Strategy Maps (Kaplan Norton)

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).

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.

Characteristics of Strategy Maps

All of the information is contained on one page; this enables relatively easy strategic communication.
There are four perspectives: Financial; Customer; Internal; Learning and Growth.
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.
These last four elements of strategic improvement are supported by price, quality, availability, selection, functionality, service, partnerships and brand.
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.
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.
Connecting arrows are describing cause and effect relationships.

What are the main principles behind 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.

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 -

Strategy Maps Forum (13)

Should the Strategy be Communicated? How Much? To Whom?
"Communicating strategy involves much more than talk. There are numerous pitfalls or issues which must be resolved for the strategy to be effectively communicated. For example, in some instances executives argue with good reason that to fully communicate the organization´s strategy is to court (Editor: ~attract) disaster. Thus, one CEO has a five year strategy which, when it is fully implemented, will mean severe disruption to a major subsidiary. He does not want to rock the boat prematurely. An energy company thought it wiser not to publicize its strategy because it would become a sitting duck for regulatory agencies.

Such reservations have merit. Discretion may indeed be the better part of valor. Fully communicating strategy may not always be in the best interest of the organization, especially where that strategy is sensitive. Each situation has its own constraints, There is no one formula guiding how much strategy to communicate. However, where limitations are put on communications, those limitations must be carefully considered. They may not only handicap a manager´s ability to keep decisions consistent with the overall strategy, but they may erode commitment to the organization.
Regardless of where you are on the strategy-communications continuum, from significant discretion to full disclosure, critical issues about communication must be allowed to surface and be resolved. What should be communicated about the strategy and where and when should it be said? How much should be said and to whom? Stockholders? Middle Managers? Supervisors? Employees? Union Leaders? Customers? Government? What forms should the communication take? Who should do the communicating?
These questions seem relatively straightforward, but recall the situation mentioned earlier in which a corporate strategy meant severe disruption to a major subsidiary."

Strategy Maps for Public Sector Organizations / Government
"How do strategy maps work for public sector organizations (i.e. government agencies) that don't have sales nor shareholders?"

Strategy Maps in Egypt?
"I'd like to know what companies are using strategy maps in Egypt if any? Thanks for your tips..."

Successful Cases which can be Shared?
"How many companies have applied a strategy map into their business so far? Is there any successful case study that can be shared to discuss? What were the advantages of using it in practice?"

Managing Cross-Divisional Collaboration
"Often, achievement of a Critical Success Factor requires collaboration of two or more divisions across organizational boundaries. For example, to increase sales of new products in overseas markets, collaboration between international sales, R&D, and marketing might be required.
However, these divisions tend to be managed separately, and might also have separate divisional strategy maps.
While strategy maps can help in working out a collaborative relationship between divisions, strategy maps and BSC seem to offer little for managing horizontal collaboration relationships, responsibilities and accountabilities compared to managing vertical commitments.
I would be interested in community member experiences, and what have you done to address this issue?"

Ends, Means and Strategy Map
"Under John Carver's Policy Governance Model management is driven by ends established by a board of directors. Management then develops means (goals, strategies, objectives) to meet the board's ends. Has anyone used their board's ends in their BSC strategy map?"

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?"

The OVAR Approach - Objectives, Value of Actions, Responsibilities
"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..."

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."

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?"

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? "

Are Balanced Scorecard and Strategy Map the Same?
"Does the strategy map tell the same story of Balanced Scorecard? Both of them are talking about these four perspectives."

Synergy in Strategy Maps?
"Is it possible to include corporate level (strategic) synergy effects into a Strategy Map? How? (Strategy maps seem to be directed primarily at the business strategy level)"

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