Strategy Maps

What is a Strategy Map?

Every organization is a collection of independent elements in a value chain that drive results and business success. These critical elements are the core departments or main business activities that are interconnected and support each other. A strategy map is a visual diagram that illustrates an organization’s strategy in four or more categories and how the elements that make up the organization can work together in a collaborative and aligned way to drive financial and strategic results.

• People, learning and growth
• Production and operational processes and activities
• Customer relationships, processes and activities
• Financial performance

This picture of the vital elements of the business and its strategy informs people how the organization is interconnected and will create value, differentiation and competitive results. For organizations to be successfully in a competitive business environment, each element of the value chain and every function in the business needs to understand the strategy and how to produce financial results that will ensure prosperity.

What are the Four Perspectives of a Strategy Map?

A typical strategy map consists of four perspectives that drive results. These include

• People, learning and growth: The organization’s culture, technology, and employee knowledge and competencies needed to support the organization’s strategy and to make the processes and activities work.
• Production and operational processes and activities: The internal processes that help people achieve customer and financial goals and targets.
• Customer relationships, processes and activities: The ways in which the organization delivers value to customers and the market and provides innovative products or services that will lead to differentiation and profitable growth.
• Financial activities: The strategy for increasing shareholder value through productivity and revenue growth.

The base of the strategy map is the People, learning and growth perspective, followed by production and operational processes and activities and customer relationships, processes and activities, with Financial activities at the top. This structure illustrates that what an organization does, leads to financial and strategic success.

How do you Create a Strategy Map?

In most cases a strategy map is created when senior leaders come together in what we call a strategic alignment meeting.  During this alignment meeting, leaders of each functional area engage in a conversation to identify the essential longer-term goals, objectives and plans that must be accomplished in order to deliver results, create value and sustain growth.  For example, one business we work with determined that there are seven essential activities that comprise their strategic map.  These activities include:

• Business development
• Research and innovation
• Production and operations
• Distribution of services and products
• Financial operations
• Product management

While a typical strategy map (originally developed by Kaplan Norton) has the four perspectives, each organization or business can create its own strategy map of aligned activities that represent the interconnected relationships that will create a unique recipe for long term success.  Senior leaders usually start at the top of the strategy map (financial perspective) because it defines the “place” to be and the other perspectives on the strategy map articulate the “path” to get there. The final task is building consensus on the strategic opportunities that each function will execute on in order to be better positioned to execute on the organization’s strategic objectives.

What are the Benefits of Strategy Mapping?

Strategy maps are an effective and efficient way to explain how the organization operates and the key business activities that will drive strategic results.  Strategy maps facilitate important conversations about the future and changes the enterprise needs to make in order to sustain the long-term growth and prosperity.  Strategy maps keep these conversations focused and help people across the organization find a line of sight on the core activities and strategy goals, objectives, plans and strategic performance indicators that will create a competitive advantage and differentiate your business from competitors and rivals.  A clear strategy map for the enterprise provides a framework that enables teams and individuals to create their own support strategic plan of action to support the enterprise, which ensures that each function adapts and evolves to stay relevant and contribute to the organization’s long-term, sustained success  Finally, a strategy map helps leaders make important decisions related to the allocation of scarce resources for each function in the organization, effectively deploying people, guiding the execution of activities and processes, and optimizing relationships that support the pursuit of strategic objectives.

What is a Workforce Strategy Map?

A workforce strategy map is part of an overarching enterprise strategy map.  Organizations depend on people and their unique skills and capabilities to drive value and achieve long-term success.  A workforce strategy map identifies the mission critical people and core skills, knowledge and competencies that are required to deliver results today and shape the future of the organization.  The objectives and plans to acquire and retain talent, develop people, build a learning organization are essential components of a workforce strategy map.

What is a Strategic Perspective?

A strategic perspective is a broad picture of the main drivers or activities that are essential to strategic success.  A strategic perspective means that you gather information and form a point of view about the future and the opportunities and challenges that could unfold. It allows you to actively adapt to the dynamic forces going on around you, including your own operation, customers, and the environment in which you operate. This heightened awareness becomes a strategic advantage as you focus on things that should be measured and monitored to maintain a competitive edge, ensure relevancy with customers and create value for owners and stakeholders.

Strategic Maps for Non-Profit Organizations

Every organization can benefit from strategy maps.  Because nonprofits, just like a profit driven business, must serve members, customers, students, patients, etc.  They too should map out a strategy and indicate activities and processes will ensure that the organization is effectively serving those that they represent. Every type of organization must manage people, develop good operating practices, manage budgets and maintain a positive image.  These are the types of activities make up a strategy map.  Each of the activities or functions needs to be represented in a visual diagram that links and aligns with all the elements in a logical and systematic way.  Without clear goals and objectives for each core activity it is difficult for nonprofit organizations to achieve long term effectiveness and deliver on their commitments to those they serve.

How do you Explain a Strategy?

A strategy is a plan to win, so it is important that everyone in the organization understands what winning means in the short term and long term and how they contribute to achieving that success. Because strategy is everyone’s job, people need to know:

• What the enterprise must do and accomplish to produce superior results?  This is known at the “what” part of strategy.
• The activities and tactics to implement or operationalize the strategy.  This is the “how” part of strategy, which breathes life into the strategy and defines the actions required to gain traction and execute with precision.

It is important to keep the strategy vivid, simple and straightforward so people can understand how they fit and why they matter in the longer-term plans to sustain success and prosperity.

What is a Strategic Thinking Map?

A strategic thinking map is a mental model to guide reflection about the future.  There are four elements of a strategic thinking map.

1. Awareness: Scanning the environment in which you operate so you are  aware of the forces shaping your world and the changes, shifts, opportunities and disruptions occurring within the business and outside of the business that could prevent you from driving value.
2. Translation: Drawing conclusions about the changes and developments in the environment and identifying the implications, opportunities and vulnerabilities so you can exploit and manage the future more effectively.
3. Formulation: Thinking about and developing a plan of action for how to win that will ensure future success and relevance.  This includes identifying how to allocate resources and responsibilities to help your organization develop and evolve.
4. Execution: A plan is nothing more than a good concept so you also need to think about the key maneuvers to drive success and avoid failure, what it will take to jump start the plan and how you will track and measure progress.  In addition, you need to think about when and how to make adjustments to the original plan you formulated.

When you think about the four critical elements or phases of a strategic thinking you will be in a stronger position to launch a strategic planning process and guide your organization forward.