During your strategic planning process, there are a lot of puzzle pieces to fit together. How do you identify the right goals for your organization? How can you ensure they are interconnected? A strategy map is your fail-safe to help you work through your organization’s priorities and goals in the proper order. It’s an incredibly effective and useful tool to put in play during both the strategic planning and execution processes. In this article, we’ll give a strategy map definition, walk through building a map, and explain why it’s so important to your strategy.
What is a strategy map?
A strategy map is a visual representation of an organization’s overall objectives and how they relate to one another. The map is created during the strategic planning process and is used as a primary reference material during periodic strategy check-in and review meetings.
A typical strategy map organizes objectives into four categories, or perspectives. These perspectives were developed by Doctors Robert S. Kaplan and David P. Norton as part of their Balanced Scorecard framework for strategic planning and management. The four perspectives for for-profit organizations include:
- Internal Processes
- People/Learning & Growth
The first two perspectives can be characterized as “what we’re getting,” while the latter two are more about “what we’re doing.” To properly understand a strategy map, you should read the “story” from the bottom perspective upward because what you do directly influences what you get.
Building A Strategy Map
While you might read a strategy map from the bottom up, you build it from the top down. You should create your map in this order:
It’s standard to use two measures of financial strategy: revenue growth and productivity. For nonprofits and municipalities, your mission would be at the top of your strategy map, not financials.
The customer value proposition should be at the core of your strategy, which is why it comes directly after the financials (or mission). For-profit companies typically focus on achieving one of these three value propositions:
- Product leadership
- Customer intimacy
- Operational excellence
To effectively map your strategy, you have to decide which of those three is the priority—it’s unrealistic to weigh them all equally. Making this choice is a big piece of your strategy.
For nonprofits and governments, your beneficiaries or citizens would replace customers and your three value propositions would more likely revolve around serving the needs of those citizens.
Once your financial and customer perspectives are established, you’ll focus on HOW (through what processes) to achieve your financial and customer goals. Most companies are working to improve (if not perfect) internal processes that support these areas of the business:
- Fostering growth through innovation and new-market expansion.
- Enhancing customer value by improving relationships with existing customers.
- Working toward operational excellence.
- Creating productive relationships with external stakeholders.
4. Learning & Growth
Here lies the foundation of the strategy. This perspective outlines the employee skills and knowledge required to make the processes run smoothly, which in turn…
provides value to customers, which in turn…
improves company financials. The specifics of this perspective can vary widely from company to company—what you define as learning and growth is entirely dependent on your goals as outlined in the preceding perspectives.
How do you take the concept of a strategy map and make it reality? Get ideas from these 5 for-profit examples.
Why create a strategy map?
Learning what strategy mapping is doesn’t always translate to knowing why it’s so important. And there are valid reasons to initially create a map and other reasons to continually use and refine it.
The truth is you can skip building a strategy map—but you shouldn’t. During the planning process, the structure of the four perspectives forces you to think through what you’re trying to accomplish and how you’ll get there. Strategy maps help you identify key goals and uncover gaps in your strategy before you set anything in stone and initiate execution. These maps also help display how intangible company resources, including employee knowledge and customer relationships, generate strategic value.
In the long term, you can use strategy maps to test methods of achieving your goals. For example, if you think a certain customer management process or internal training will create more value and drive additional revenue, you can implement the tactic to test the theory. A year later during your annual strategic review, you can assess the implementation and progress toward the goal, adjusting your strategy if needed. In short, your strategy map helps you track progress and ensure alignment as you move through the execution phases.
Perhaps most importantly, strategy maps give employees an understanding of how their jobs contribute to top-level, strategic goals. When teams know their efforts are contributing to the organization’s overall goals, it’s a huge productivity driver and morale booster.
Strategy Maps In Balanced Scorecard Software
If you’re using Balanced Scorecard software, your map will also offer a visual representation of how your strategy is doing at a glance through status icons. For example, with ClearPoint you can upload an image and the details of your four perspectives, add icons for your objectives, and then generate a custom strategy map within the system. From there, it’s easy to update and change the map as needed—it’s a living document you can use as a tool within your Balanced Scorecard framework.
Strategy maps present valuable information in a visual, easy-to-understand format that helps you get everyone on board with the strategy. Just remember—build from the top down, read from the bottom up!