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Designing a Strategy Map

Designing a Strategy Map

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Published by imad rehman
Performance Management
Performance Management

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Published by: imad rehman on Oct 29, 2010
Copyright:Attribution Non-commercial


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Juha Antola, Antti Lönnqvist, Erkki Uusi-Rauva
Tampere University of Technology juha.antola@tut.fi
The objective of this paper is to model the designing of a strategy map for abusiness unit or for a broader entity and for a duty. The strategy map is avisual presentation of a company’s critical success factors and the cause-and-effect relations between them. Strategy maps can be used, e.g., to illustrate thestrategy of a company. Especially, the duty-related strategy maps canillustrate how the duties of an employee relate to the objectives of anorganisation.The research method used is action research. The contribution this paper makes is as follows. First, the paper presents a step-by-step model of designing a strategy map. Second, this paper presents how to design a duty-related strategy map. Third, the process of designing strategy maps isdescribed in practice.
Successful guidance and control of a business require not only the consideration of financial aspects but also paying attention to non-financial aspects. For this reason,managerial tools have been developed. This study is about one tool – the strategy map.Strategy maps show the cause-and-effect links between an organisation’s criticalsuccess factors. It can be used, e.g., to illustrate how an increase in employee motivationimproves productivity and profitability or to show how an employee’s operativeactivities contribute to achieving company-level objectives (see e.g. Kaplan and Norton2004, p. 15). It also serves as a tool in developing a company’s performancemeasurement system (Lauslahti and Alhola 2003).In the literature there is a lack of a detailed model for designing a strategy map. Theobjective of this paper is to construct a detailed model of how to design a strategy map.The study was conducted as an action research (see e.g. Coughlan and Coghlan 2002;Gummesson 2000, p. 209; Olkkonen 1994, pp. 72 – 75). During the study, a strategymap was designed for a Finnish forest industry production unit which employs severalhundred people. Three duty-related strategy maps were designed for the unit, too.
The strategy map is a visual presentation of an organisation’s critical success factorsand of the cause-and-effect relations between them. Strategy maps provide a consistentway to represent the strategy, so that objectives and measures can be established andmanaged. (Anon. 2001, p. 9; Kaplan and Norton 2004, p. 10; 2000, p. 176) In theliterature the terms used to describe the strategy map differ from each other. Kaplan andNorton (see e.g. 2004) have used the term ‘strategy map’, but Neely and Bourne (see e.g.2000) have used the term ‘success map’. However, the definitions of the terms arecongruent with each other. The term ‘strategy map’ is used in this study. Strategy mapscan be of benefit as follows:
The strategy map clarifies the path from non-financial success factors tofinancial results and facilitates the implementation of a performancemeasurement system (Laitinen 2003, p. 381),-
it clarifies a company’s strategy to employees by showing how their duties arelinked to the organisation’s overall goals,-
it can be used to align business units and focus management processes (Kaplanand Norton 2004, p. 15),-
it provides the missing link between strategy formulation and strategy execution(Kaplan and Norton 2004, p. 10) and-
it is a tool for supporting performance measurement in organisations by trying tohighlight a company’s important matters, i.e. the matters which should bemeasured (Kaplan and Norton 2004, p. 55).According to Neely and Bourne (2000, pp. 3 – 5), the strategy map is a cause-and-effectrelationship diagram derived from a company’s strategy. Marr (2003, p. 27) considersthe strategy map as a presentation describing how an organisation sees itself. Kaplanand Norton relate the strategy map strictly to the Balanced Scorecard framework. Theyconsider the strategy map as an illustrative one-page presentation in which theorganisation’s overall goals are integrated to the four perspectives of the BalancedScorecard (Kaplan and Norton 2004, p. 55). However, strategy maps can also be usedoutside the Balanced Scorecard environment (see e.g. Neely and Bourne 2000).
Kaplan and Norton (see e.g. 2004) have modelled the designing of the strategy map.Their model concentrates on strategy map templates. Each of the templates is based on adifferent strategy, e.g. operational excellence or product leadership, and on the cause-and-effect links in the strategy. A company should choose a strategy and then tailor thestrategy map for the organisation. An example of Kaplan and Norton’s strategy maptemplate is illustrated in Figure 1.According to Kaplan and Norton (2000, pp. 170 – 176), the designing of a strategy mapshould begin with defining the objectives of a company and then proceed to the meansfor reaching the objectives. The defining of the objectives begins with identifying thereasons for a company’s existence. After this, the management of a company defines thevision. Defining of the strategy follows the vision. The next stage is to illustrate thecritical objectives of a company and the relations between these objectives in line withthe four perspectives of the Balanced Scorecard. The perspectives should be handled inthe following order: financial perspective, customer perspective, internal processperspective and learning and growth perspective.
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Figure 1. The Balanced Scorecard Strategy Map (Amended from Kaplan andNorton 2000, pp. 168 – 169)
The strategy map presented in Figure 1 is designed according to the four perspectives of the Balanced Scorecard framework as follows.
Financial perspective
: The objective of the financial perspective is to link the revenue growth strategy and the productivitystrategy together.
Customer perspective
: The core of the strategy is the customer valueproposition. The value proposition can be chosen from three differentiators: operationalexcellence, product leadership and customer intimacy. A company should excel in oneof the three areas and meet general requirements in two others.
 Internal process

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