When it comes to strategy development, strategy maps have taken up a popular role in organizations. It’s a tool that promotes thinking, conversation as well as communication.
Diagrams – instead of the same old PowerPoint presentations and documents with too many pages – have proven to be a great language that organizations can use to communicate its strategies, direction, and priorities. They are not only easier to understand but also open up opportunities for everyone in the organization, from top to bottom, to get more involved during the design process.
Throughout the post, we have added strategy map templates, and you can use them to get a headstart on designing your strategy map.
Strategy Mapping Steps
- Defining Mission and Vision
- Understanding Your Environment
- Defining the Strategy
- Translating the Strategy
- Highlighting the Cause and Effect Relationships
- Showing Themes in Your Strategy Map
- Cascading the Strategy Map
What is a Strategy Map?
Before we jump into creating a solid strategy map, let’s clarify what it is first. A diagram speaks a thousand words, so here’s a strategy map example for you to understand what it is.
A strategy map is a powerful strategic planning method that helps visualize the entire strategy of an organization on a single sheet of paper. It shows the cause-and-effect relationship between the components of an organizational strategy.
The technique of strategy mapping is designed to help a management team explore and discuss the strategy in more detail than they normally would.
It helps develop highly effective strategies that can actually be implemented. In addition, strategy maps help those who are involved to develop the mission, vision, and goals, and action plans to address them, as well as understand the challenges they may face during the journey.
Strategy maps also help
- Discover strategic issues that are not necessarily obvious
- Be effective in evaluating organizational vision, mission, goals, strategies, and actions
- Communicate strategies in an easy-to-understand manner making it easier to implement them
- A way to properly guide, monitor, manage and review strategy implementation
- Stimulate thinking and facilitate conversation and understanding of the strategy
A generic strategy map focuses on four strategic perspectives;
- Financial perspective: outlines the tangible outcomes of the organizational strategy
- Customer perspective: describes the value proposition for the customers
- Internal process perspective: specifies the essential internal processes that will have the greatest impact on the strategy
- Learning and growth perspective: identifies the intangible assets important to the strategy
These elements are categorized as individual rows on the map, and each represents objectives pertaining to them. And the objectives are linked together to convey the cause-and-effect relationship between them.
The book “Strategy Maps” by veteran business consultants Robert Kaplan and David Norton popularized the idea of the technique, which emerged from years of research and client consultation conducted by them. The strategy map evolved from the four-perspective model of the balanced scorecard, which is another framework developed by the duo earlier.
Principles of Developing a Strategy Map
- Strategy balances contradictory forces
- Strategy is based on a differentiated value proposition
- Strategy consists of simultaneous, complementary themes
- Strategic alignment determines the value of intangible assets
To understand these principles in more detail refer to Strategy Maps: Converting Intangible Assets into Tangible Outcomes By Robert S. Kaplan, and David P. Norton.
How to Create a Strategy Map
Most of the value the strategy provides to the organization comes from discussion and thinking generated during the process of designing it. Now that the strategy map definition is out of the way, let’s focus on the steps you need to take to create one.
Step 1: Defining Mission and Vision
Most organizations already have mission and vision statements and values defined.
While the mission is an internally focuses statement that describes why an organization exists and the purpose toward which its activities are directed, the vision statement (a more concise statement) outlines the short and long-term goals and objectives of the organization, creating a picture of its future.
The mission and the vision statements are crucial in helping the company stakeholders understand what the company is about and what it intends to achieve.
And having them well-defined will help you with the foundation for your strategy map.
Step 2: Understanding Your Environment
Before putting together your strategy, you need to understand the context; the landscape, and the industry in which your organization operates. Identifying the trends in the industry that may affect your strategy is equally important before you start mapping your strategy.
When analyzing the environment of your organization, one key aspect to focus on is the different stakeholders (customers, suppliers, competitors, investors, etc.) you interact with, what roles they play and what issues they may create.
A tool you can use here is the stakeholder map which will help identify everyone who has a stake or interest in your strategy and how they relate to the organization.
Another key aspect you need to focus on here is how you serve and add value to your customers and you can conduct a value chain analysis to understand this.
Through this stakeholder and value chain analysis, you will be able to identify the assumptions, issues, and risks that you may want to keep an eye out for as you implement your strategy.
Having completed this step will help you immensely when you are defining the customer perspective of the strategy map.
Step 3: Defining the Strategy
With an understanding of why the company exists, its general objectives and direction, and the environment in which your organization exists, you need to now focus on defining a strategy to accomplish the said mission and vision.
Your strategy describes the set of activities that you need to take to ensure that your organization will create a sustainable difference in the marketplace. For example, you can create a sustainable difference by offering a product that would deliver greater value to your customers than your competitors.
Step 4: Translating the Strategy
This is where the strategy map comes into play. It helps make your strategy seem more meaningful and actionable for your employees.
In a strategy map, the objectives in your balanced scorecard are represented with an oval shape. These objectives are then categorized under the four perspectives that we introduced earlier.
Financial Perspective
Specify the plans and strategies to improve revenue and lower costs. There are two dimensions to financial strategies – revenue growth (long-term objectives) and productivity (short-term objectives). The overarching financial objective of a strategy should be to sustain growth in shareholder value and therefore should comprise both short-term and long-term objectives.
For example, deepening relationships with existing customers to sell them more existing products or services or selling entirely new products is a common revenue growth strategy.
Productivity improvements can occur when companies reduce costs by lowering direct and indirect expenses which enables them to produce the same quantity of output while spending less on resources.
Customer Perspective
Understand who the targeted customers of the organization are in order to identify the objectives and measures for the value proposition it aims to offer them. The value proposition is based on the organization’s strategy for its customers. It communicates what the company expects to do for its customers better or differently than its competitors.
The objectives and measures for a particular value proposition define the strategy of an organization.
Internal Processes Perspective
How does the organization manage its internal processes and develop its human, information and organizational capital to deliver the differentiated value proposition of the strategy?
Internal processes help produce and deliver the value proposition for customers, and they help improve processes and reduce costs to boost productivity. Internal processes include operations management processes, customer management processes, innovation processes, and regulatory and social processes.
Learning and Growth Perspective
This section of the map focuses on the skills, knowledge, and systems the organization needs to deliver the intended value.
Step 5: Highlighting the Cause and Effect Relationships
Now that you have identified each of the objectives you need to complete in order to deliver your strategy, it’s time to show how the objectives are connected to each other. Draw arrows between objectives in each perspective to show this causal relationship.
For example, if you train your employees well enough, they will contribute to streamlining internal processes. And that’s a cause-and-effect relationship right there.
Step 6: Showing Themes in Your Strategy Map
Some organizations prefer to highlight themes in the strategy maps by vertically grouping objectives. Themes highlight strategic focuses, and they may represent areas such as sustainability, the culture of safety, etc.
Step 7: Cascading the Strategy Map
Corporate-level strategy maps are great at communicating the core strategies to key stakeholders, and most strategy mapping exercises tend to stop at this point of ‘corporate strategy map’.
But the corporate strategy maps can be used as a starting point to develop many lower-level strategy maps. Such examples of cascading strategy maps include the within organization strategy maps (based on geographical, product, service, etc. distinctions), within perspective strategy maps, etc.
Time to Make Your Own Strategy Map
Your strategy map should describe how your organization’s values will affect the way you learn and grow to improve your internal processes, increase customer satisfaction and accomplish your financial goals in order to achieve your organization’s purpose and ambitions.
A correct, well-designed strategy map will make it easier to create the subsequent balance scorecard. It will also make communicating your strategy to the rest of the organization much easier.
