should result in revenue growth and increased profitability. The focus should be on long term shareholder value and the cause and effect of generating this through growth and productivity. When approaching the model from the financial perspective the question that should be uppermost in everybody's mind is "If the strategy is successful, how will the shareholders view us?"

The main focus of the customer perspective is to provide the customers with a differentiated value proposition that is manifested in the product or service quality and improves the customer's buying experience. This is the dimension that clarified the conditions that will create value for the customers. When approaching the model from the customer's perspective, the question that should be answered by the team is "to achieve our vision, how must we look after our customers?"

The main focus of the internal business process perspective is to ensure that all the internal activities in the company are aligned. This is the value creating processes that defines the processes that transforms intangible assets into customer and financial benefits. This is often reflected in the quality of the suppliers and the alignment of all the processes necessary to successfully manage the complete product lines or service delivery components of the company. When approaching the model from the internal business process perspective the question that that needs to be successfully answered by the team is "to successfully implement our strategy, at which processes must we excel?"

The main focus of the learning & growth perspective is a motivated and prepared workforce. This is the dimension where clustering of assets and activities are used to define the intangible assets that must be aligned and properly integrated to create the desired value. This is achieved by ensuring an innovative, learning and growth culture exists in the company. The underlying issues necessary for this is ensuring that suitable and sufficient competencies and supporting technology is available and a climate for action is established. The success of this perspective will be based on the synergy that can be achieved between the company's human capital, information capital and organization capital. When approaching the model from the learning & growth perspective the question that that needs to be successfully answered by the team is "to succeed in our strategy implementation, how must we learn and improve?"

Conclusion:

A critical precondition for constructing a rational and practical strategy map is the accurate comprehension of the individual positioning and strategic reliance of the different perspectives of the model.

Another dimension that contributes to the success of the strategy model as a practical tool is that each perspective includes at least one SMART objective that is linked to measurable performance outcomes and quantifiable values.

The use of a single or series of pictures, graphs or flow charts normally goes a long way to ensure that the strategy is effectively understood and properly implemented, for this reason the strategy map has been very popular when considering alternatives for recording a company's strategy.

© Carl Marx