Introduction to the Strategy Map
The Balanced Scorecard provides a vital framework for measuring and managing performance, but organizations also need a way to visually represent their strategy and tell the story of how they create value. This is where the "Strategy Map" comes in as a powerful complement to the Scorecard.
Developed by Balanced Scorecard co-creators Drs. Robert Kaplan and David Norton, a Strategy Map illustrates an organization's strategic objectives and their cause-and-effect linkages in a single page. It provides a high-level view of the organization's strategy and how activities across perspectives contribute to strategic goals.
While the Balanced Scorecard measures tactical performance, the Strategy Map shows the big picture of the underlying strategy. It serves as the cornerstone for implementing the Scorecard by clarifying strategy before selecting measures and initiatives. The visual nature of Strategy Maps also facilitates employee communication and alignment.
Constructing a Strategy Map involves four key steps:
Identify Strategic Themes - The core strategic themes represent the areas an organization must excel at to achieve its mission and vision. Common themes include operational excellence, customer intimacy, product leadership etc.
Map Strategic Objectives - Next, specific multi-year strategic objectives are defined for each theme. These are arranged on the map showing their linkages and alignment. Objectives across themes should reinforce one another.
Connect Objectives with Cause-and-Effect Linkages - The heart of the map shows how objectives work together in cause-and-effect relationships using directional arrows. This explains how activities in one area drive results in another area.
Validate the Map - The maps must align with financial targets and be validated to confirm the presumed cause-and-effect linkages that underpin the strategy. Do the connections make logical sense?
On the map, strategic objectives are generally arranged from the bottom to top in a logical flow:
The Learning & Growth perspective anchors the foundation of the map with human, information and organization capital objectives. These enable critical internal process performance.
The Internal Process perspective sits in the middle with objectives for enhancing key operating processes and competencies.
The Customer perspective appears next with goals for creating value for target customer and market segments.
The Financial perspective fills the top of the map, showing how shareholder expectations are met through profitable customer relationships and operational excellence.
By clarifying objectives and their interrelationships visually, Strategy Maps tell the story of the organization’s strategy succinctly yet powerfully. They serve as a vital reference point for communicating priorities, guiding resource allocation, selecting measures, and monitoring performance. Strategy Maps and Balanced Scorecards truly function best as an integrated system.
In today's fast-changing world, organizations must continually re-evaluate their strategy and update their maps and scorecards accordingly. Used together, these tools help ensure the organization's strategy remains aligned, coherent and focused on creating value in practice, not just in theory. For these reasons, the Strategy Map is an essential component of any performance management framework.
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