Strategy Maps (Kaplan Norton)

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Picturing and communicating how an organization can create value: connecting strategic objectives in cause and effect relationships with each other. Explanation of Strategy Maps of Kaplan and Norton ('92, '01).


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What are Strategy Maps? Description

In the 2001 book "The Strategy-Focused Organization", Kaplan and Norton transform their Balanced Scorecard. In 1992 they introduced the Balanced Scorecard in the Harvard Business Review as system to measure performance; now they change it to a strategic management system. A lot of this transformation was done by further emphasizing the so called Strategy Map.

 

Strategy Maps are diagrams that describes how an organization can create value: by connecting strategic objectives in explicit cause and effect relationship with each other. Via the four Balanced Scorecard perspectives: financial, customer, processes, learning and growth. See the figure below (You can click on the graph to download a bigger one in pdf-format). Strategy Maps are a strategic part of the Balanced Scorecard framework to describe strategies for value creation.

 

Strategy MapsCharacteristics of Strategy Maps

  1. All of the information is contained on one page; this enables relatively easy strategic communication.

  2. There are four perspectives: Financial; Customer; Internal; Learning and Growth.

  3. The financial perspective looks at creating long-term shareholder value, and uses a productivity strategy of improving cost structure and asset utilization and a growth strategy of expanding opportunities and enhancing customer value.

  4. These last four elements of strategic improvement are supported by price, quality, availability, selection, functionality, service, partnerships and brand.

  5. From an internal perspective, the operations processes and the customer management processes help to make the product and service attributes. While the innovation, regulatory and social processes help with relationships and image.

  6. All of these processes are supported by the allocation of human capital, information capital and organizational capital. Organizational capital is comprised of company culture, leadership, alignment and teamwork.

  7. Connecting arrows are describing cause and effect relationships.

What are the main principles behind Strategy Maps?

  1. Strategy balances contradictory forces.
  2. Strategy is based on a differentiating customer value proposition.
  3. Value is added through internal business processes.
  4. Strategy consists of simultaneous, complementary themes.
  5. Strategic alignment determines the value of intangible assets.

Usage of Strategy Maps? Benefits

By connecting such things as shareholder value creation, customer management, process management, quality management, core capabilities, innovation, human resources, information technology, organizational design and learning with one another in one graphical representation, Strategy Maps can help greatly in describing the strategy and to communicate the strategy among executives and to their employees. In this way an alignment can be created around the strategy, which makes a successful implementation of the strategy more easy. No small thing, bearing in mind that often, the implementation of a constructed strategy is the biggest challenge.


Although the previous book of Kaplan and Norton already spent 64 pages on Strategy Maps, you can find the latest, best and most comprehensive treatment of Strategy Maps including lots of examples in the book that is mentioned below.

 

Book: Robert Kaplan and David Norton - Strategy Maps -

 

 

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Strategy Maps Forum

Recent User Comments
Carlos Brown - USA Online or DVD Training Materials on BSC / Strategy Maps "I am in quest of e-learning or DVD informal training related to:
- Strategy Plan development;
- Strategy Map development
- Balanced Scorecard / Dashboard development
- Aligning Strategy with action plan
Any idea who I can contact for additional information?"		    0
Mohamed Salem - Egypt BSC as Strategy for Change? "(How) Can we use the Balanced Scorecard as a strategy for organizational change?"    -1
Benjamine VO VINH - France Have you heard about OVAR ? "OVAR is a second - similar - strategic approach that allows confontation of departments' choices. O for Objectives, VA for Value of Actions, R for Responsibilities. Every department implements the company's objectives into actions and decides whom may be responsible or partner for what. After that, all departments meet and cross the needs, the do's and the dont's. Accountabiliy, alignment and transversality are the benefits of this tested and proven approach..."    0
Jeswan SinghPS - Malaysia Strengths of Strategy Maps "Strategy Maps are an excellent extension to the basic framework of the Balanced Scorecard (BSC) approach.
- Business strategy statements can be catchy, but line management are often searching for answers and appropriate data on the implementation and the translation to results of the strategy - this is where Strategy Maps (SMs) come into play.
- They facilitate further the value adding process of senior and line management.
- They provide direction and show the way for successful implementation of agreed Business strategy."		    2
Abdul Babar - Australia Disadvantages / Problems with Strategy Maps "Hi everyone, I find business literature mainly talks in favor of Strategy Maps.. can you help me to find problems or disadvantages in strategy map implementation?"    4



Best User Comments
Luis Villegas - Mexico Customer Perspective "Good morning, In the Customer Perspective of the Strategy Map there is a product/service attribute called "Selection". What does it mean? Examples? "    10
Sam - Australia BSC "Does the strategy map tell the same story of Balanced Scorecard? Both of them are talking about these four perspectives."    4
William - USA Synergy in Strategy Maps? "Is it possible to include corporate level synergy effects into a Strategy Map? How? (Strategy maps seem to be directed primarily at the business strategy level)"    0
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  └► Baran Samandi (Iran) Strategy Map Strength "A strategy Map displays only pure strategy to demonstrate the core Business Strategy to relevant stakeholders and managers."

  └► Gaia (Italy) Problems with Strategy Maps "Problems about implementation could be: time/resources management, training and trading interests."
  └► Jason Kent (United States) Benefit "I've seen/experienced that an organization's sense of urgency results in moving forward too quickly without proper planning. I've facilitated small workshops at the beginning of a change initiative, for example, to get people around a table brainstorming about the items in a strategy map (like the one on this page) so that they at least understand all the nuances that exist. It also gets them thinking early on about the effects (positive and negative) on others (such as a client) which can easily be overlooked, as well as starting to identify key stakeholders to make sure the change initiative runs more smoothly. The project/change typically moves forward before all of the details are hashed out but at least this "time out" provides a checklist so that everyone understands what is (or should be) involved in implementing a new strategy."
  └► Bob (Thailand) Advance SMap / BSCard "The original BSC does not address risk and uncertainty which are one of the major reasons for the current financial crisis. One should consider to integrate other tools (Scenario Analysis, Risk Management, War Gaming) to make the strategies future, time and competitor proved. Original BSC is not sufficient to response to current crisis."
  └► Guusje (Belgium) Limitation of Strategy Maps "One obvious yet very important limitation of Strategy Maps is that they do not help at all to devise and formulate the right strategy. It is a tool to COMMUNICATE a strategy once it is devised and formulated."
  └► Anderson Su (Taiwan) The Customer Perspective in Strategy Map "The customer perspective in strategy map should be difined in feasible. How to suit the customer requirements that is always challenge our company, now we are using QFD to screen the customer's needs and then transfer to R&D side for developing the right products and reducing time into market."

  └► Andrew White (UK) BSC "I think this means 'range of offering' for example a number of products available that might meet a customer's requirements, perhaps with varying functionality..."
  └► Rob Siwicki (UK) BSC "Hi. I believe selection actually means selection of customers. How do we select the customers we target. The 'range of offering' refers to selection in the value proposition - which is different."
  └► Jeswan SinghPS (Malaysia) Selection - Product/Service attribute "As the above attribute falls within the CUSTOMER perspective, it refers also to the choice of geographical boundary targetted by the product/service provider. This is why the BSC provides a succint, clear and complete picture of an organisation' business strategy elements. The BSC also enumerates the key accountabilities of those tasked with the achievement of the strategies."

  └► Dennis Webbers (The Netherlands) BSC and Strategy Maps "The strategy map concept was designed by the same authors (Kaplan & Norton) and is a more practical approach to combine the assets of an organisation to methods to create value. I find especially the visual aspect of strategy maps appealing."
  └► Dee (Zimbabwe) Difference BSC and Strategy Maps "Strategy maps help clarify the strategy and the related strategic objectives whereas balanced scorecards are used to establish metrics and targets to measure and manage the performance of the organization against those strategic objectives."

  └► Al (NL) synergy in strategy maps "I believe you can, by creating a new map on the higher level"
  └► Stephen (USA) Higher Level Targets "Yes, I did one for my company and the challenge is to find the right quantification of the corporate synergy goals. If you act in a non fact based corporate culture you will obviously have a hard time selling this."
  └► Patricia (Algeria) Corporate Strategy Maps "How do we implement a strategy map at the corporate level as opposed to at business unit level?"
  └► Gaia (Italy) Corporate Synergy? "I think corporate level have to be the sponsor on "thinking and acting in according to BSC". Nice your question, but what do you mean, exactly, with corporate level synergy effects?"