Shallow Swim In Strategy Maps

I was going through chapters from a book by Robert S Kaplan & David P Norton titled Strategy maps and found some interesting points related to measuring the effectiveness of strategy which I would like to share with larger community.

Successful execution of strategy requires three components:

{Breakthrough results} = {Describe the strategy} + {Manage the strategy}

The authors say that the philosophy behind these three components is simple:

• You cannot manage (third component) what you cannot measure (second component)
• You cannot measure what you cannot describe(first component)

Let me now introduce you two key terms which help us provide lot of information around a strategy implementation and how can we as an organization seek measurement of it.

Balanced Scorecards are performance management tools that translate an organization’s vision and strategy into a sensible distribution of performance measures. The Balanced Scorecard model prioritizes these measures around three non-financial perspectives (Internal Process, Learning & Growth, Customer) in additional to the traditional financial perspective.

Now taking this further, it is necessary to graphically describe a strategy by explicit cause-and-effect relationships among objectives in the four BSC perspectives. This helps to bring out much desired relationship between strategy and its implementation & this particular void is filled by strategy map of a company. This concept and framework of strategy maps has been coined by Robert S Kaplan & David P Norton.

The exercise of creating strategy map clarifies the logic by which the company’s strategic goal will be achieved and visually communicate different components or elements of strategy. The framework of strategy maps links short term and long term financial aspirations of a company to the differentiated value that the company needs to provide to the customers to ensure their loyalty both in current and future time frame. While every organization’s strategy map is different, the authors have come-up with a generic strategy map to serve as a starting point for any organization in any industry. If we revisit the equation as stated above, the BSC helps us address the second component by showing how to measure strategic objectives in multiple perspectives. With introduction of strategy maps equations gets translated into:

Breakthrough results = {Strategy Maps} + {Balanced Scorecard} + {Strategy-Focused Organization}

Strategy maps apart from clarifying the strategy of the company through cause and effect relationship also help in identification of:

• Targeted customers and the attributes of the products and services that they value.
• Key processes of the company that deliver the company’s strategy.
• Identification of intangible assets that would support the processes that deliver a company’s strategy.

Through this framework introduced By Robert & Norton one can get to know the following:

• How value gets created in the internal and learning and growth perspectives.
• Themes, based on value-creating processes that articulate the dynamics of strategy.

Identification of intangible assets is one of the most important aspects of strategy maps, as most organizations fail to establish a link between their intangible assets and fulfillment of their strategic goals. Often it is seen that HR has little or no alignment with the strategic goals of the company. Strategy maps help in converting intangible assets into tangible outcomes for following classified intangible assets:

• Human capital (employee skill and knowledge)
• Information capital (databases, information systems, networks and technology infrastructure)
• Organizational capital (culture, leadership, employee alignment, teamwork and knowledge management)

The value of intangible assets can not be directly or independently measured but their value derives from their ability to help the organization in implementing its strategy, which can be ensured through strong linkages created by strategy maps & also it provides the managers with the required granularity to describe and manage strategy at an operational level.

You can refer to following website to view a sample of the strategy map which helps clarify further how the linkages are useful in bringing out meaningful information for measuring strategic outcomes in an organization: Sample Strategy Map

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