The strategy map, invented by Robert Kaplan and David Norton of Harvard University, is a useful diagramming technique for representing business strategy. It is often used in tandem with the balanced scorecard, a common tool in corporate performance management (CPM) for aligning financial and operational processes with the strategy and monitoring their performance.
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Strategy maps contain four major building blocks that feed each other from the bottom up (see Figure 1, which shows a generic strategy map published by Wikipedia). Let's start from the middle and work in both directions.
Internal Business Processes represent the core processes that delight customers. Examples include product development, quality and customer service.
Not all processes are where they need to be, so Learning and Growth speak to the continuous growth the corporation goes through to improve its processes. Learning and growth lead naturally to improved business processes.
The third building block is the Customer. All businesses exist to serve their customers -- or constituents in the case of public service. In a framework made popular by Michael Treacy and Fred Weirsema in their book The Discipline of Market Leaders, companies differentiate themselves by product quality, core service or operational excellence (that is, being the low-cost provider).
Finally, all customer activity eventually leads to improvement in the company's overall Financial position.
This approach, with learning and growth feeding into internal business processes, then in turn to customer satisfaction and financial performance -- all depicted in a strategy map -- is simple in conception but quite useful for describing complex strategies.
Strategy maps: Two examples
A community bank might fill out the four building blocks of its strategy map in the following way.
First, understanding the voice of the customer will drive the strategy, and includes getting customers the right products and services, providing them with convenient information and being easy for them to work with. The bank's learning and growth efforts will focus on developing people, skills and strategies.
Its internal business processes will be geared toward delighting the customer, which might include developing new banking products and software to support new relationships while providing the right information to the right customers at the right time. If it does all of this, the bank believes it can attain double-digit growth in net income, its financial objective.
It is quite appropriate for operating departments to have strategy maps as well, so let's consider part of the strategy map for an IT department. Here, IT is describing how it serves its internal customers and the financial implications of serving those customers well. The customer component of the map commits the department to implementing solutions quickly and at a competitive price, and to keep the systems up and running. The internal business process strategy includes providing world-class customer service and delivering according to plan.
Putting it all together
Strategy maps represent an excellent approach for an organization to use to define and deliver on its strategy. To illustrate, here are some possible elements of a corporate strategy, with IT as a logical piece therein.
Each department in the company must understand the four components of the strategy map and how they tie together. Departments must also collaborate where strategy maps overlap.
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The CEO and his direct reports work on the new strategy. Most often, it will involve a rethinking of products and services delivered to disparate markets.
The CFO serves as a key member of the strategy team and is responsible for many of the operating departments and their work, such as IT and human resources.
This strategy team next creates a new set of strategy maps for the entire corporation.
It then becomes the challenge of the IT department and others to rebuild their own strategy maps to meet the new corporate direction. Doing so will often require a new project that is dedicated to supporting the strategy. It could, for example, be a project to improve response times in the customer call center by 40%. For IT, it might mean acquiring additional software and hardware to support internal business processes, as well as training for programmers. IT might also need to align its new strategy map with that of marketing and sales.
For IT, the keyword is agility. Since strategy is an ongoing process, it may be prudent for IT to overinvest a little in training, staff and equipment so it is always ready to respond to new strategic objectives with speed and quality.
About the author:
Barry Wilderman has more than 30 years of experience as an industry analyst, researcher and consultant at such companies as Meta Group, Lawson Software, SalesOps Analytics and McKinsey and Co. He is currently president of Wilderman Associates. Contact him at Barry@WildermanAssociates.com and on Twitter @BarryWilderman.