Adapted from the Management Accounting Guideline, “Strategy Mapping” by Howard Armitage and Cam Scholeyi. This Guideline was developed for the AICPA ,CIMA and CMA Canada.
Effective execution of strategy is paramount to success and essential for survival, yet few companies are truly successful at implementing the strategies they have selected, and many fall far short of their own expectations and the expectations of others.
Possibly the single most significant reason for poor strategy implementation is that leaders who chart the course for the organization are not able to communicate their vision in a way that others can share in, one that gets everyone necessary for the achievement of that vision “on the same page.”
While the vast majority of organizations have well defined procedures for developing strategic plans, there is a major disconnect between the formulation and execution phases of strategy. The ability to cascade an organization’s vision, mission and core strategies into the actionable behaviors that achieve critical objectives is a more challenging task than strategy theorists and gurus would suggest.
Strategy maps provide a way for organizations to describe and communicate their strategies. Evolving as a breakthrough in second-generation balanced scorecards, the underlying concept of strategy maps is based on a well-known premise – a picture is worth a thousand words. Strategy maps provide a way for companies to “tell the story” of their strategy in a way that reduces the “noise level” in the message. The visual nature of the strategy map enables individual employees and other stakeholders to locate themselves in the bigger picture and take up their role in the ongoing “story” of the organization.
Strategy maps describe how organizations create value by building on strategic themes such as “growth” or “productivity”. These themes determine what specific strategies organizations will adopt at their customer, process, and learning and growth levels. Well constructed maps describe how the organization plans to meet its specific customer promises through a combination of employee, technology and business processes that satisfy customer expectations and meet shareholder demands. In short, they provide the conceptual framework that organization leaders and their followers can use to better understand and execute strategy. In so doing they reduce the impediments to successful strategy implementation.
Planning the Trip
A systematic approach is key to realizing the benefits of strategy mapping. The following six steps have proven very useful and. can be used by managers to effectively create and implement strategy mapping initiatives in their own organization:
1. Determine the overriding objective – While customer satisfaction and quality are worthwhile pursuits, the overriding objective(s) for profit-making enterprises must be economic. These financial targets should be a “SMART” goals – specific, measurable, attainable, realistic and have a time parameter. For example, “increase component sales by 20% within the next two years.”
2. Determine the dominant value proposition – No organization can be all things to all people. The key here is to select one dominant value proposition and provide breakthrough customer value in that proposition. Operational excellence, product leadership and customer intimacy are all worthy value propositions, pick one to excel at.
3. Choose the key financial strategies – Deciding on your dominant value proposition will guide your selection of financial strategies. Focusing on your dominant value proposition will bring clarity to asset utilization decisions, productivity pursuits, and the cost and revenue balancing act.
4. Choose the key customer related strategies –Similarly, your dominant value proposition will determine how much emphasis you place on adding and retaining customers, increasing revenues per customer, or reducing costs per customer.
5. Choose the key internal business process strategies – Once the appropriate financial and customer strategies are identified, the “what” we want to accomplish becomes the “how.” Identifying appropriate metrics serves to provide focus and prioritize the effort expended on critical internal operations, innovation, or customer management processes.
6. Choose the key learning and growth strategies - Finally, the inevitable gaps in knowledge skills and abilities necessary for effective execution are addressed with learning and growth strategies in three key areas: human capital, information capital and organization capital.
This six-step process will produce an effective strategy map, a reliable navigation tool that your entire organization can use to maintain focus on the ultimate destination of success.
Embarking on the Journey
Once a corporate level map is developed, it can be used to communicate the path of the journey you are embarking on together in a way that will draw others into their own planning for how they can contribute to the successful achievement of the organization’s objectives, ensuring that everyone is “on the same bus.”
While some organizations will be well served by one corporate-level strategy map, others may find the need to cascade the process further down into their organization and develop more detailed maps for different “terrains”, based on geographical, product, service or group distinctions. Additional perspective can also be developed by drilling deeper into specific strategies within the corporate level map.
While some have the perception that strategy mapping is a good tool for the corporate behemoths of the world, large companies do not have a corner on the market when it comes to poor strategy execution. Nor do they have a corner on the market when it comes to the benefits of strategy mapping.
ATS, Automated Tooling Systems, Inc. a Toronto Stock Exchange company is an excellent case in point. A leading designer and producer of automated manufacturing and test systems, ATS used strategy mapping to overcome several significant impediments to growth that were rooted in the entrepreneurial culture that had contributed to their success.
Following the death of their founder Klaus Woerner in 2004, Ron Jutras, the former CFO took over as CEO and made strategic planning and execution a priority for ATS, implementing a strategy mapping initiative. After first selecting a customer intimacy value proposition revolving around the objective of becoming “a total solutions provider,” ATS developed drill-down strategy maps for their three main business groups.
According to Jutras, taking a more disciplined and structured approach to running the business has “brought our organization together more globally…The strategy map has played a significant role in helping us understand communicate and execute our strategy. We are committed to it.”
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