Strategy maps are single-page, visual representations of organizational strategy. Their simplicity makes them ideal for communicating big-picture objectives to every employee in an organization – regardless of seniority or project involvement level. A strategy map is a visual representation of organizational objectives and how they relate to one another.
| Component | Description |
|---|---|
| Definition | A Strategy Map is a visual representation of an organization’s strategic objectives and the cause-and-effect relationships among them. It is a critical component of the Balanced Scorecard framework, helping organizations translate their vision and mission into actionable strategies. Strategy Maps provide a clear view of how various strategic objectives are interconnected to achieve long-term success. |
| Purpose | The primary purpose of a Strategy Map is to communicate the organization’s strategy, align teams and departments with strategic goals, and facilitate performance measurement and improvement. It offers a comprehensive view of the strategic priorities, allowing leaders to make informed decisions and allocate resources effectively. |
| Development Process | – Define Strategic Objectives: The process begins with defining clear and specific strategic objectives. These objectives should align with the organization’s mission and vision. – Identify Cause-and-Effect Relationships: Determine how achieving one objective impacts another. Identify dependencies and linkages to create a cause-and-effect chain. – Select Key Performance Indicators (KPIs): For each strategic objective, choose relevant KPIs that measure progress and success. These KPIs should provide actionable insights. – Visualize the Map: Create a graphical representation of the Strategy Map. Typically, it is depicted as a visual diagram with objectives arranged in a hierarchical and interconnected manner. – Communicate and Cascade: Share the Strategy Map across the organization to ensure alignment and understanding. Cascade the objectives down to teams and individuals. – Implement and Monitor: Execute the strategies defined in the map and continuously monitor performance against KPIs. Make adjustments and improvements as needed. |
| Components | A Strategy Map typically comprises four essential components: – Financial Objectives: These are financial performance goals that reflect the organization’s long-term financial health and sustainability. – Customer Objectives: Focus on creating value for customers, improving satisfaction, and building loyalty. – Internal Process Objectives: Address the critical internal processes and operations that drive value creation. – Learning and Growth Objectives: Concentrate on developing human capital, fostering innovation, and enhancing organizational capabilities. These components are interconnected and contribute to achieving the organization’s overall mission and vision. |
| Cause-and-Effect | The Strategy Map emphasizes the cause-and-effect relationships among the four components. It illustrates how achieving objectives in one component influences and drives success in other areas. For example, improving internal processes may lead to higher customer satisfaction, resulting in increased financial performance. These causal linkages help organizations understand how various objectives contribute to overall success. |
| Metrics and KPIs | Each strategic objective in the Strategy Map is associated with specific Key Performance Indicators (KPIs). These metrics are used to measure progress and performance. For instance, a financial objective may be linked to KPIs such as revenue growth rate, return on investment (ROI), or profitability margins. Customer objectives may include KPIs like customer retention rate, Net Promoter Score (NPS), or market share. Internal process objectives could involve KPIs related to process efficiency, quality, or cycle times. Learning and growth objectives might be associated with KPIs like employee training hours, innovation success rate, or employee satisfaction scores. |
| Benefits | – Clarity and Alignment: Strategy Maps provide clarity by visualizing strategic priorities and aligning all levels of the organization with the overarching strategy. – Performance Measurement: They enable organizations to track and measure progress toward strategic objectives using KPIs. – Resource Allocation: Leaders can allocate resources more effectively by understanding which objectives have the most significant impact. – Communication: Strategy Maps facilitate communication of complex strategies to employees, stakeholders, and investors. – Strategic Focus: They help organizations stay focused on long-term goals and avoid distractions. – Decision Support: Strategy Maps assist leaders in making data-driven decisions based on strategic priorities. |
| Drawbacks | – Complexity: Developing and maintaining Strategy Maps can be complex and time-consuming. – Subjectivity: The selection of strategic objectives and KPIs may involve subjectivity and bias. – Implementation Challenges: Translating the map into actionable strategies can be challenging. – Resistance to Change: Employees may resist changes in alignment with the strategic objectives. – Resource Intensive: It may require significant resources to collect and analyze KPI data. – Risk of Misinterpretation: Misinterpretation of the Strategy Map’s components and cause-and-effect relationships can lead to misguided decisions. |
| Applications | Strategy Maps are widely used in various industries and organizations. Large corporations use Strategy Maps to align business units, track financial performance, and guide long-term growth. |
Understanding strategy maps
Well-designed strategy maps articulate the role every employee will play in achieving the organizational strategy.
They also produce clearly defined objectives with measurable results. Importantly, strategy maps are built from the top down.
The organization must first define an overarching strategic objective before identifying the strategy and key performance indicators that will play a role in its achievement.
Most strategy maps are based on the four balanced scorecard perspectives of financial, customer, internal processes, and learning and growth.
We will take a look at these perspectives in more detail in the next section.
Using the four perspectives to construct a strategy map
On a strategy map, each strategic objective is represented by an oval or circle.
The number of strategic objectives must be kept under twenty since tracking too many objectives risks diluting the message or making the strategy difficult to communicate.
Each of the objectives is then grouped according to the four perspectives of the balanced scorecard.
This helps the business develop predictive, forward-looking strategies that are not solely based on financial performance.
The four perspectives are:
Finances
Encompassing strategies designed to increase shareholder value. Revenue growth and productivity are the two primary objectives measured under this perspective for most companies.
For non-profits, the customer or company mission is most important – financial performance is simply a means to an end.
Customers
Directly under the finances or mission is the customer value proposition.
For-profit companies tend to focus on either product leadership, operational excellence, or customer intimacy.
Processes
Which describe how financial and customer goals will be achieved.
Examples include innovation, market expansion, working toward operational excellence, improving customer relationships, and productive stakeholder relationships.
Learning and growth
The part of a strategy map detailing the employee skills and experience necessary to ensure processes run efficiently.
Company culture and intellectual capital are also important.
How to connect the four perspectives within the strategy map?
Arrows can then be used to illustrate the cause-and-effect relationship between strategic objectives.
Consider the example of an airline company strategy map.
With a properly trained ground crew (learning and growth), each flight has a faster turnaround time (processes).
Faster turnaround times then result in lower prices and fewer delayed passengers (customers), which increases profitability and lowers operating costs (financial).
When completing the strategy map, teams may find that some objectives do not fit neatly into a single perspective.
In this case, it may make sense to have them straddling two perspectives.
Teams should also realize that it is perfectly acceptable to deviate from the traditional strategy map framework to accommodate unique or particular goals.
Strategy Map vs. Balanced Scorecard
Within a balanced scorecard, the strategy map can be used to as a visual representation of organizational objectives and how they relate to one another.
Thus, the tools can be used to assess an organization’s performance better.
Case Studies
Retail Company Strategy Map:
- Financial Perspective:
- Objective: Increase profitability.
- KPIs: Gross margin, net profit margin, return on assets.
- Customer Perspective:
- Objective: Enhance customer satisfaction.
- KPIs: Customer Net Promoter Score (NPS), customer retention rate, average transaction value.
- Internal Processes Perspective:
- Objective: Optimize supply chain efficiency.
- KPIs: Inventory turnover, order fulfillment time, on-time delivery.
- Learning and Growth Perspective:
- Objective: Develop employee skills.
- KPIs: Employee training hours, employee turnover rate, skill development assessments.
Healthcare Organization Strategy Map:
- Financial Perspective:
- Objective: Achieve financial sustainability.
- KPIs: Operating margin, revenue per patient, cost per patient.
- Patient Perspective:
- Objective: Improve patient outcomes.
- KPIs: Patient satisfaction scores, readmission rates, mortality rates.
- Internal Processes Perspective:
- Objective: Enhance clinical processes.
- KPIs: Wait times, appointment scheduling efficiency, compliance with clinical protocols.
- Learning and Growth Perspective:
- Objective: Develop healthcare professionals.
- KPIs: Staff training hours, physician satisfaction, nurse-patient ratio.
Technology Startup Strategy Map:
- Financial Perspective:
- Objective: Achieve rapid revenue growth.
- KPIs: Monthly recurring revenue (MRR), customer acquisition cost (CAC), customer lifetime value (CLV).
- Product Perspective:
- Objective: Deliver innovative solutions.
- KPIs: Product release cycle time, feature adoption rate, user feedback.
- Operational Excellence Perspective:
- Objective: Streamline operations.
- KPIs: Burn rate, operational efficiency ratio, support ticket resolution time.
- Learning and Growth Perspective:
- Objective: Foster a culture of innovation.
- KPIs: Employee idea submissions, innovation workshops, employee engagement.
Manufacturing Company Strategy Map:
- Financial Perspective:
- Objective: Maximize shareholder value.
- KPIs: Return on equity (ROE), earnings per share (EPS), market share.
- Operational Excellence Perspective:
- Objective: Improve production efficiency.
- KPIs: Manufacturing cycle time, defect rate, capacity utilization.
- Customer Perspective:
- Objective: Deliver superior product quality.
- KPIs: Customer complaints, product returns, on-time delivery.
- Learning and Growth Perspective:
- Objective: Develop a skilled workforce.
- KPIs: Employee training, safety incidents, employee turnover.
Key takeaways:
- A strategy map is a visual representation of organizational objectives and how they relate to one another.
- A strategy map defines strategic objectives according to the four perspectives of the balanced scorecard: finances, customers, processes, and learning and growth. By analyzing the cause and effect relationships between different objectives, teams can develop forward-looking strategies free from a myopic focus on financial performance.
- A strategy map must be built from the top down. With a primary goal or outcome identified, the business must work backward to identify how it will be achieved.
Key Highlights
- Strategy Maps: Strategy maps are visual representations of organizational strategy that communicate big-picture objectives to all employees, regardless of their role or seniority.
- Purpose of Strategy Maps: Well-designed strategy maps help employees understand their role in achieving organizational strategy, provide clear and measurable objectives, and are built from top to bottom.
- Balanced Scorecard Perspectives: Strategy maps are often based on the four balanced scorecard perspectives: financial, customer, internal processes, and learning and growth.
- Four Perspectives in Detail:
- Finances: Focus on strategies to increase shareholder value, revenue growth, and productivity.
- Customers: Directly relate to the customer value proposition, emphasizing product leadership, operational excellence, or customer intimacy.
- Processes: Describe how financial and customer goals will be achieved, including innovation, market expansion, and stakeholder relationships.
- Learning and Growth: Detail employee skills, experience, company culture, and intellectual capital necessary for efficient processes.
- Connecting Perspectives: Strategy maps use arrows to illustrate cause-and-effect relationships between strategic objectives. For instance, well-trained ground crews lead to faster flight turnaround times, resulting in lower prices, fewer delays, and increased profitability.
- Flexibility: Strategy maps may involve objectives that straddle two perspectives or deviate from the traditional framework to accommodate unique goals.
- Strategy Map vs. Balanced Scorecard: The balanced scorecard is a management system proposed by Robert Kaplan, while the strategy map serves as a visual representation of organizational objectives within the balanced scorecard framework.
- Building a Strategy Map: Strategy maps are constructed by identifying a primary goal and working backward to define how it will be achieved through the four perspectives.
| Related Frameworks | Description | When to Apply |
|---|---|---|
| Balanced Scorecard (BSC) | – The Balanced Scorecard (BSC) is a strategic management framework that translates an organization’s mission and strategy into a comprehensive set of performance metrics. It typically includes four perspectives: financial, customer, internal processes, and learning and growth. The BSC enables organizations to align strategic objectives, measure performance, and monitor progress towards strategic goals. | – When aligning strategic objectives, defining performance metrics, and monitoring progress towards strategic goals. – In situations where a comprehensive framework is needed to communicate strategy, measure performance, and drive organizational alignment and execution. |
| Hoshin Kanri (Policy Deployment) | – Hoshin Kanri, also known as Policy Deployment, is a strategic planning methodology that aligns organizational goals and priorities at all levels. It involves cascading strategic objectives from top management to frontline employees through a structured process of goal setting, action planning, and performance review. Hoshin Kanri fosters cross-functional collaboration, employee engagement, and continuous improvement in achieving strategic objectives. | – When aligning organizational goals and priorities, cascading strategic objectives, and fostering cross-functional collaboration and employee engagement. – In environments where a structured approach to strategic planning and execution is essential for achieving organizational alignment and driving continuous improvement efforts. |
| SWOT Analysis | – SWOT Analysis is a strategic planning tool used to identify an organization’s strengths, weaknesses, opportunities, and threats. It involves assessing internal factors (strengths and weaknesses) and external factors (opportunities and threats) that may impact the organization’s ability to achieve its objectives. SWOT Analysis provides valuable insights for strategic decision-making and helps organizations capitalize on strengths and opportunities while addressing weaknesses and threats. | – When assessing an organization’s internal capabilities and external environment to identify strategic advantages, risks, and areas for improvement. – In situations where strategic planning and decision-making require a comprehensive analysis of internal and external factors influencing organizational performance. |
| Strategy Canvas | – The Strategy Canvas is a visual tool used in Blue Ocean Strategy to illustrate the strategic profile of a company and its competitors in the industry. It maps key factors of competition along two axes and visually depicts the differences in strategic positioning. The Strategy Canvas enables organizations to identify areas of differentiation and innovation opportunities to create new market space and gain competitive advantage. | – When analyzing competitive positioning, identifying areas for differentiation, and developing innovative strategies to create new market space. – In environments where visualizing competitive dynamics and strategic alternatives is essential for driving innovation and achieving competitive differentiation. |
| Scenario Planning | – Scenario Planning is a strategic foresight technique used to explore and prepare for alternative future scenarios. It involves identifying key uncertainties and drivers of change, constructing plausible scenarios, and assessing their implications on the organization’s strategy. Scenario Planning helps organizations anticipate potential disruptions, adapt to changing environments, and make informed strategic decisions. | – When exploring alternative future scenarios, assessing strategic risks and opportunities, and preparing for uncertainty and change. – In situations where strategic decision-making requires considering multiple possible futures and their potential impact on the organization. |
| Value Chain Analysis | – Value Chain Analysis is a strategic management framework that identifies the primary and support activities involved in creating value for customers. It involves analyzing each activity’s cost and value contribution to understand the organization’s competitive advantage and identify opportunities for cost reduction or differentiation. Value Chain Analysis helps organizations optimize their internal processes and enhance overall value delivery. | – When analyzing the activities involved in creating value for customers, identifying sources of competitive advantage, and optimizing internal processes. – In environments where understanding the end-to-end value creation process is essential for achieving competitive differentiation and enhancing customer satisfaction. |
| Blue Ocean Strategy | – Blue Ocean Strategy is a strategic planning framework that focuses on creating uncontested market space by making competition irrelevant. It involves identifying and capturing new market opportunities through innovation and value innovation. Blue Ocean Strategy encourages organizations to shift their focus from competing in existing markets (red oceans) to creating new markets (blue oceans) where competition is minimal. | – When seeking to create uncontested market space, identify new market opportunities, and drive innovation and value innovation. – In situations where traditional competitive strategies are not sufficient for achieving sustainable growth and competitive differentiation. |
| Core Competencies Analysis | – Core Competencies Analysis is a strategic management tool used to identify an organization’s unique strengths and capabilities that provide a competitive advantage in the marketplace. It involves assessing the skills, resources, and capabilities that differentiate the organization from its competitors and contribute to its long-term success. Core Competencies Analysis helps organizations focus on leveraging their strengths and building competitive advantages. | – When identifying an organization’s unique strengths, capabilities, and competitive advantages in the marketplace. – In environments where aligning strategic initiatives with core competencies is essential for maximizing organizational performance and achieving sustainable growth. |
| Porter’s Five Forces | – Porter’s Five Forces is a strategic analysis framework used to assess the competitive intensity and attractiveness of an industry. It examines five key factors: the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products or services, and the intensity of competitive rivalry. Porter’s Five Forces helps organizations understand industry dynamics and formulate competitive strategies. | – When analyzing the competitive forces shaping an industry, assessing industry attractiveness, and formulating competitive strategies. – In situations where understanding industry dynamics and competitive positioning is essential for making strategic decisions and gaining competitive advantage. |
| Ansoff Matrix | – Ansoff Matrix, also known as the Product-Market Growth Matrix, is a strategic planning tool used to identify growth opportunities for a company’s products and markets. It categorizes growth strategies into four quadrants: market penetration, market development, product development, and diversification. Ansoff Matrix helps organizations evaluate strategic options and choose the most suitable growth strategy based on their objectives and risk appetite. | – When evaluating growth opportunities, identifying strategic options, and selecting suitable growth strategies based on organizational objectives and risk tolerance. – In environments where aligning product and market expansion strategies with overall business goals is essential for achieving sustainable growth and competitive advantage. |
What are the four 4 perspectives in a strategy map?
The four perspectives of a strategy map comprise:
What is the goal of a strategy map?
Well-designed strategy maps articulate every employee’s role in achieving the organizational strategy through four perspectives (finances, customers, processes, and learning & growth). The strategy map, combined with other organizational structure tools, can help better define and monitor the achievements of a company.
Connected Strategy Frameworks
Main Guides:
