strategy mapping

Strategy Mapping


What is it?

Framework

Strategy mapping is a tool created by Balanced Scorecard (BSC) pioneers Robert S Kaplan and David P Norton. It allows organisations to describe and communicate their strategies. Strategy maps also serve as an appropriate basis for the development of financial and non-financial Balanced Scorecard (BSC) measures that can be used to monitor strategy execution and performance.

Strategy maps can be used as a standalone tool to depict an organisation’s strategy. However, their real value is when they are used as part of a systematic strategic management process that aligns organisational and individual targets and initiatives with a defined mission and desired strategic outcomes. Strategy maps can be created for not-for-profit and public service entities, as well as for- profit enterprises.

The original formulation of the strategy map is based on the ‘four perspectives’ of the BSC – financial, customer, internal and learning and growth. The financial and customer perspectives – the outcome perspectives – are developed in response to the basic question ‘What do we want to accomplish?’ The internal and learning and growth perspectives – the input perspectives – depict ‘How do we plan to accomplish it?’

Example of Strategy Mapping  

Example strategy map

Source: CGMA Strategy Mapping Tool

What benefits does Strategy Mapping provide?

Strategy maps describe how organisations create value by building on strategic themes such as ‘growth’ or ‘productivity’. They provide a way for companies to ‘tell the story’ of their strategy to employees and other corporate stakeholders, thereby increasing engagement in the strategic process.

Strategy maps force organisations to place the onus first on the strategy, then on measuring implementation, thus removing the problem of numerous, unfocused measures. They form the appropriate basis for balanced scorecard performance measures, links to appropriate management and validation techniques, and allocating resources to initiatives and strategies that support an organisation’s value propositions and overriding objectives.

Questions to consider when implementing a Strategy Map

  • Do we need a more effective way to articulate and communicate our strategy?
  • Do we need better alignment of our mission, vision, and strategy with our organisational initiatives and actions?
  • Are we willing to commit to a process of clarifying the objectives, value proposition and key financial and non-financial measures necessary for strategic success?
  • Do we have enough top-management buy-in to lead and implement?
Actions to take / Dos Actions to Avoid / Don'ts
  • Treat the strategy map as an integral part of the strategy management process
  • Engage a broad range of stakeholders – many include external stakeholders as well as internal
  • Connect the strategy map to vision and mission
  • Clarify your overriding value proposition
  • Cascade the strategy map to business units and functional departments
  • Develop business unit and functional strategy maps separately to reflect the appropriate drivers of success that will contribute to overall performance
  • Link the strategy map to initiatives and actions – for example, new customer service goals might require changes in the customer service process and additional training to improve response times or quality
  • Tie the strategy map to budget and performance processes
  • Include the operating costs and strategic investments necessary to drive success of learning and growth, and internal process initiatives
  • Do not treat strategy mapping as a one-off, or ‘me-too’ exercise
  • Do not forget to incorporate strategy mapping into the overall strategy management process
  • Never limit involvement to top management
  • Don’t forget to validate the links and measures derived from the strategy mapping process
  • Do not ignore the resource requirements of the learning and growth, and internal process initiatives
  • Do not adopt an inflexible approach. Organisations are complex and dynamic, and strategy maps should reflect the realities of the business

 

 

In practice:
Strategy Mapping

 
 

An examination of a homebuilder's performance measurement and incentive systems
(CIMA, Research Executive Summaries Vol. 5, Issue 6)

Download the full case study

A major US homebuilder, referred to as ‘Modern Classic Homes’, designed a performance incentive system around its strategy map, which included customer and employee satisfaction measures as drivers of financial performance.

The operating assumption underlying the strategy map was that positive employee satisfaction would contribute to positive customer satisfaction, thereby increasing referrals and decreasing warranty costs. This would result in increased revenues and profits.

While these links are intuitively appealing, especially the assumption that customer satisfaction should be a leading indicator of future success and profitability, the research is mixed. The study conducted to validate Modern Classic Homes’ strategy map yielded similarly mixed findings.

Lessons learned

  • Customer and employee satisfaction measures are complex – multiple measures may be necessary, and managers need to be more sophisticated in their understanding of how, when and where to measure them.
  • There may be diminishing returns in improving customer satisfaction – managers need to assess both the costs and the benefits of improvements in satisfaction.
  • Validating strategy maps is essential to ensure that the underlying assumptions hold true in practice and in driving the appropriate behaviours.
 

Related and similar practices

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Essential tools for management accountants - front cover

‘A strategy map provides a visual representation of the organization's strategy. This is truly an example of how one picture is more powerful than 1,000 words (or even twenty-five ad hoc performance measures).’

Robert S Kaplan. Mapping your corporate strategy. HBS, February 2004