strategy-map

What Is A Strategy Map? The Strategy Map In A Nutshell

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.

ComponentDescription
DefinitionA 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.
PurposeThe 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 ProcessDefine 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.
ComponentsA 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-EffectThe 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 KPIsEach 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.
BenefitsClarity 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.
DrawbacksComplexity: 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.
ApplicationsStrategy 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.

Generate a Strategy Map

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

balanced-scorecard
First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.

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:

  1. Financial Perspective:
    • Objective: Increase profitability.
    • KPIs: Gross margin, net profit margin, return on assets.
  2. Customer Perspective:
    • Objective: Enhance customer satisfaction.
    • KPIs: Customer Net Promoter Score (NPS), customer retention rate, average transaction value.
  3. Internal Processes Perspective:
    • Objective: Optimize supply chain efficiency.
    • KPIs: Inventory turnover, order fulfillment time, on-time delivery.
  4. Learning and Growth Perspective:
    • Objective: Develop employee skills.
    • KPIs: Employee training hours, employee turnover rate, skill development assessments.

Healthcare Organization Strategy Map:

  1. Financial Perspective:
    • Objective: Achieve financial sustainability.
    • KPIs: Operating margin, revenue per patient, cost per patient.
  2. Patient Perspective:
    • Objective: Improve patient outcomes.
    • KPIs: Patient satisfaction scores, readmission rates, mortality rates.
  3. Internal Processes Perspective:
    • Objective: Enhance clinical processes.
    • KPIs: Wait times, appointment scheduling efficiency, compliance with clinical protocols.
  4. Learning and Growth Perspective:
    • Objective: Develop healthcare professionals.
    • KPIs: Staff training hours, physician satisfaction, nurse-patient ratio.

Technology Startup Strategy Map:

  1. Financial Perspective:
    • Objective: Achieve rapid revenue growth.
    • KPIs: Monthly recurring revenue (MRR), customer acquisition cost (CAC), customer lifetime value (CLV).
  2. Product Perspective:
    • Objective: Deliver innovative solutions.
    • KPIs: Product release cycle time, feature adoption rate, user feedback.
  3. Operational Excellence Perspective:
    • Objective: Streamline operations.
    • KPIs: Burn rate, operational efficiency ratio, support ticket resolution time.
  4. Learning and Growth Perspective:
    • Objective: Foster a culture of innovation.
    • KPIs: Employee idea submissions, innovation workshops, employee engagement.

Manufacturing Company Strategy Map:

  1. Financial Perspective:
    • Objective: Maximize shareholder value.
    • KPIs: Return on equity (ROE), earnings per share (EPS), market share.
  2. Operational Excellence Perspective:
    • Objective: Improve production efficiency.
    • KPIs: Manufacturing cycle time, defect rate, capacity utilization.
  3. Customer Perspective:
    • Objective: Deliver superior product quality.
    • KPIs: Customer complaints, product returns, on-time delivery.
  4. 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.

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

ADKAR Model

adkar-model
The ADKAR model is a management tool designed to assist employees and businesses in transitioning through organizational change. To maximize the chances of employees embracing change, the ADKAR model was developed by author and engineer Jeff Hiatt in 2003. The model seeks to guide people through the change process and importantly, ensure that people do not revert to habitual ways of operating after some time has passed.

Ansoff Matrix

ansoff-matrix
You can use the Ansoff Matrix as a strategic framework to understand what growth strategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growth strategy can be derived from whether the market is new or existing, and whether the product is new or existing.

Business Model Canvas

business-model-canvas
The business model canvas is a framework proposed by Alexander Osterwalder and Yves Pigneur in Busines Model Generation enabling the design of business models through nine building blocks comprising: key partners, key activities, value propositions, customer relationships, customer segments, critical resources, channels, cost structure, and revenue streams.

Lean Startup Canvas

lean-startup-canvas
The lean startup canvas is an adaptation by Ash Maurya of the business model canvas by Alexander Osterwalder, which adds a layer that focuses on problems, solutions, key metrics, unfair advantage based, and a unique value proposition. Thus, starting from mastering the problem rather than the solution.

Blitzscaling Canvas

blitzscaling-business-model-innovation-canvas
The Blitzscaling business model canvas is a model based on the concept of Blitzscaling, which is a particular process of massive growth under uncertainty, and that prioritizes speed over efficiency and focuses on market domination to create a first-scaler advantage in a scenario of uncertainty.

Blue Ocean Strategy

blue-ocean-strategy
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.

Business Analysis Framework

business-analysis
Business analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.

BCG Matrix

bcg-matrix
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.

Balanced Scorecard

balanced-scorecard
First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.

Blue Ocean Strategy 

blue-ocean-strategy
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.

GAP Analysis

gap-analysis
A gap analysis helps an organization assess its alignment with strategic objectives to determine whether the current execution is in line with the company’s mission and long-term vision. Gap analyses then help reach a target performance by assisting organizations to use their resources better. A good gap analysis is a powerful tool to improve execution.

GE McKinsey Model

ge-mckinsey-matrix
The GE McKinsey Matrix was developed in the 1970s after General Electric asked its consultant McKinsey to develop a portfolio management model. This matrix is a strategy tool that provides guidance on how a corporation should prioritize its investments among its business units, leading to three possible scenarios: invest, protect, harvest, and divest.

McKinsey 7-S Model

mckinsey-7-s-model
The McKinsey 7-S Model was developed in the late 1970s by Robert Waterman and Thomas Peters, who were consultants at McKinsey & Company. Waterman and Peters created seven key internal elements that inform a business of how well positioned it is to achieve its goals, based on three hard elements and four soft elements.

McKinsey’s Seven Degrees

mckinseys-seven-degrees
McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.

McKinsey Horizon Model

mckinsey-horizon-model
The McKinsey Horizon Model helps a business focus on innovation and growth. The model is a strategy framework divided into three broad categories, otherwise known as horizons. Thus, the framework is sometimes referred to as McKinsey’s Three Horizons of Growth.

Porter’s Five Forces

porter-five-forces
Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces.

Porter’s Generic Strategies

competitive-advantage
According to Michael Porter, a competitive advantage, in a given industry could be pursued in two key ways: low cost (cost leadership), or differentiation. A third generic strategy is focus. According to Porter a failure to do so would end up stuck in the middle scenario, where the company will not retain a long-term competitive advantage.

Porter’s Value Chain Model

porters-value-chain-model
In his 1985 book Competitive Advantage, Porter explains that a value chain is a collection of processes that a company performs to create value for its consumers. As a result, he asserts that value chain analysis is directly linked to competitive advantage. Porter’s Value Chain Model is a strategic management tool developed by Harvard Business School professor Michael Porter. The tool analyses a company’s value chain – defined as the combination of processes that the company uses to make money.

Porter’s Diamond Model

porters-diamond-model
Porter’s Diamond Model is a diamond-shaped framework that explains why specific industries in a nation become internationally competitive while those in other nations do not. The model was first published in Michael Porter’s 1990 book The Competitive Advantage of Nations. This framework looks at the firm strategy, structure/rivalry, factor conditions, demand conditions, related and supporting industries.

SWOT Analysis

swot-analysis
A SWOT Analysis is a framework used for evaluating the business‘s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.

PESTEL Analysis

pestel-analysis

Scenario Planning

scenario-planning
Businesses use scenario planning to make assumptions on future events and how their respective business environments may change in response to those future events. Therefore, scenario planning identifies specific uncertainties – or different realities and how they might affect future business operations. Scenario planning attempts at better strategic decision making by avoiding two pitfalls: underprediction, and overprediction.

STEEPLE Analysis

steeple-analysis
The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.

SWOT Analysis

swot-analysis
A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.

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