A Strategy Map is a diagram that is used to document the primary strategic goals being pursued by an organization or management team. It is an element of the documentation associated with the Balanced Scorecard, and in particular is characteristic of the second generation of Balanced Scorecard designs that first appeared during the mid-1990s. The first diagrams of this type appeared in the early 1990s, and the idea of using this type of diagram to help document Balanced Scorecard was discussed in a paper by Kaplan & Norton in 1996.
The Strategy Map idea featured in several books and articles during the late 1990 by Kaplan & Norton and others, including most notably Olve and Wetter in their 1998 book, Performance Drivers.
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.
Relation to Balanced Scorecard
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.
Characteristics of Strategy Maps
- Strategy balances contradictory forces.
- Strategy is based on a differentiating customer value proposition.
- Value is added through internal business processes.
- Strategy consists of simultaneous, complementary themes.
- Strategic alignment determines the value of intangible assets.
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.
You can learn about utilizing Strategy Maps and the Balanced Scorecard as a strategic management tool in this business framework presentation.
Source: Robert Kaplan and David Norton – Strategy MapsBusiness frameworks like Strategy Map are invaluable to evaluating and analyzing various business problems. You can download business frameworks developed by management consultants and other business professionals at Flevy here.