A strategy map developed by Robert S. Kaplan and David P. Norton as part of their Balanced Scorecard framework for strategic planning and management. A strategy map is a visual representation of a company’s overall objectives and how they relate to one another on a single page. It’s great for quickly communicating big-picture objectives to everyone in the company.
With a well-designed strategy map, every employee can know your overall strategy and where they fit in. It helps keep everyone on the same page, and it allows people to see how their jobs affect the company’s strategic objectives. Your company can be benefited from Strategy Map which includes:
- It provides all the relevant information for decision making in a one page document
- It improves communication of the organization’s Vision and Strategy
- It help to identify and link together the critical internal processes, human resources, information that deliver the value proposition of the company
- It prioritizes action items in the implementation roadmap in tough economic times, if it is used together with balanced score card
Structure of a Strategy Map
A Strategy Map describes your strategy and tells your story of your strategy. It shows, visually, how you expect to create value in the organization for your customers. It describes what you believe will drive change by providing a simple visual representation of the strategic objectives to be focused on in the form of the perspectives and causal arrows. The strategy map has been found useful in enabling discussion within a management team about what objectives to choose, and subsequently to support discussion of the actual performance achieved. We can develop a strategy map based on the following key concepts and guiles:
- It is an underlying framework of horizontal perspectives arranged in a cause and effect relationship, typically Financial, Customer, Process and Learning & Growth
- Objectives within those perspectives. Each objective as text appearing within a shape (usually an oval or rectangle). Relatively few objectives (usually fewer than 20)
- Vertical sets of linked objectives that span the perspectives. These are called strategic themes.
- Clear cause-and-effect relationships between these objectives, across the perspectives.
- The strategic themes represent hypotheses about how the strategy will bring about change to the outcomes of the organization.
How to Create the 4 Perspectives of a Strategy Map
A strategy map put all goals across the four key business perspectives on a single page which encourages everyone to see the cause and effect relationship between them.
- The first two perspectives are about “what we’re getting,”
- The latter two perspectives are more about “what we’re doing.”
To properly understand a strategy map, you should read the “story” from the bottom perspective upward because what you do directly influences what you get.
You can develop the four perspectives by deriving the answers for the following questions:
- Financial: the financial results and survival
- Question: To satisfy stakeholders, what financial objectives must be accomplished?
- Customer: what the customers want or need
- Question: To achieve the financial objectives, what customer need must be met?
- Internal Processes: the internal organization and processes that deliver the customer needs
- Question: To satisfy customers, and stakeholders, which internal organizational process are critical?
- Learning and Growth: the training, technology and knowledge needed to operate the processes or procedures successfully
- Question: To achieve goals, how must the individuals be enabled?
Guidelines for Developing a Strategy Map
There are several guidelines that need to be taken into consideration when designing a Strategy Map:
- Choose the right template
- Start from the top down
- Ask the questions in a cause and effect chain repeatedly
- Until you have reached the lowest level perspective
Strategy Map Example – IT Company
- Starting from the First perspective – Financial
- ‘What’ do we want to achieve?
- Maintain Profitability so,
- In the second perspective – Customer
- ‘How’ are we going to do that?
- Improve Customer Satisfaction
- Now, repeat the process in Internal Process perspective
- How are we going to do that?
- Reduce support calls
Repeat and so on….
When you are performing the mapping and associated a link between them through arrows, you will see a cause-and-effect relationship between those goals.
Combining the Power of Strategy Map and Balanced Scorecard
A Strategy Map does not contain measures, it contains objectives. Of cause, we can combine the power of both tools by using a strategy map as a part of the Balanced Scorecard. Strategy maps provide the means of linking the objectives to the balanced scorecard which provides a roadmap giving direction and linking the performance indicators and initiatives to the strategy of the company. As shown in the diagram above for each perspective, there is a set of objectives. Measures within the scorecard framework are aligned to the objectives and targets set. An action plan is linked to the objectives and along with an associated budget.
We can place your measures on the strategy map, alongside the objectives they correspond with:
Edit this Diagram
A clear direction is necessary for everyone to know what they are working on and what goals to accomplish to increase their productivity. When you have identify your strategic objectives or goals on a strategy map and associated a link between them through arrows, you will see a cause-and-effect relationship between those goals. At that point, you can gauge the importance of one goal in attaining the other goals. This will help you in devising your action plan, and consequently developing your overall strategy according to your organization’s targets. You will also be able to monitor and control the implementation of your strategy.