As the headline reveals, a Strategy Map is a fantastic tool for creating a clear picture of your strategy and to make it easier to explain and describe to others. At the same time, the tool is very usefull, when you have to develop a strategy. The method provides a structured recipe which ensures that goals, processes and resources are connected.
The Strategy Map was originally developed as a part of Robert S. Kaplan and David P. Norton’s very popular balanced scorecard method from the mid 90’s. Initially, the Strategy Map had a smaller significance to the method, but the two professors have since developed both the Balanced Scorecard method and the Strategy Map from being a method that measures performance in a company to a strategy development tool. In this process, the Strategy Map has been given a far more important role. In Kaplan and Norton’s latest books the Strategy Map is a central tool. First, you work out the company’s Strategy Map and based on this you create your scorecards. This ensures then balance (which is the Balanced Scorecard main purpose) between strategic goals and operational and tactical plans and initiatives.
The Strategy Map is typically (and best) developed by top management and the employees directly under them, and is, as mentioned, the foundation for operational and tactical plans, projects and scorecards. It requires a lot of work to develop a Strategy Map both form you and your management team, but i'is definitely worth the effort.
Before assembling your management team there are a few things you need to have in place. You must collect and create knowledge of the following:
Your annual reports
Your mission statement (If you don't have one, make one)
Your vision for the future
Your project plans and initiatives
Consultant analyses, -studies and results (if you have any)
Reports of your presentations for the past 12 months
Compative data and analyses
Your organizational history (among other things, find out what the company’s founders valued and wished to achieve)
Industry magazines and news articles about your company
Benchmarking reports and information
Don't cut corners by copying what other companies have done. This must be your strategy. And also remember that your vision, mission, values and principles must be connected. If this isn't the case, revise them until they are.
When you've done your strategic preparatory work, you are ready to develop your Strategy Map. The map in the illustration below gives you an idea of what the result could be. Your own Strategy Map is likely to become much more complex than this one.
Use this approach when making a Strategy Map:
Develop business strategies, ie.: Expand business by 50 % or increase customer loyalty by 15 % in three years.
Develop objectives and goals for each of the Balanced Scorecard’s four principles (see fact box).
Ensure that all interactions and connections are defined in all four perspectives.
Some companies begin with the financial perspective and set themselves economic goals before they work on the other perspectives. Others start with the customer perspective and assess customers, markets, customer trends and forecasts of the future, before they deal with the financial perspective. Which solution works best for your company, is a question for top management and their evaluation of the company and its situation.
However, a clever move is often to start with the customer perspective. Many companies tend to set themselves unrealistic financial goals, which they force on the entire organization afterwards, only to find out that the customer foundation cannot support them. By starting with customers and market and then move on to finances (of course based on a reasonable assessment of your customers and markets) you avoid this problem more easily and avoid having to make corrections later in the process.
While the Strategy Map helps you develop the company’s strategy, the completed map also works as an efficient tool for presenting the chosen strategy to the rest of the company. In only one page you can show the strategy in general outlines a nd also describe connections and dependences. This means, that each of your employees can easily see where he/she fits in the strategy and where he/she can and must contribute in reaching the company’s goals.
Balanced Scorecard’s 4 perspectives:
The financial perspective. How should we appear in front of our shareholders to achieve economic success?
Customer perspective. How must we appear in front of our customers to achieve our vision?
Internal processes. Which business processes should we master in order to satisfy our customers and shareholders?
Learning and growth. How can we maintain our ability to change and improve ourselves to achieve our vision?