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Strategy Maps

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A strategy map is a diagram that is used to document the primary strategic goals being pursued by an organization or management team. It is an element of the documentation associated with the Balanced ...

A strategy map is a diagram that is used to document the primary strategic goals being pursued by an organization or management team. It is an element of the documentation associated with the Balanced Scorecard, and in particular is characteristic of the second generation of Balanced Scorecard designs that first appeared during the mid-1990s. The first diagrams of this type appeared in the early 1990s, and the idea of using this type of diagram to help document Balanced Scorecard was discussed in a paper by Kaplan & Norton in 1996.
The strategy map idea featured in several books and articles during the late 1990 by Kaplan & Norton and others, including most notably Olve and Wetter in their 1998/9 book Performance Drivers.
Across this broad range of articles, there are only a few common attributes. Strategy maps show:
Each objective as text appearing within a shape (usually an oval or rectangle)
Relatively few objectives (usually less than 20)
Objectives are arrayed across two or more horizontal bands on the strategy map, with each band representing a 'perspective'
Broad causal relationships between objectives shown with arrows that either join objectives together, or placed in a way not linked with specific objectives but to provide general euphemistic indications of where causality lies.
The purpose of the strategy map in Balanced Scorecard design, and its emergence as a design aid, is discussed in some detail in a research paper on the evolution of Balanced Scorecard designs during the 1990s by Lawrie & Cobbold.

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    Strategy Maps Strategy Maps Presentation Transcript

    • Strategy Maps Wali Memon1 Wali Memon
    • Agenda Leading conversations using Strategy Maps What are strategy maps? Strategy Mapping Steps The Coffee Pot example References for future conversations Questions?2 Wali Memon
    • Typical Manager “Conversations” “I don’t understand how Icontribute to the organization’s strategy” “Our senior team just can’t seem to get everyone on3 Wali Memon the same page”
    • Typical Manager “Conversations” “In spite all of our efforts, employees still do not seem to understand the strategy”“We have a strategy, but everyone interprets itdifferently and goes their own way” 4 Wali Memon
    • NTSLeaders cannot successfully lead their organization, division or department if they cannot easily describe their unit’s strategy. To be effective leaders not only need to describe what and how much value needs to be created to satisfy the unit’s shareholders and stakeholders, but also leaders need to clearly outline which processes need to be completed and how the employees will contribute. A conversation that only discusses what and how much value, without specifically describing how the employees and internal processes will create the value is not fruitful. 5 Wali Memon
    • Kaplan & Norton’s Strategy Map While an organization’s strategy tells us where it wants to go (outcomes), a strategy map clearly communicates how an organization (division or department) will get there Outlines the key initiatives that need to be successfully completed if the organization/ division/ dept is to achieve its desired (financial) outcomes6 Wali Memon
    • Why Use Strategy Maps? Leaders cannot successfully execute a strategy that: They cannot explain, Employees do not understand, and Does not have an underlying logic7 Wali Memon
    • Related Conversations Herb Kelleher of Southwest Airlines “Place your employees first, the customers second, and the shareholders third” In 2009 Jack Welch “Shareholder value is a result of strategy, not a strategy. Your main constituencies are your employees, your8 customers, and your Wali Memon products”
    • Related Conversations Consulting firm methodology: People X Process X Product = Profit The main issue is that while the logic is clear, there has not be a rigorous way to model it9 Wali Memon
    • Balance Leadership creates vision and a sense of urgency. Leaders communicate, inspire and Leadership motivate through words and actions Management are systems that provide the alignment and discipline required to implement the strategy and achieve the vision Management 10 Wali Memon
    • Strategy Map LogicLearning & Internal Customer FinancialGrowth 11 Wali Memon
    • Financial PerspectiveStrategy map starts with FinancialPerspective The end result and ultimate scorecard for for-profit firms Outlines how much value do we need to create for our shareholders and stakeholders12 Wali Memon
    • Financial PerspectiveTwo ways to increaseshareholder returns: Increase revenues by selling to new customers or getting current customers to buy more Reduce cost or increase productivity13 Wali Memon
    • Customer/User PerspectiveDescribes why users/customers patronize us instead of ourrivals (answers “What is our customer/user valueproposition?”)Three types of value propositions1. Operational Excellence (Price)2. Product Leadership (Product)3. Customer Intimacy (Service) 14 Wali Memon Price
    • Customer/User Perspective Describes why users/customers patronize us instead of our rivals (answers “What is our customer/user value proposition?”):1. Operational Excellence (Price) Acceptable quality at a low, low price15 Wali Memon
    • Customer/User Perspective Describes why users/customers patronize us instead of our rivals (answers “What is our customer/user value proposition?”):2. Product Leadership (Product) Simply the best products, first to market16 Wali Memon
    • Customer/User Perspective Describes why users/customers patronize us instead of our rivals (answers “What is our customer/user value proposition?”):3. Customer Intimacy (Service) Build customer relationships so that you can offer complete (customized) solutions17 Wali Memon
    • NTS Describes why users/customers patronize us instead of our rivals (answers “What is our customer/user value proposition?”):1. Operational Excellence (Wal-Mart, McDonalds) Acceptable quality at a low, low price2. Product Leadership (Apple, BMW) Simply the best products, first to market3. Customer Intimacy (Lexus, Private Banking) Build customer relationships so that you can offer complete (customized) solutions18 Wali Memon
    • Internal Processes Perspective Describes how the organization will deliver its Customer/User Value Proposition. There are four key processes organizations must execute: 1. Customer processes 2. Operations processes 3. Innovation processes 4. Regulatory and Social processes19 Wali Memon
    • Internal Processes Perspective Describes how the organization will deliver its Customer/User Value Proposition: 1. Customer processes - marketing/sales activities to deepen relationships with existing customers and acquire new customers20 Wali Memon
    • Internal Processes Perspective Describes how the organization will deliver its Customer/User Value Proposition: 2. Operations processes - day-to-day activities to produce value for customers, e.g., purchasing, production, shipping, after sales service21 Wali Memon
    • Internal Processes Perspective Describes how the organization will deliver its Customer/User Value Proposition: 3. Innovation processes - developing new products and improving production process22 Wali Memon
    • Internal Processes Perspective Describes how the organization will deliver its Customer/User Value Proposition: 4. Regulatory and Social processes - being a responsible corporate citizen and ensuring employees comply laws and regulations23 Wali Memon
    • NTS Describes how the organization will deliver its Customer/User Value Proposition: Customer processes (marketing/sales activities to deepen relationships with existing customers and acquire new customers) Operations processes (day-to-day activities to produce value for customers, e.g., purchasing, production, shipping, after sales service) Innovation processes (developing new products, improving production process) Regulatory and Social processes (being a responsible corporate citizen and ensuring employees comply with laws and regulations)24 Wali Memon
    • Learning and Growth Perspective Describes how the organization will meet its internal process needs 1. Human Capital 2. Information Capital 3. Organization Capital25 Wali Memon
    • Learning and Growth Perspective Describes how the organization will meet its internal process needs 1. Human Capital – Recruit, retain, and build employees’ competencies26 Wali Memon
    • Learning and Growth Perspective Describes how the organization will meet its internal process needs Information Capital – Develop IT and other decision support systems to improve business decisions (e.g., SOP)27 Wali Memon
    • Learning and Growth Perspective Describes how the organization will meet its internal process needs Organization Capital – Enhance the org’s culture, teamwork and leadership to align employees with the org’s vision/mission28 Wali Memon
    • Strategy Map w/ Generic Categories 29 Wali Memon
    • Example: Panago Strategy Map Market Panago IncreaseHire and PanagoTrain Develop offers high Revenues Promotions quality, -Pizza/DipsStandard -Increase Take calls healthyOperating Market pizzas and ShareProcedures Make dips thatEstablish Pizzas are ControlFun Deliver delivered Costs -ReduceCulture pizzas fast to labor Create new your door -Reduce offerings waste30 Wali Memon
    • Not-for-Profit Strategy Map31 Wali Memon
    • Inspires Other Conversations Kicks off a strategic planning session (Is everyone on the same page? Do we still have a valid strategy?) Tests the logic of a proposed strategy (Anything missing or not logical?) Used for gap analysis – compare the organization’s actual strategy map versus its planned strategy map (What initiatives will improve our performance?) 32 Wali Memon
    • Inspires Other Conversations Helps to identify key risks (What needs to go right if the organization is to succeed?) Provides basis for developing robust BSC measures (How should we track our progress in meeting our strategic goals?) 33 Wali Memon
    • Basic Strategy Mapping Steps1. Define the expectations of shareholders and stakeholders. Place these expected outcomes in the Financial/Outcomes Perspective2. Define the organization’s value proposition. Place this in the Customer/User Perspective3. What internal processes need to be completed if we are to deliver the value we promise? Place these activities in the Internal Process Perspective4. What types of employees and supporting systems do the employees need to complete internal processes? Place these in the Learning & Growth 34 Wali Memon
    • Strategy Mapping Example You own a chain of six coffee shops, The Coffee Pot, that you recentlyinherited from your father. The shops are located near shopping mall foodcourts. The shops have been losing money due to the intense competitionfrom Starbucks and Tim’s, so you decide to change the strategy to serve fairtrade coffee in re-usable mugs at low prices along with fresh baked goods.The Coffee Pot will advertise the change on radio, in addition to using signageand a loyalty program to attract new and retain old customers. Each coffee shop has a full-time manager, an assistant manager, andemploys mainly high school kids as servers. Unfortunately, the culture of greatservice that your father worked hard to instil is slowly ebbing away as thestudents turnover. Each shop only has a basic inventory, purchasing,accounting and payroll system as the manager is there daily. You have beenhaving little success in rolling out the new strategy in each shop so you decideto develop a strategy map to illustrate and educate the change.Assignment: Develop a Strategy Map for The Coffee Pot 35 Wali Memon
    • Strategy Map w/ Generic Categories36 Wali Memon
    • Strategy Map for the Coffee Pot37 Wali Memon
    • Strategy Map for The Coffee Pot Wali Memon 38
    • 7 Times, 7 Different Ways Leadership meetings Quarterly/monthly newsletters Informal meetings and learning lunches Company Intranet (social networking) Include in employees’ incentive system/initiative Share strategy map with employees CEO randomly visits employees and quizzes them on their knowledge of the map 39 Wali Memon
    • Inputs to Future Conversations Robert Kaplan and David Norton (2008) The Execution Premium, Harvard Business School Publishing Norman Sheehan (2010) “A Risk-Based Approach to Strategy Execution,” Journal of Business Strategy (available from author sheehan@edwards.usask.ca) Wikipedia on Strategy Mapping 40 Wali Memon
    • Inputs to Future Conversations Robert Kaplan and David Norton (2008) The Execution Premium, Harvard Business School Publishing Norman Sheehan (2010) “A Risk- Based Approach to Strategy Execution,” Journal of Business Strategy (available from author) Wikipedia on Strategy Mapping 41 Wali Memon
    • Brainstorming What stands out for you about this presentation? In your view, how does this connect with the conference theme and/or leadership practice?42 Wali Memon