Introduction
Strategic mapping is a valuable analytical tool for managers which provides insights into the strategic leverage and a well-structured strategic map can indicate how industry participants cluster into different groups, aid in the identification of barriers to organizational growth and provides insight into the essential options facing the company .
Strategy mapping has the following benefits: 1) It categorizes markets into various areas or groups which may vary in terms of available leverage .
2) It helps in the identification of reasons why some market areas have better protection from internal and external competitors and establishes relationship of these reasons with the underlying economic forces .
3) It categorizes industry firms in various market areas and aids in the identification of vulnerable areas for firms .
4) It helps in determining which market areas offer the most leverage and helps in deciding whether to enter or exit certain market areas or groups .
5) It also provides valuable insight on which areas the leverage is concentrated and what limits the return .
Balanced Score Card (BSC)
The Balanced Scorecard developed by Kaplan & Norton is an excellent strategic tool which helps the managers translate the company’s mission, goals and strategies into measures .
Figure 1. Balanced Scorecard relationship with strategy measurement .
The four perspectives of the scorecard permit a balance between the short term and the long term goals; between the desired outcomes and factors driving these outcomes; and between hard objective and soft objective measures .
The four main performance measures distinguished by Balanced Scorecard are:
- The financial performance measures define the long term strategies of the organization which essentially include profitability, cash flow, sales growth and other measures .
- In the customer perspective, the organization identifies the customers and the market segments in which the business unit competes and the measures of performance of the business unit in these segments . Performance measures may include customer satisfaction, customer retention, new customer acquisition and customer profitability .
- In the internal business process perspective, the managers identify the critical internal processes in which the organization must excel which may include identification and the improvisation of key processes .
- Learning and growth dimension identifies the infrastructure that the organizations must build to create long term growth and improvement and is based on three essential organizational resources-people, systems and procedures .
Figure 2. Balanced Scorecard Example .
Figure 2 shows the Balanced Scorecard for a company whose long term goal is to be a market leader. A Balanced Scorecard can be implemented at the corporate and the functional levels. A functional Scorecard translates the functional strategy into a set of performance measures . A balanced scorecard of a corporate service links the performance measures of the organizational unit with its mission, goals and strategies; and aligns them with corporate strategies .
Strategy maps are an evolution of the Balanced Scorecard approach which focus on cause-effect relationships amongst measures of different perspectives and objectives; and the alignment of the intangible assets .
Strategy maps serve the following purposes:
- Promotion of understanding and the clarity of strategy .
- Encouraging greater engagement and commitment to the strategy .
- Ensuring alignment of resources .
- Identification of gaps or blind spots .
- Making efficient use of resources .
- Alignment of remuneration with strategy .
According to Lawson and Descroches, Strategy Maps enable organizations to 1) describe strategy in a single picture; 2) clarify strategies and communicate them to employees; 3) identify key internal processes which drive success; 4) align investments in people, process and capital for maximum impact; 5) expose gaps in strategies so that corrective actions can be taken; 6) identify explicit customer value propositions; 7) map critical internal processes for creating and delivering the value proposition; and 8) aligning human resources, technology and organizational culture to internal processes .
The five main principles behind strategy maps are:
- Strategy balances contradictory forces .
- Strategy is based on differentiated customer value proposition .
- Value is created through internal business processes .
- Strategy consists of simultaneous complementary themes .
- Strategic alignment determines the value of intangible assets .
How is Strategy Mapping Approach different?
The Balanced Scorecard provides the management with a broader and a more balanced view of the organization by incorporating the non-financial operational measures that are related to customers, internal processes, employee innovation, learning and growth . Any shortcomings are reported when they can be handled easily in time before these problems may become bigger threats. Other approaches including Dashboard approach provide limited overview of strategy such as the operational processes and thus are not competent enough to provide a balanced approach for organizational strategy.
Conclusion
A strategy map is much more important than the Balanced Scorecard and executives use strategy maps in conjunction with the Balanced Score Card approach . The usage of strategy maps along with a Balanced Scorecard approach helps the managers in constituting an effective and balanced strategic approach for organisations.
References
Cokins, G. (2013, July 22). The balanced scorecard, strategy maps and dashboards: Why are they different? . Retrieved from CGMA: http://www.cgma.org/magazine/features/pages/20138186.aspx?TestCookiesEnabled=redirect
Glyka, M. (2013). Fuzzy cognitive strategic maps in business process performance measurement. Expert Systems with Applications, 1-14.
Lele, M. M. (1992). Creating Strategic Leverage: Matching Company Strengths with Market Opportunities. Canada: John Wiley & Sons.
Verweire, K., & Berghe, L. (2004). Integrated Performance Management: A Guide to Strategy Implementation. London: SAGE.
