Using Strategy Mapping To Drive Performance

U S I N G S T R AT E G Y M A P S T O D R I V E P E R F O R M A N C Eone suggests that strategy maps are the completeanswer to strategy execution, they are a promisingsolution to the compelling need for betterexecution of strategy. Strong anecdotal evidencesuggests that such maps assist organizations toachieve better results. In addition, well-craftedstrategy maps improve the alignment of othercorporate functions, such as strategy planning,budgeting, monitoring, operations, andcompensation. By so doing, they can improve theprobability of successful execution of strategy andsuperior operating and financial performance.sponsorship support at the senior level(CEO/president and board) leads to the creationof strategy mapping champions and teams thatcan use this process to begin developing andcommunicating their corporate and divisionalmaps.In the following sections, this MAG will describe(a) the scope of, and reasons for the MAG, (b) asix-step methodology for developing andimplementing a corporate-level strategy map,(c) how to cascade the map to lower level businessunits and support groups, and (d) the importanceof validating the map and its associated measureswith ongoing strategic objectives. Understand the benefits of strategy mapping; Understand the steps in the strategy mappingprocess; Effectively participate in developing, validating,integrating and rolling out processes necessaryfor a successful strategy mapping initiative.SCOPE AND AUDIENCEThe MAG discusses the compelling need forbetter strategy execution, and provides aframework for implementing a strategy mapsystematically. Much excellent literature clearlyarticulates what strategy mapping is, and why acompany should adopt it.This guideline focuses onhow to implement a strategy mapping initiative.Strategy maps have proven useful in public, notfor-profit and private sector organizations. Indeed,many principles underlying the construction, rollout and communication of strategy maps aresimilar for a wide variety of entities. Sectors differin several important ways. This MAG providesuseful insight for a broad cross-section of readers.However, its primary audience is the privatesector, and the construction of the map thatfollows assumes a private sector settingii.Well-conceived strategy maps will pervade theorganization. Consequently, the MAG will be ofinterest to several levels of organizationalpersonnel, including the professional accountant inbusiness. First, there are many mid- to senior levelindividuals who have read about strategy maps (orhave been to conferences describing them), andhave become strategy mapping advocates. Suchadvocates come from various corporatefunctions, including finance, accounting, marketing,manufacturing, and head office support.The MAGprovides advocates with the reasons and aprocess for implementing a strategy map that canconvince corporate sponsors to provide financialand moral support for the initiative. In turn,The guideline should also be useful to consultantsintending to implement strategy maps for clients.In short, the guideline will assist strategy mappingadvocates, sponsors, champions andimplementation teams to:THE COMPELLING NEED FORBETTER EXECUTION OFSTRATEGYThe vast majority of organizations have welldefined procedures for developing strategic plans.Strategic planning concepts including (but notlimited to) Porter’s 5-Forces, STEEP (Social,Technological, Economic, Environmental andPolitical) analysis and SWOT (Strength,Weakness,Opportunity,Threat) analysis, PMI (Plus, Minus,Interesting), Red and Blue Ocean strategies3,together with liberal use of focus groups, marketassessments and company retreats to revisit andrefine strategy are common practices on thebusiness landscape.While strategic planningexercises will always have room for improvementand new insight, it is clear that considerableresources, in the form of company personnel,consultants and research firms, are spent annuallyto develop and roll out strategies designed to giveorganizations a competitive edge. And for themost part, the result of these corporate retreats,research and planning exercises are good, solid,strategies designed to move the entity forwardand provide sustainable, even superior, returns.But there is also a major disconnect between theformulation and execution phases of strategy.The ability to cascade an organization’s vision,mission and core strategies into actionablebehaviors that achieve critical objectives is moredifficult than much of our current strategyliterature would suggest. Failure to executestrategy not only leads to shareholder and boardfrustration, but also accounts for high executiveturnover.5

MANAGEMENTS T R AT E G YMEASUREMENTRecently, this disconnect between plan andexecution has become more evident. LarryBossidy, Chairman and CEO of HoneywellInternational, and co-author of Execution, theDiscipline of Getting Things Done, wrote:Most often today, the difference between acompany and its competitor is the ability toexecute. .Execution is the great unaddressedissue in the business world today. Its absence isthe single biggest obstacle to success and thecause of most of the disappointments that aremistakenly attributed to other causes4.This same sentiment was expressed by MichaelRoach, CEO, CGI GroupThe true value of leadership is actually in theexecution. Can you actually implement thatvision, that dream? Can you execute to the plan,can you deliver a positive outcome?5”While these sentiments reflect the frustrations ofpractitioners, academics have also observed thesame phenomenon. In a well-known publication,The Knowing-Doing Gap, Pfeffer and Sutton6document the extraordinary gap betweenknowledge obtained through books, articles,meetings, retreats, workshops, educationalprograms, and the deliverables organizationalleaders hope for.Analysts are equally concerned about thisknowing-doing gap. A series of Ernst & Youngstudies7 in the USA and the UK asked analysts torank the most important non-financial variablesthey look for in analyzing a firm’s future prospects.They cited factors such as “ability to attract andretain talent”,“management credibility”,“innovativeness” and “quality of corporatestrategy”, but the single most importantconsideration for both USA and UK analysts inrecommending an investment was the ability ofthe firm to execute its corporate strategy.The inference to be drawn is that, while analystsunderstand the importance of creating a valuepromise, the ability to deliver on the promise iswhat justifies premium ratings.6This, of course, leads to the question of why wellformulated strategies so often fail to besuccessfully implemented. Some conclusions areobvious to those close to the action. For example,senior managers often falsely conclude that othersin the organization share their view of thecorporate strategy. Organizational leaders alsooften misjudge the resistance to change and theimpact of culture on strategic implementation.Change agents often underestimate the time ittakes to create a successful change process.However, experienced management teams usuallyknow these things and attempt to take them intoaccount. So why, in the face of all we know and allthe money and time poured into planning retreats,executive education and consultants, do we haveso little to show for in converting knowledge intosuccessful outcomes?David Norton, author and co-author of manyarticles and books in the area of strategy andscorecarding systems, pinpoints the key issues thatimpede strategy execution. In a popular website,he recently highlighted these issues8:First, it is impossible to execute somethingthat cannot be described.The point he ismaking here is that, while we have generallyaccepted tools, such as financial statements,to describe the economic health of a firm,we do not have similar taxonomies toeffectively describe, agree on andcommunicate strategy. Executive opinionsoften differ substantially on whether thestrategy should focus on product/servicedifferentiation, customer intimacy, costeffectiveness, technical superiority, or somecombination of several approaches.Thistype of confusion is widespreadiii and wheresuch confusion exists, execution fails at theoperating levels. Indeed, this explains whymost managers and employees cannotarticulate their company’s strategy.Second, this confusion exists becauseorganizations do not effectively managetheir implementation of strategy or makestrategy a priority in the firm. For example,while vice presidential titles are common infinance, HR, marketing, logistics andmanufacturing, it is much less common toencounter vice presidents of corporatestrategy or Offices of Strategy Managementthat provide the central focus andresourcing for executing strategy.Third, even when strategy implementation isgiven more focus, organizations have yet todevote adequate resources tocommunicating, monitoring, measuring andvalidating their strategic progress. It is onething to track high-level, lagging, financialindicators of performance. It is quiteanother to develop, measure and monitorleading measures of performance that oftenforetell future success or failure, and relatethem directly to strategy achievement.First-generation balanced scorecards introducedin the mid- and late 90s attempted to address

U S I N G S T R AT E G Y M A P S T O D R I V E P E R F O R M A N C Ethese issues, but with only limited success.Whilestrategy was portrayed as being at the heart ofthese early scorecards, in reality organizationsprimarily used their scorecards as improvedperformance measurement systems to overcomean overriding emphasis on financial numbers.However, building scorecards without firstunderstanding core strategies turned out to befrustrating, unproductive, and largely disappointing.Many firms that adopted first-generation balancedscorecard systems abandoned their initiatives.Other organizations, however, persisted, soonrecognizing the necessity of making strategy thestarting point of a more complete managementsystem, one that begins with describing andcommunicating strategy before attempting todevelop specific performance measures.has not been widely followed in business circles.Strategy maps bring this visualization to life in abusiness context in a generalized but highlyintegrated manner. Every organization, no matterits size or sector, must meet customerrequirements and financial obligations. In turn,customer and financial expectations can only bemet with the right people/technologies and theright business processes.The strategy map, asdepicted in generic form in Figure 2, incorporatesthese two outcome perspectives (customer andfinancial expectations) with the two inputperspectives (people/technologies and processes)into a single representation that organizations canuse to communicate their strategies and translatethem into concrete actions.Strategy maps describe how organizations createvalue by building on strategic themes such as“growth” or “productivity”.These themesdetermine what specific strategies organizationswill adopt at their customer, process, and learningand growth levels.Well-constructed maps describehow the organization plans to meet its specificcustomer promises, through a combination ofThe breakthrough in these second-generationscorecards was the use of a strategy mapiv —a visualization process designed to communicateand validate the “story” of a company’s strategy ina manner that company stakeholders can follow,understand and help realize.The underlying concept of strategy maps is basedFigure 2: A Generic Strategy MapCompleted Generic Strategy MapFinancialCustomerInternalIncreaseRevenue ratedCustomerManagementLeadershipProductivity StrategyNewInnovation &CommercializationSupremacy1) Human Capital(Staff competencies)New OfferingsReduce Costper Scalability Strategies(e.g.Web)EffectiveGovernance& Control2) Information Capital(Technologyinfrastructure)on a well-known premise — a picture is worth athousand words.While psychologists tell us thatmost humans are better able to respond to visualrather than oral or textual forms ofcommunication, until the past decade this axiomAsset UtilizationPerception;PublicRelations3) Organization Capital(Climate for action)How we plan to accomplish itLearning & GrowthRevenue Growth StrategyWhat we want to accomplishMaximize Organizational Valueemployee, technology and business processes thatsatisfy customer expectations and meetshareholder demands. In short, they provide theconceptual framework that organizational leadersand their followers can use to better understand7

MANAGEMENTS T R AT E G Yand execute strategy.MEASUREMENTOrganizations adopting strategy maps can reducethe impediments to successful strategyimplementation. First, the map provides a way todescribe and communicate strategy systematically— companies use their maps to “tell the story” oftheir strategy to various corporate stakeholders,thereby achieving a much greater understandingand engagement in the strategic process. Second,maps force organizations to place the onus first onthe strategy, and only secondarily on measuringimplementation, thus removing the problem ofnumerous unfocused measures.Third, leading edgeadopters use their maps to not only define andcommunicate strategic imperatives, but also tovalidate their actions.They use them to test thelinks described on the map. For example,“if weundertake this set of strategies/initiatives inperspective X, then are we seeing the results weexpect to see in perspective Y”?The timing for this MAG is appropriate.While theconcept of the balanced scorecard has beenwidely accepted worldwide (estimates are that40 - 50% of Fortune 500 companies have adoptedsome form of the BSCv), many implementationsare still at early stages.The strategy map, anintegral part of advanced balanced scorecardsystems, is much less recognized by practitionersvi,and the process of building robust strategy maps isstill in its infancy.We observe that many maps arepoorly conceived and poorly constructed.Theproper “story” of the company’s strategy is notbeing told. Linkages between perspectives are notwell thought through.Value propositions are notexplicitly expressed, and when they are,inappropriate business processes are often chosento support them. Certainly, there are books, a few(fairly expensive) websites and consultingorganizations that provide guidance. However, forthe vast majority of firms that may want todevelop their own strategy map, there is littleguidance as to how to go about it. In short, toreach strategy maps’ full potential calls for adisciplined, systematic approach to theirdevelopment and ongoing use within theorganization.The next section provides a step-by-step approachto strategy mapping that will assist advocates,sponsors, strategy-mapping champions and teamsin their endeavor to create and implement aproper strategy map.CREATING STRATEGY MAPS — THEGUIDING SIX STEPSOrganizations increasingly recognize the strategymap as an integral component of successfulstrategy execution. In this and the next section, wespend considerable time discussing how todevelop high level corporate, and secondary andtertiary level maps.Strategy maps can be, and often are, used as standalone tools that organizations employ to develop,understand, and convey their strategic story.Tomaximize their value, however, they need to beseen, and used, as core building blocks in an alignedFigure 3:The Strategy PyramidMissionWhy We ExistValuesWhat’s Important to UsVisionWhat We Want to BeStrategyOur Game PlanStrategy MapTranslate the StrategyBalanced ScorecardMeasure and FocusTargets and InitiativesWhat We Need to DoPersonal ObjectivesWhat I Need to DoStrategic OutcomesSatisfied Shareholders8Delighted CustomersEfficient and EffectiveProcessesMotivated and PreparedWorkforce

U S I N G S T R AT E G Y M A P S T O D R I V E P E R F O R M A N C Echange management process.This means that theexistence of a strategy map and balancedscorecard are necessary, but not sufficient,conditions to effectively execute strategy.To getthe most from them, they need to be seen as partof a change management initiative. Figure 39highlights where the strategy map fits in theoverall strategic management process.The diagram indicates that strategic deploymentbegins with shaping or reaffirming the firm’smission, core values, and vision.These statementsform the basis for the considerable (and oftenlengthy) discussion that leads to the developmentof a strategic plan.This part of the process,consisting of the use of well-known strategicplanning tools, consultant input and executiveknowledge, is generally robust.The logic and visual quality of the strategy maphas improved the ability to cascade the strategicobjectives down to specific measures, targets, andpersonal initiatives. However, organizations are stilluncertain about the actual steps they can take tocreate their own strategy maps.We now discuss six steps that have proven veryuseful in developing a strategy map.To provide anintegrated view of the map’s development, eachstep will consist of both an explanation andexposition.The steps are:1.2.3.4.5.Specify an overriding objectiveChoose the value propositionChoose the financial strategiesChoose the customer strategiesExecute through the internal perspectivestrategies6. Plan the learning and growth strategiesTo better communicate the transition fromgeneric principles to their specific application, wewill use The Glacier Innvii as an example.The Glacier InnThe Glacier Inn was established a few years agoin Northern Minnesota after a visit to Quebec’sIce Hotel convinced the owner and her partnersthat a similarly styled hotel would be popularwith both adventurous Americans andCanadians.As a result, the owner and partners investedtheir life savings and were able to secure asubstantial 3-year loan from the stategovernment.With these proceeds, theypurchased a plot of land bordering a main river,which provided the hotel’s main constructionmaterial — ice.The stated vision of the GlacierHotel was:To be an ice hotel of global renown,where innovative and unique offeringsprovide an unmatched value, anunrivaled experience and totalsatisfaction for our guests.The hotel opened January 1. Made entirely ofice, the opening and closing dates of the hotelwere dictated mostly by Mother Nature.Thehotel consisted of 28 rooms in its first year, andincluded an art gallery that visitors not stayingat the hotel could visit for a fee.All rooms hadone queen-size bed, which slept two. Everythingin the hotel, including beds, had a frame madeentirely of ice. Guests slept in a sleeping bag ona bed of deer pelts placed overtop a bedshaped block of ice.The room temperatureranged from -3 C to -6 C (26 F to 21 F), butguests remained warm as long as theyremained in the bed.Expected occupancy was 98%. Actualoccupancy was 91%. Financial and operatingresults barely met expectations, and the ownerknew that changes had to be made.The owneralso knew that the board and governmentwould be looking for a strategy that would putthe hotel in a position to be compared to thelikes of the ones in Quebec and Sweden. Shehad learned of Strategy Mapping and theBalanced Scorecard and felt they would behelpful tools to develop, communicate andmeasure progress toward achieving strategicobjectives.Step 1: Specify an OverridingObjectiveIn the next few years, what will it take to succeed?This first step is critical, because it links thestrategy map to the earlier steps ofcreating/reaffirming an organization’s mission/corevalues/vision.This step must differentiate betweenwhat the organization truly understands as itsoverriding objective, and the strategies it plans toimplement.There is considerable confusion on thispoint. Many mission and vision statements areoften mistakenly portrayed as the ultimateobjective to be achieved — satisfied customers,service excellence, best-in-field, market leader,low-cost provider, etc. Indeed, these are criticaloutcomes and are highly desired by allorganizations. However, for profit-makingorganizations, the overriding objective must be9

MANAGEMENTS T R AT E G YMEASUREMENTeconomic. Michael Porter, the well-knownstrategist, makes this point forcefully:“Start with the right goal: superior long termreturn on investment. Only by grounding strategyin sustained profitability will real economic valuebe generated. Economic value is created whencustomers are willing to pay a price for aproduct or service that exceeds the cost ofproducing it.When goals are defined in terms ofvolume or market share leadership, with profitsassumed to follow, poor strategies often result”.10This is a fine point, but its importance should notbe underestimated.There is no question thatserving customers effectively, developing new andunique products and achieving market dominanceare worthy objectives. And, as Tom Peters pointsout, business isn’t some dry, dreary, boring, by-thenumbers enterprise. Business can be cool11. But in aprofit-making environment, these are all theingredients for success. Success is achieved bysignificant revenues and/or cost containment thatlead to superior economic returns — the overridingobjective.Those who have missed this lesson have paid aserious price.Take quality, for example. Fewfollowers of organizational practice would disputethe importance of total quality management. Betterprocesses, fewer defects and reduced variance haveimproved the fortune of companies and consumersalike. Indeed, many organizations believe thatachieving higher and higher levels of quality is theprimary goal that, if religiously pursued, will lead tosuperior returns. However, shortly af

Norton (also the founders of the Balanced Scorecard movement),strategy mapping is a cutting-edge approach to the art of strategy execution.In that approach,an organization depicts its key objectives in a graphical and illustrative (i.e.“picture”) format. As the saying goes,“a picture is worth a thousand words.” Well-conceived strategy .