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Strategy Mapping and Its Relation to Performance Management and Establishing Value Propositions
Introduction
A strategy map is a graphical representation of an organization’s key objectives. Strategy mapping is a new approach to strategy execution. It is a method that developed from the experiences of users of the Balanced Scorecard created by Robert Kaplan and David Norton. The two pioneers of business strategy created the strategy mapping technique as a way of improving on the technique of strategy-making. The strategy map assists an organization to lay out and communicate its strategy in a systematic process that depicts a sequence of actions expected in order to oversee the implementation of the overall objective . Laying out the organization’s strategy this way increases the chances of implementation of the strategy.
This paper compares the technique of strategy mapping to the traditional approach to the balanced scorecard. It also outlines the benefits of strategy mapping and examines the specific improvements that were made to the Balanced Scorecard.
Analysis
Despite the fact that strategy mapping was introduced after the Balanced Scorecard, the technique predates the Balanced Scorecard. The content of a strategy map includes much of what is contained in a Balanced Scorecard. Since the strategy map was recognized as a technique after the Balanced Scorecard and is, in fact, considered as a method of implementing the Balanced Scorecard, there is a need to distinguish between the two approaches for discussion purposes. In this paper, the original technique is referred to as the Balanced Scorecard (BSC), while the strategy map retains its name. There are several differences between the BSC and the strategy map.
First, the approach to performance is different for both techniques. The BSC is concerned with comparing an organization’s actual performance to the performance indicators as laid out in the BSC. These performance indicators are divided into four ‘perspectives’ namely financial, internal business process, customer and growth . Strategy maps, on the other hand, are concerned with describing the organizational strategy and communicating it to the stakeholders. The BSC is therefore concerned with the targets to be achieved while the strategy map is concerned with the step by step process of implementation of the organization’s strategy in order to meet those targets. The strategy map approach is, therefore, more capable of compelling stakeholders to implement the strategy.
Organizational strategies involve processes that are expected to lead to specified goals . In order to ensure that these goals are reached, it is important to have an approach to performance management that focuses on the strategy. The strategy map fulfills this requirement by having a laid out process involving all the activities that should be carried out in order to achieve an objective. The BSC, on the other hand, focuses on the operational targets of an organization, with the major focus being getting things right. This may pose the risk of an organization formulating a strategy then continuing to focus on operations rather than implementation of the strategy.
The Balanced Scorecard was introduced as a way of helping managers assess the progress of an organization based on a set of targets. As a result, the BSC was more concerned with the measurement and monitoring of operational performance. This approach has, however, been seen to ignore the aspect of innovation. As a result, the strategy map was introduced as an improved approach to the Balanced Scorecard. The strategy map focuses not only on monitoring and evaluation but also on how to improve operational performance. In short, they provide a framework for enhancing organizational processes by improving on the existing ones or creating new ones.
In order for an organization to succeed in the market, particularly a highly competitive one, it must have a way of controlling the quality of its internal processes, products or services. Every organization is unique, so it is important to have a quality management system that takes into account the specific aspects influencing the organization. Strategy maps offer a good basis for setting unique targets by offering a flexible framework for planning and strategy formulation. An organization is, therefore, able to strategize based on reality and setting targets beyond the standards. This flexibility is not present in BSC mainly because the approach uses set targets while ignoring the state of the processes of formulating and achieving these targets.
An organization’s goals cannot be achieved without a specific target. The BSC approach focuses on assessment of the operations of an organization based on the four main perspectives, with specific objectives and strategies being formulated and assessed for each. This may make an organization lose the benefit of focus. A strategy map solves this problem by having a common ‘overriding objective’ which is composed of a specific financial target to be achieved in a specific timeline. It is this objective that guides the other processes. The strategy is, therefore, formulated in a way that ensures that all organizational resources and processes are in line with the overall objective.
The value proposition is an important aspect of an organization. It is a statement made by the organization in form of a promise to its stakeholders indicating what the organization aims to provide. The value proposition can focus on three areas of excellence namely price leadership, operational excellence and customer intimacy. An organization must choose which area to focus on, usually at the expense of another area. Focusing on one area means that the area has leading indicators while not focusing on an area means that the area constitutes lagging indicators.
The BSC approach has four key perspectives, and of those four, it focuses on the leading indicators of the internal processes of an organization and learning and growth. Kaplan and Norton (2004) contend that this approach would be beneficial to a public entity or a Not-for-Profit organization which is not particularly interested in perfecting the other two perspectives, namely customer and financial. This approach is also not in line with the overall objective of the organization. The strategy map, on the other hand, integrates the four perspectives to ensure a common objective and a description of processes aimed at achieving the objective. This approach is useful for all organizations since it treats the customer value proposition and financial performance with the same seriousness as the operational and learning functions. The strategy map approach, therefore, has the advantage of applicability across all sectors.
Conclusion
The strategy map is an important improvement on the BSC approach to performance improvement and value proposition. The strategy map has features not present in BSC which include a common goal for the organization, a focus on strategy, process improvement, flexibility and applicability across all industries. The strategy map approach to the Balanced Scorecard is therefore superior to the traditional approach.
References
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