Strategy maps are a powerful tool for any organization to better understand and communicate its strategy. They provide an at-a-glance, one page view of how the different parts of an organization work together to achieve the desired results. But how do you create a strategy map? What are its components & considerations? This strategy map guide gives you an overview of what strategy maps are and offers tips on creating a strategy map, from an absolute beginner’s perspective.
What is a strategy map?
A strategy map visually outlines an organization’s strategy in a single page by connecting objectives, goals, and measures in an easy-to-understand format. It provides a comprehensive view of the entire business strategy, including the various objectives and goals, performance measures, and initiatives needed to achieve those objectives. The primary purpose of strategy maps is to enable better decision-making and strategic planning by helping managers identify and analyze the components they need to consider when making decisions.
The Components of a Strategy Map
The concept of strategy maps was first introduced in 1992 by Robert S. Kaplan and David P. Norton, the balanced scorecard (BSC) pioneers. According to their idea, a company’s success is evaluated based on four perspectives: financial, customer, internal processes, and learning and growth. With a strategy roadmap, the visual cause-and-effect relationship between these various perspectives is well laid out for everyone in the company to understand.
1. Financial goals:
The financial perspective is the main objective of every organization. The objectives here concern your goals for revenue growth, improving return on investment (ROI), or how to reduce operating costs.
2. Customer goals:
The customer perspective focuses on acquiring and retaining customers. The objectives of this category cover areas such as customer satisfaction, growth of the customer base, or reduction of customer complaints.
3. Internal business processes:
The internal processes perspective focuses on how to make the organizational workings more efficient. The objectives in this category cover areas such as reducing the production turnaround time, improving quality control, or expanding the capabilities of the current workforce through training.
4. Learning and development processes:
The learning and development perspective focuses on making the organizational workforce more capable. Objectives in this category cover areas such as reducing the turnover rate, improving customer service, or training the workforce to expand their capabilities.
At its most basic, a strategy map is a diagram that contains several oval shapes inside of boxes connected by arrows. Each oval represents a strategic objective, the boxes indicate four perspectives as described above, and the arrows indicate the associated objectives. For example, a strategy map might have an oval labeled ‘Increase sales revenue,’ which is connected to ovals labeled ‘Develop new products,’ ‘Improve customer service,’ and ‘Expand into new markets.’ The arrows indicate that the organization believes its effort to increase sales revenue will be enhanced by developing new products, improving customer service, and expanding into new markets.
A more detailed strategy map would include strategic themes such as objectives, drivers, and initiatives. Objectives are the outcome of a company’s strategic efforts (and can be multilevel)—things intended to be accomplished within a given timeline. Drivers are the measures that are employed to achieve those objectives. Lastly, initiatives are the individual projects or programs that will help to achieve those drivers. By connecting these themes on a strategy map, it becomes easier for managers to visualize the complete picture of their strategy and make better-connected decisions.
For example, the top level can focus on the organizational mission and goals, while the next level could include specific initiatives to reach those goals. The third level would be measured for those initiatives, such as target customer groups or market segments. Once these higher-level components are established, lower-level metrics can be added to define each item further. This can include financial metrics, customer or employee satisfaction levels, or other performance indicators that must be monitored.
Generally speaking, the objects (or nodes) that populate the strategy map represent strategies, objectives, departments, or any other unit of an organization. The connecting lines between the nodes represent the relationship between them. You may use different line styles or colors to distinguish between these connections.
Benefits of a strategy map
Strategy maps can contain hundreds of ovals and arrows representing complicated relationships; however, unlike other complex business models, strategy maps are easy to understand. Because the visual structure of a strategy map resembles a flowchart, anyone familiar with computer-assisted software development tools can understand the relationships between ovals and arrows.
1. Better communication:
The primary benefit of strategy maps is that they simplify communication between departments and management, allowing everyone involved to understand the objectives and actions needed to achieve them.
2. Better performance:
By defining objectives and linking them to related performance indicators, strategy maps help an organization consistently perform at a high level. This makes strategy maps an excellent tool for both front line workers as well as management.
3. Better team collaboration:
Strategy maps are great for team collaboration. Individuals with different skills – including programmers, designers, marketers, product developers, and more. Each member can contribute ideas to the content and layout of the strategy map, thus creating a tool that everyone on the team can use to work together more effectively.
4. Better analysis:
Strategy maps allow you to organize information visually to facilitate analysis. Analysis of a strategy map is a handy tool to evaluate a business model (or a product) performance. By visually organizing information into a strategy map, your team can identify interdependencies between objectives, thus revealing complex patterns that would otherwise go unnoticed.
5. Better planning:
This level of detail combined with such a comprehensive, overall view makes strategy maps an excellent tool for strategic planning and coordination within an organization. Moreover, since strategy maps are easy to update, they can be used to track an initiative’s progress over time – or to redesign problematic sections of the business model, should a problem be discovered.
6. Better decision-making:
Strategy maps provide a framework for decision-making that takes into account all factors associated with an objective, making it easier for managers to make well-informed decisions about their strategies. Finally, strategy maps increase visibility into performance metrics so managers can measure progress against their goals over time and adjust their strategy accordingly.
8 steps to create a strategy map
1. Identify the goals and objectives of the organization: Identify critical areas of focus and overall strategic goals for the organization.
2. Identify critical relationships: Map the relationships between objectives to understand how the organization works and how success is achieved.
3. Identify the key performance indicators (KPIs): KPIs measure progress towards your goals and objectives. Define a set of meaningful metrics.
4. Develop a strategy map: Use the defined KPIs to visually represent your strategy, highlighting the relationships between these elements in an easy-to-understand way.
5. Set objectives for each indicator: For each KPI, set targets representing progress toward the organization’s strategic goals.
6. Track progress: Monitor progress towards objectives regularly, identifying improvement areas.
7. Adjust strategy as needed: As performance data is collected, adjust your strategy map to ensure that the organization achieves its desired results.
8. Evaluate success: Analyze results and evaluate success, making adjustments as necessary to ensure that the organization meets its goals and objectives.
Strategy Map Example
Do you need a strategy map?
Using strategy maps is an effective way for companies to visualize their overall strategies and improve decision-making capabilities within their organization. By creating a framework around objectives, drivers, and initiatives, teams can easily communicate with each other while focusing on all relevant components related to their goals. In addition, managers can use this information to measure progress against their goals over time and make adjustments as needed. Although it may take some time for businesses to get used to utilizing strategy maps in their decision-making processes, this method allows for better communication among departments and greater transparency into the organization’s performance metrics.
While strategy maps are invaluable for planning and communication, there may be better solutions in some circumstances. Specifically, due to their complexity, there may be better choices than strategy maps for communicating precise and detailed information to employees.
Conclusion
Strategy maps are still relevant and valuable tools for businesses. They provide an incredibly useful way of looking at a business. From understanding the current competitive landscape to creating a long-term strategy, strategy maps can help businesses develop a strategic advantage. However, it is essential to note that strategy maps have limitations and that companies should continually evaluate their effectiveness. In addition, companies should ensure that their strategies are complemented by robust measurement systems and are regularly reviewed to remain viable.
