Introduction to Strategy Maps - A Book by Robert S Kaplan and David P Norton


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Introduction to Strategy Maps - A Book by Robert S Kaplan and David P Norton

  1. 1. “...most companiesdon’t succeed inimplementing theirstrategies.”Robert S. Kaplan & David P. Norton
  2. 2. Your company:one of thosefailed companies?
  3. 3. This book will help you to stay out ofthe failed troops.
  4. 4. IntroductionOutline : PresenterAbout the book : Marvin MahadharmaWhy strategy important : Marlisa KurniatyValue creation & strategy : Mudzamil M Fickry SuaduCase studies & Next? : Endro Catur Nugroho
  5. 5. About the BookWhatDiscusses strategy as a non-universal conceptand attempts to describe it using a causalrelationship called the strategy map
  6. 6. Executive SummaryThe strategy map – at least described in the Introductionsection of the book – is a powerful tool tocapture, develop and communicate organization strategyinternally.There are little risk of failure in creating the strategymap so long as managers are equipped with accuratedata and information, analytical skills and appropriatemethod to maintain the map to reflect organizationaldynamics, as briefly described in less-successful of BSCimplementation – the tool used throughout the book.
  7. 7. About the BookWhy•Shifting trend from product-driven economy to knowledge economy puts intangible assets at the heart of organization performance•No literature at the time offered a holistic view of the strategy (skews to certain perspectives of the Balanced Scorecard)
  8. 8. About the BookWho•For managers who will be leading Balanced Scorecard projects•For companies with strategy and management system but no clear links between them•For companies tired of vague success of strategy implementation
  9. 9. About the BookHowCreating the strategy that will map illustratelinkages between intangible assets toorganizational growth, built on the base ofBalanced Scorecard.
  10. 10. About the BookOutputComprehensive, integrated visualrepresentation of organization’s strategythat serves as the first step to becomingstrategy-focused organization.
  11. 11. Oh by the way...
  12. 12. Happy reading fromMr Kaplan and Mr Norton 
  13. 13. Why strategy important?Study: Only 8.33% companies - whichenjoyed at least 5.5% annual growth - hadstrategic plans. (Bain & Company, 1988-1998, page 6)
  14. 14. Why strategy important?Problem: No two organizations thoughtabout strategy in the same way, it’s either: o financial plans for revenue and profit growth, o products or services, o targeted customers, o quality and process, or o human resources or learning perspective.”(page 5)
  15. 15. Why strategy important?Problem: No general way available todescribe strategy. Even experts haveinconsistent way of representing strategy.(page 5)
  16. 16. Why strategy important?Problem: “Few [executives – those withstrategy execution roles] had a holistic viewof their organization.” (page 5)
  17. 17. Why strategy important?Effect: executives found it difficult tocommunicate strategy to their teams, and tothemselves. (page 5)
  18. 18. Why strategy important?Effect: Executives, then, make the situationworst by interpreting strategy in theirnarrow, operational approach (page 5)
  19. 19. [and it doesn’t help thecompany’s shareholders, either]
  20. 20. “An organization’sstrategy [must]describes how it intendsto create value for itsshareholders, customers, and citizens”(page 4)
  21. 21. Even when you have good strategy ...
  22. 22. “in the majority of cases– weestimate- [of] thereal problem isn’t [badstrategy] ... it’s badexecutions” (page 6)
  23. 23. Balanced ScorecardSolutions? ... able to describe and link strategy to the management system (page 6)
  24. 24. “If you can measure it,you can manage it”(page 6)
  25. 25. BSC FrameworkCause-effect perspectives:1.Financial2.Customer value proposition3.Internal process4.Learning and growth
  26. 26. BSC Framework Profit Organizations Learning & Internal Customer Financial Growth TheHow our organization Which process must How must we look How we look to our Strategy learn and improve? be excelled? to our customers shareholders? Non-Profit Organizations Customer How must we look Learning & to our customers Internal Growth TheHow our organization Which process must learn and improve? be excelled? Mission Fiduciary How will we look to our donosr?
  27. 27. BSC Framework...has proven to “provides a language thatexecutives team can use to discuss thedirection and priorities of their enterprises”(page 9)
  28. 28. From BSC Framework toStrategy Map1. Draw four perspectives (BSC Framework) of strategic measures as a series of cause- and-effect linkages;2. Add second-layer of detailed information that describes the perspectives;3. Your strategy map is done.(page 9)
  29. 29. Strategy MapProvides uniform and consistent way todescribe strategy, and serve as the bridge tolink between strategy formulation andexecution. (page 10)
  30. 30. Strategy MapBe careful: any missing elements(component or relationships) in a strategymap may lead to flawed strategy execution.(page 10)
  31. 31. Strategy Map: Principles1. It balances (what seemed like) contradictory forces2. It is based on differentiated customer value proposition3. Value (to customer) is created through internal business process4. It consists of simultaneous, complimentary themes5. It needs to be aligned with management system to leverage intangible assets
  32. 32. Intangible Assets1. Human Capital: employees skills, talent, knowledge2. Information Capital: databases, information systems, networks, technology infrastructure3. Organization Capital: culture, leadership, employee alignment, teamwork, KM
  33. 33. Align Intangible Assets toStrategyApproach:1. Strategic job families: aligning human capital to strategic themes2. The strategic IT portfolio: aligning information capital to strategic themes3. An organization change agenda: integrating and aligning organization capital for learning & improvement in strategic themes
  34. 34. Case Studies
  35. 35. Case StudiesAmerican Diabetes Association (ADA)The Mission: The Goal:“prevent and cure diabetes “by 2007 to be the leadingand to improve the lives of diabetes organization byall people affected by increasing income todiabetes” $300million to better support its efforts and programs of research, information and advocacy”
  36. 36. Case StudiesSituation: Solution:1.Merged 57 corporate in Used BSC: Balancing growth 1998; no single defined with operational efficiency organizational culture.2.Vision and strategy exist; Impact: little consensus on how 1.Greater value for to execute. stakeholders &3.Needed better way to constituents measure organizational 2.More targeted audience success.
  37. 37. Case StudiesThe Strategy Map: Actions (intangible assets):To meet stakeholders’ and 1.Recruit qualified talentconstituents’ as well as 2.Train worksforcefinancial objective through: 3.Retain best people1.Constituent relationship 4.Cross functionality management 5.Integrate data2.Standardized execution 6.Align with priorities 7.Appropriate fund balance
  38. 38. Case StudiesThe Situation:1. The Retail Division of Arran Ltd required performance measurement system that would deliver an ability to control the business at an operational level.2. Few years afterward, the Division’s changed their strategies.3. The Company also wanted to apply the Division’s strategy map to the company level, because “the Division is part of the business”.
  39. 39. Case StudiesSolutions:1. BSC to monitor operation the Division only: divisional level to operators within each branch.2. Controlled by computer software.3. Each employee individual BSC linked to branch and, subsequently, Retail Division BSC.
  40. 40. Case StudiesThe Effect:1. The measurement function by BSC served well for two years.2. When the Retail Division had to change their non- anticipated strategies, the system reject this change and measurement result no longer reflected the reality.3. When the Company used the Retail Division’s strategy map to their corporate strategy map using the computer system, it reflected results that are different than the reality.
  41. 41. Case StudiesLessons Learned:1. Company’s managers clearly did not understand the concept of strategy map; it had to be re-created if the scope of the new strategy is different.2. Two years is too short for the strategy to change; Retail Division should anticipate strategy for longer years unless there’s force majeur.3. Nothing wrong in BSC as a tool; there’s something wrong with the computer application that use BSC methodology. Careful in choosing supporting system.
  42. 42. Other cases?Contribute, please.
  43. 43. SummaryA strategy map template“describes how intangible assets Intangible Asset: 1. Human Capitaldrive performance enhancements 2. Information Capital: 3. Organization Capitalto the organizational’s internalprocesses that have the maximum Strategy Map:leverage for delivering value to 1. Financial 2. Customer valuecustomers, shareholders, and proposition 3. Internal process 4. Learning andcommunities.” growth
  44. 44. Next?Detailed explanations of Strategy Map.