Mapping Your Corporate Strategy

By Martha Lagace
Harvard Business School Working Knowledge
Since the 1990s, the Balanced Scorecard system has cut a path in business as a more
rigorous way to measure performance by quantifying what had been considered
intangible assets, such as human capital, information, and culture. The system draws
strength from four perspectives:

1. financial measures;
2. customers;
3. internal processes; and
4. learning and growth.

Developed by HBS professor Robert S. Kaplan, chairman of the Balanced Scorecard

Collaborative, and David P. Norton, co-founder with Kaplan and president of the
Balanced Scorecard Collaborative, the system has led to three books that take the
ideas further, starting with The Balanced Scorecard: Translating Strategy into Action
(1996) and The Strategy-Focused Organization: How Balanced Scorecard Companies
Thrive in the New Business Environment (2000). Most recently, Kaplan and Norton
have built on the original, four-perspective model of the Balanced Scorecard, and they
link it with the time-based dynamics of strategy in their latest book, Strategy Maps:
Converting Intangible Assets into Tangible Outcomes (Harvard Business School
Press, 2004). In this e-mail interview, Kaplan discusses Strategy Maps' practical
lessons for business leaders.
Martha Lagace: Why should companies learn more about the
benefits of strategy maps? What could companies be doing better
than they are now?
Robert S. Kaplan: A strategy map provides a visual representation
of the organization's strategy. This is truly an example of how one
picture is more powerful than 1,000 words (or even twenty-five ad
hoc performance measures). The financial and customer objectives
describe the outcomes the organization wants to achieve; objectives
in the internal and learning and growth perspectives describe how
the organization intends to achieve these outcomes. The discipline
of creating the strategy map of linked objectives in the four
perspectives engages the executive team, and often promotes much
greater clarity and commitment to the strategy.
Once created, the strategy map is a powerful communication tool
that enables all employees to understand the strategy, and
translate it into actions they can take to help the organization
succeed. Here is a picture of two employees of the Royal Canadian
Mounted Police (RCMP) with their strategy map helping them do
their job in the ice fields above the Arctic Circle.
A strategy map also provides the structure for meetings where
managers can quickly see which aspects of their strategy are
succeeding and where they are falling short. The causal
relationships enable managers to test whether the theory of their
strategy is valid.
Q: Does it matter what size a company is before it can consider
creating a strategy map? At a company, who ideally should be the
steward of the strategy map? And, how often can or should the map
evolve at a single organization?
A: We have seen strategy maps work extremely effectively in
organizations with as few as twenty-five employees, as described in
the Boston Lyric Opera case in our new book. And it clearly helps to
align the multiple business units and the thousands and tens of
thousands of employees in large organizations, as we see in the
Thompson Corporation, the U.S. Army, and Ingersoll Rand examples
in the book.
Most organizations identify a single person to be the steward or
organizer of the strategy map. This person ensures that data are
continually fed into the map and Balanced Scorecard to keep them
refreshed, organizes the monthly report distribution—usually
electronically—and sets the agenda for the monthly management
meeting to discuss performance against the strategy. Some
organizations call this person the "Chief of Staff."
In large organizations, the process is run by a new organization
called the Office of Strategy Management—which reports directly to
the CEO or COO. This office manages the process of periodic review
and adaptation of the strategy map—perhaps done annually—and
provides a central resource for implementing all five management
processes to become a strategy-focused organization (the subject of
our previous book): mobilize, translate, align, motivate, and sustain.

Royal Canadian Mounted Police V Division

Iqaluit (Baffin Island)
Q: You wrote in Strategy Maps, "A strategy, as articulated by (HBS professor)
Michael Porter, will be most successful when the collection of integrated and aligned
activities enable the company to offer a value proposition—whether low total cost,
product leadership, complete customer solutions, or system lock-in—better than
competitors." Many of our readers are familiar with Porter's work. How does your
work on strategy intersect with his?

A: It's actually quite simple. Porter's work helps managers formulate

their strategy. Our work provides the discipline to ensure that the
formulated strategy has specific objectives for shareholders and
customers, an explicit customer value proposition, the critical
internal processes for creating and delivering the value proposition,
and aligned human resources, information technology, and
organization culture.

Porter argues that strategy is determined by a unique combination

of activities that deliver a different value proposition than
competitors or the same value proposition better. The strategy map
framework allows companies to identify and link together the critical
internal processes and human, information, and organization capital
that deliver the value proposition differently or better. Thus, the
process of creating a strategy map and Balanced Scorecard
translates the formulated strategy into specific objectives,
measures, targets, and initiatives in the four inter-related
perspectives.

Our work helps organizations translate, communicate, implement,

and review the strategy they have formulated following Mike
Porter's principles. Our methodology, however, is completely
general; whichever strategic framework the organization is using, it
still needs to translate and communicate it across all business units
and to all employees if the strategy is to be implemented effectively.

Q: This is your third book since The Balanced Scorecard and The
Strategy-Focused Organization. How would you like to build on the
lessons you convey in Strategy Maps for your future research?
What's next for you?

A: We will continue to expand the framework established in The

Strategy-Focused Organization. The Strategy Maps book elaborates
the first principle in the SFO book, going into much more depth and
with a large number of examples of how to translate a strategy into
measurable, linked objectives.

Our next target will be the second principle, alignment. We already

have ample new material on how a variety of organizations are
cascading their enterprise strategy map and scorecard out to align
dispersed business units, support groups, and individuals. Dave
Norton and I already have the table of contents for this next book
and have started to write chapter drafts.

We are also working, in parallel, on the governance aspects of the

Balanced Scorecard. In the SFO book, we described the internal
governance process by which the enterprise guides, monitors, and
evaluates its strategic performance. We have a new case study on
First Commonwealth Financial Corporation, and a new paper on how
innovating organizations are using strategy maps and Balanced
Scorecards in the governance process with boards of directors and
even their public shareholders.

So fortunately we are not running out of new material and

applications.

Additional Information:
Robert S. Kaplan is the Marvin Bower Professor of Leadership
Development at Harvard Business School.

This article is part of the Performance Management in the Public

Sector Learning Series.