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HBROnPoint
F R O M T H E H A R V A R D B U S I N E S S R E V I E W
A R T I C L E
Having Trouble with YourStrategy? Then Map Itby Robert S. Kaplan
and David P. Norton
New sections to
guide you through
the article:
The Idea in Brief
The Idea at Work
Exploring Further. . .
P R O D U C T N U M B E R 5 1 6 5
Your vision is sublime;
your strategy, brilliant.
So why are your troops lost?
Maybe they need a map.
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T H E I D E A
How does Mobil make sure that every gasstation owner understands
the companys strat-egyand implements it each time a customerdrives
up to his pumps? How did Mobil becomethe industrys profit leader
and boost its cashflow by $1 billion+ per year? By using a
strategymapa powerful new tool built on the bal-anced
scorecard.
The balanced scorecard measures your com-panys performance from
four perspectivesfinancial, customer, internal processes, and
learning and growth. A strategy map is a visualframework for the
corporate objectives withinthose four areas. The authors created
strategymap templates for various industries, includingretail,
telecommunications, and e-commerce.
Strategy maps put into focus the often-blurryline of sight
between your corporate strategyand what your employees do every
daysignificantly enhancing collaboration and coordination.
Having Trouble with Your Strategy? Then Map It
WHY STRATEGY MAPS?
Strategy maps are essential in the informationage, when
intangible assetscustomer relation-ships, employee skills, the
ability to innovateare competitive advantages. But these assetshave
value only within the context of a strategy.
For example, a growth-oriented strategy mightrequire in-depth
customer knowledge, salestraining, and incentive-based
compensation.But none of these, alone, would be enough toimplement
that strategy. Strategy maps quantifythe value of tangible and
intangible assetslinking them all to your overarching strategy.
BUILDING YOUR STRATEGY MAP
Step 1. Clarify your mission and strategicvision. Mobil sought
to be the best integratedrefiner-marketer in the U.S. by
efficiently deliv-ering unprecedented value to customers.
Step 2. Specify objectives in the four scorecardareas to realize
your companys vision.
Financial. Balance revenue growth and produc-tivity
improvement.
E X A M P L E :Mobil grew revenue by selling more
non-gasolineproducts and services and more premium gas. Itimproved
productivity by slashing operatingexpenses (e.g., reducing refinery
downtime).
HBR OnPoint 2000 by Harvard Business School Publishing
Corporation. All rights reserved.
Customer. Differentiate your firm from com-petitors. Choose one
of these value proposi-tions: operational excellence, customer
inti-macy, or product leadership.
E X A M P L E :Mobil emphasized customer intimacy,
targetingpremium customers by offering fast, friendly, andsafe
service. Satisfied customers gladly paid more.
Internal Processes. Identify operational,
cus-tomer-relationship, and innovation processesto support your
customer and financial goals.
E X A M P L E :Mobil reduced environmental and safety
incidents(operational), built best-in-class franchise
teams(customer relationships), and developed non-gasoline services
(innovation).
Learning and Growth. Define the skills, tech-nologies, and
corporate culture needed to sup-port your strategy.
E X A M P L E :Mobils objectives were: increase employee
knowl-edge of refining business; nurture leadership skillsnecessary
to articulate its vision.
Mobils strategy map linked the four perspec-tives, providing all
its business units clear direc-tion for creating their own more
detailed maps.
T H E I D E A A T W O R K
I N B R I E F
-
magine that you are a generaltaking your troops into foreign
terri-
tory. Obviously, you would need detailedmaps showing the
important towns andvillages, the surrounding landscape,
keystructures like bridges and tunnels, andthe roads and highways
that traverse theregion. Without such information, youcouldnt
communicate your campaignstrategy to your eld officers and the
restof your troops.
Unfortunately, many top executivesare trying to do just that.
When attempt-ing to implement their business strate-gies, they give
employees only limiteddescriptions of what they should do andwhy
those tasks are important. Withoutclearer and more detailed
information,its no wonder that many companieshave failed in
executing their strategies.After all, how can people carry out a
plan that they dont fully understand?
harvard business review SeptemberOctober 2000 Copyright 2000 by
the President and Fellows of Harvard College. All rights
reserved.
T O O L K I T
Having Trouble with Your Strategy?
The key to executing your strategy is
to have people in your organization
understand it including the crucial
but perplexing processes by which
intangible assets will be converted
into tangible outcomes. Strategy maps
can help chart this difficult terrain.
by Robert S. Kaplan and David P. Norton
I
Then Map It
ILLU
STR
ATIO
N B
Y LA
SZLO
KU
BIN
YI
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Organizations need tools for communi-cating both their strategy
and the pro-cesses and systems that will help themimplement that
strategy.
Strategy maps provide such a tool.They give employees a clear
line of sightinto how their jobs are linked to theoverall
objectives of the organization,enabling them to work in a
coordinated,collaborative fashion toward the com-panys desired
goals. The maps provide avisual representation of a
companyscritical objectives and the crucial rela-
tionships among them that drive organi-zational performance.
Strategy maps can depict objectivesfor revenue growth; targeted
customermarkets in which protable growth will
occur; value propositions that will leadto customers doing more
business andat higher margins; the key role of inno-vation and
excellence in products, ser-vices, and processes; and the
invest-ments required in people and systems to generate and sustain
the projectedgrowth.
Strategy maps show the cause-and-effect links by which specic
improve-ments create desired outcomes forexample, how faster
process-cycle timesand enhanced employee capabilities willincrease
retention of customers and thus increase a companys revenues.
From a larger perspective, strategymaps show how an organization
will con-vert its initiatives and resources includ-
ing intangible assets such as corporateculture and employee
knowledge intotangible outcomes.
Why Strategy Maps?In the industrial age, companies createdvalue
by transforming raw materials intonished products. The economy was
pri-marily based on tangible assets inven-tory, land, factories,
and equipment andan organization could describe and doc-ument its
business strategy by usingnancial tools such as general
ledgers,income statements, and balance sheets.
In the information age, businessesmust increasingly create and
deployintangible assets for instance, customerrelationships;
employee skills and knowl-
4 harvard business review SeptemberOctober 2000
T O O L K I T Having Trouble with Your Strategy? Then Map It
Product Leadership
Customer Intimacy
Operational Excellence
Improve Shareholder Value
Revenue Growth Strategy Productivity Strategy
build the franchise
revenue from new sources
increase value to customers
customer protability
improve cost structure
operating cost per unit produced
share price return on capital employed
improve use of assets
asset utilization
employee competencies technology corporate culture
achieve operational excellence through operations and logistics
processes
increase customer value through customer management
processes
build the franchisethrough innovations
become a good corporate citizen through regulatory and
environmental processes
Customer Value Proposition
customer acquisition,retention, and satisfaction
Financial Perspective
Customer Perspective
InternalProcess Perspective
Learning and Growth Perspective
The Balanced ScorecardStrategy Map
-
edge; information technologies; and acorporate culture that
encourages inno-vation, problem solving, and generalorganizational
improvements.
Even though intangible assets havebecome major sources of
competitiveadvantage, no tools existed to describethem and the
value they can create. Themain difficulty is that the value of
intan-gible assets depends on their organiza-tional context and a
companys strategy.For example, a growth-oriented salesstrategy
might require knowledge aboutcustomers, additional training for
sales-people, new databases and informationsystems, a different
organizational struc-ture, and an incentive-based compensa-tion
program. Investing in just one of
those items or in a few of them but notall would cause the
strategy to fail. Thevalue of an intangible asset such as acustomer
database cannot be consideredseparately from the organizational
pro-cesses that will transform it and otherassets both intangible
and tangible into customer and nancial outcomes.The value does not
reside in any individ-ual intangible asset. It arises from
theentire set of assets and the strategy thatlinks them
together.
To understand how organizations create value in the information
age, wedeveloped the balanced scorecard, whichmeasures a companys
performance fromfour major perspectives: nancial, cus-tomer,
internal process, and learning and
growth.1 Briey summarized, balancedscorecards tell you the
knowledge, skills,and systems that your employees willneed (their
learning and growth) to inno-vate and build the right strategic
capa-bilities and efficiencies (the internalprocesses) that deliver
specic value tothe market (the customers), which willeventually
lead to higher shareholdervalue (the nancials).
Since we introduced the concept in1992, we have worked with
hundreds ofexecutive teams from various organiza-tions, in both the
private and public sec-tors. From this extensive research, wehave
noticed certain patterns and havebrought them into a common
visualframework a strategy map that em-
harvard business review SeptemberOctober 2000 5
Having Trouble with Your Strategy? Then Map It T O O L K I T
Customer Value Proposition Strategies
measure of achievement
Operational Excellence
Customer Intimacy
Product Leadership
Relationship
price time
quality selection
Product/Service Attributes
smartshopper
Image
Companies excel at offering personalized service to customers
and at building long-term relations with them.
service customer relations
RelationshipProduct/Service Attributes
trustedbrand
Image
Companies excel at creating unique products that push the
envelope.
Relationship
time
functionality
Product/Service Attributes
best in class
Image
general requirement
differentiator
Companies excel at competitive pricing, product quality, and
on-time delivery.
Strategy maps show how an organization
plans to convert its various assets into
desired outcomes. Companies can use
the template here to develop their own
strategy maps, which are based on the
balanced scorecard. At far left, from
bottom to top, the template shows how
employees need certain knowledge, skills,
and systems (learning and growth per-
spective) to innovate and build the right
strategic capabilities and efficiencies
(internal process perspective) so that they
can deliver specic value to the market
(customer perspective), which will lead
to higher shareholder value (nancial
perspective). For the customer perspec-
tive, companies typically select one of
three strategies: operational excellence,
customer intimacy, or product leadership.
-
beds the different items on an organiza-tions balanced scorecard
into a cause-and-effect chain, connecting desired out-comes with
the drivers of those results.
We have developed strategy maps forcompanies in various
industries, includ-ing insurance, banking, retail, healthcare,
chemicals, energy, telecommunica-tions, and e-commerce. The maps
havealso been useful for nonprot organiza-tions and government
units. From thisexperience, we have developed a stan-dard template
that executives can use todevelop their own strategy maps. (Seethe
exhibit The Balanced ScorecardStrategy Map.) The template
containsfour distinct regions nancial, cus-tomer, internal process,
and learning andgrowth that correspond to the four per-spectives of
the balanced scorecard.
The template provides a commonframework and language that can
beused to describe any strategy, much likenancial statements
provide a generallyaccepted structure for describing nan-cial
performance. A strategy map enablesan organization to describe and
illus-trate, in clear and general language, itsobjectives,
initiatives, and targets; themeasures used to assess its
performance(such as market share and customer sur-veys); and the
linkages that are the foun-dation for strategic direction.
To understand how a strategy map isbuilt, we will study Mobil
North Ameri-can Marketing and Rening, which exe-cuted a new
strategy to reconstruct itselffrom a centrally controlled
manufacturerof commodity products to a decentral-ized,
customer-driven organization. As aresult, Mobil increased its
operating cashow by more than $1 billion per year andbecame the
industrys prot leader.
From the Top DownThe best way to build strategy maps isfrom the
top down, starting with the des-tination and then charting the
routesthat will lead there. Corporate executivesshould rst review
their mission state-ment and their core values why theircompany
exists and what it believes in.With that information, managers
candevelop a strategic vision, or what thecompany wants to become.
This visionshould create a clear picture of the com-panys overall
goal for example, tobecome the prot leader in an industry.A
strategy must then dene the logic ofhow to arrive at that
destination.
Financial Perspective. Building astrategy map typically starts
with a nan-cial strategy for increasing shareholdervalue. (Nonprot
and government unitsoften place their customers or consti-tuents
not the nancials at the top oftheir strategy maps.) Companies
havetwo basic levers for their nancial strat-egy: revenue growth
and productivity.The former generally has two compo-nents: build
the franchise with revenuefrom new markets, new products, andnew
customers; and increase value toexisting customers by deepening
rela-tionships with them through expandedsales for example,
cross-selling productsor offering bundled products instead ofsingle
products. The productivity strat-egy also usually has two parts:
improvethe companys cost structure by reduc-ing direct and indirect
expenses, and useassets more efficiently by reducing theworking and
xed capital needed to sup-port a given level of business.
In general, the productivity strategyyields results sooner than
the growthstrategy. But one of the principal contri-butions of a
strategy map is to highlightthe opportunities for enhancing
nancialperformance through revenue growth,not just by cost
reduction and improvedasset utilization. Also, balancing the
twostrategies helps to ensure that cost andasset reductions do not
compromise acompanys growth opportunities withcustomers.
Mobils stated strategic vision was tobe the best integrated
rener-marketerin the United States by efficiently deliver-ing
unprecedented value to customers.The companys high-level nancial
goalwas to increase its return on capital
6 harvard business review SeptemberOctober 2000
T O O L K I T Having Trouble with Your Strategy? Then Map It
Robert S. Kaplan ([email protected]) is theMarvin Bower Professor
of Leadership De-velopment at Harvard Business School inBoston.
David P. Norton ([email protected]) is founder and president of the
Bal-anced Scorecard Collaborative (www.bscol.com) based in Lincoln,
Massachusetts. Thisarticle is adapted from their book
TheStrategy-Focused Organization: How Bal-anced Scorecard Companies
Thrive inthe New Business Environment (HarvardBusiness School
Press, September 2000).The strategy maps concept was introducedin
issues of The Balanced Scorecard Report,a newsletter published
jointly by the Bal-anced Scorecard Collaborative and
HarvardBusiness School Publishing.
Mobil sStrategy Map
**To account for Mobils indepen-dent-dealer customers not
justconsumers the company adapt-ed the strategy map template
tofactor in dealer relationships.
Shown here is a map for the
strategy that Mobil North American
Marketing and Rening used to
transform itself from a centrally con-
trolled manufacturer of commodity
products to a decentralized customer-
driven organization. A major part of
the strategy was to target consumers
who were willing to pay price premi-
ums for gasoline if they could buy at
fast, friendly stations that were outt-
ted with excellent convenience stores.
Their purchases enabled Mobil to
increase its prot margins and its
revenue from nongasoline products.
Using the strategy map shown here,
Mobil increased its operating cash
ow by more than $1 billion per year.
measure of achievement
general requirement
differentiator
-
harvard business review SeptemberOctober 2000 7
Increase Mobils Return on Capital Employed
CustomerIntimacyProposition
understand customers needs and differentiate accordingly
maximize the use of existing assets;integrate the business to
reduce
total delivered cost
introduce new sources of nongasoline revenue through expanded
convenience store presence
revenue from nongasoline products
prot margin
create nongasoline products and services
new product acceptance rate
new product return on investment
sell more premium brands to increase customer protability
sales volume comparedwith the rest of the industry
ratio of premium products soldto regular products sold
become the industry cost leader in every supply chain
category
Mobils cost per gallon compared with the rest of the
industry
companys actual return on capital net margin compared with rest
of the industry
maximize the use of existing assets
actual cash owcompared with the business plan
dealer protability dealer satisfaction
share of targeted customer segments mystery shopper rating
friendly, helpful workers
recognize customer loyalty
Relationship
clean safe
quality product
speedy purchase
Product/Service Attributes
understand customer segments better and build best-in-class
franchise teams
share of target market dealer quality rating
promote functional excellence, develop leadership skills, and
create an integrated view of the company among employees
ratio of strategic skillsto job coverage
adopt new technology that encourages and aids process
improvements
on-time deployment of systems
align business and personal goals
personal balanced scorecards employee feedback
improve environmental health and safety
reduced number ofenvironmental incidentsand safety incidents
improve hardware performance and inventory management, deliver
products on spec and on time, and become the industry cost
leader
renery yield gap unplanned downtime inventory levels stockout
rate activity-based costs
versus the competition
offer more consumer products
help dealers develop their business skills
Win-Win Dealer Relations**
trusted brand
Image
Revenue Growth Strategy Productivity Growth StrategyFinancial
Perspective
Customer Perspective
InternalProcess Perspective
Learning and Growth Perspective
Delight the consumer
-
employed by more than six percentagepoints within three years.
To achievethat, executives used all four of the drivers of a
nancial strategy that webreak out in the strategy map two
forrevenue growth and two for productivity.(See the nancial portion
of the exhibitMobils Strategy Map.)
The revenue growth strategy called forMobil to expand sales
outside of gaso-line by offering convenience store prod-ucts and
services, ancillary automotiveservices (car washes, oil changes,
andminor repairs), automotive products (oil,antifreeze, and wiper
uid), and com-mon replacement parts (tires and wiperblades). Also,
the company would sellmore premium brands to customers, andit would
increase sales faster than theindustry average. In terms of
produc-tivity, Mobil wanted to slash operatingexpenses per gallon
sold to the lowestlevel in the industry and extract morefrom
existing assets for example, byreducing the downtime at its oil
rener-ies and increasing their yields.
Customer Perspective. The core ofany business strategy is the
customervalue proposition, which describes theunique mix of product
and service attri-butes, customer relations, and corporateimage
that a company offers. It deneshow the organization will
differentiateitself from competitors to attract, retain,and deepen
relationships with targetedcustomers. The value proposition is
cru-cial because it helps an organization con-nect its internal
processes to improvedoutcomes with its customers.
Typically, the value proposition is cho-sen from among three
differentiators:operational excellence (for example,McDonalds and
Dell Computer), cus-tomer intimacy (for example, HomeDepot and IBM
in the 1960s and 1970s),and product leadership (for example,Intel
and Sony).2 Companies strive toexcel in one of the three areas
whilemaintaining threshold standards in theother two. By
identifying its customervalue proposition, a company will thenknow
which classes and types of cus-tomers to target. In our research,
wehave found that although a clear deni-tion of the value
proposition is the singlemost important step in developing
astrategy, approximately three-quarters ofexecutive teams do not
have consensusabout this basic information.
The inset of the exhibit The Balanced
8 harvard business review SeptemberOctober 2000
T O O L K I T Having Trouble with Your Strategy? Then Map It
customers are the independent ownersof gasoline stations. These
franchisedretailers purchase gasoline and otherproducts from Mobil
and sell them toconsumers in Mobil-branded stations.Because dealers
were such a critical partof the new strategy, Mobil included
twoadditional metrics to its customer per-spective: dealer
protability and dealersatisfaction.
Thus, Mobils complete customerstrategy motivated independent
dealersto deliver a great buying experience that would attract an
increasing share oftargeted consumers. These consumerswould buy
products and services at pre-mium prices, increasing prots for
bothMobil and its dealers, who would thencontinue to be motivated
to offer thegreat buying experience. And this virtu-ous cycle would
generate the revenuegrowth for Mobils nancial strategy.Note that
the objectives in the customerperspective portion of Mobils
strategymap were not generic, undifferentiateditems like customer
satisfaction. Instead,they were specic and focused on thecompanys
strategy.
Internal Process Perspective. Oncean organization has a clear
picture of itscustomer and nancial perspectives, itcan then
determine the means by whichit will achieve the differentiated
valueproposition for customers and the pro-ductivity improvements
to reach itsnancial objectives. The internal processperspective
captures these critical orga-nizational activities, which fall into
fourhigh-level processes: build the franchiseby innovating with new
products andservices and by penetrating new marketsand customer
segments; increase cus-tomer value by deepening relationshipswith
existing customers; achieve opera-tional excellence by improving
supplychain management, the cost, quality, andcycle time of
internal processes, assetutilization, and capacity management;and
become a good corporate citizen byestablishing effective
relationships withexternal stakeholders.
An important caveat to rememberhere is that while many
companiesespouse a strategy that calls for innova-tion or for
developing value-adding cus-tomer relationships, they
mistakenlychoose to measure only the cost andquality of their
operations and not theirinnovations or their customer manage-ment
processes. These companies have
Scorecard Strategy Map highlights thedifferent objectives for
the three genericstrategy concepts of operational excel-lence,
customer intimacy, and productleadership. Specically, companies
thatpursue a strategy of operational excel-lence need to excel at
competitive pric-ing, product quality and selection, speedyorder
fulllment, and on-time delivery.For customer intimacy, an
organizationmust stress the quality of its relation-ships with
customers, including excep-tional service and the completeness
ofthe solutions it offers. And companiesthat pursue a product
leadership strat-egy must concentrate on the functional-ity,
features, and overall performance ofits products or services.
Mobil, in the past, had attempted tosell a full range of
products and servicesto all consumers, while still matching thelow
prices of nearby discount stations.But this unfocused strategy had
failed,leading to poor nancial performance inthe early 90s. Through
market research,Mobil discovered that price-sensitiveconsumers
represented only about 20%of gasoline purchasers, while
consumersegments representing nearly 60% of themarket might be
willing to pay signi-cant price premiums for gasoline if theycould
buy at stations that were fast,friendly, and outtted with excellent
con-venience stores. With this information,Mobil made the crucial
decision toadopt a differentiated value proposi-tion. The company
would target the premium customer segments by offer-ing them
immediate access to gasolinepumps, each equipped with a
self-pay-ment mechanism; safe, well-lit stations;clean restrooms;
convenience storesstocked with fresh, high-quality mer-chandise;
and friendly employees.
Mobil decided that the consumersbuying experience was so central
to itsstrategy that it invested in a new systemfor measuring its
progress in this area.Each month, the company sent mysteryshoppers
to purchase fuel and a snackat every Mobil station nationwide
andthen asked the shoppers to evaluatetheir buying experience based
on 23 spe-cic criteria. Thus, Mobil could use afairly simple set of
metrics (share of targeted customer segments and a sum-mary score
from the mystery shoppers)for its consumer objectives.
But Mobil does not sell directly toconsumers. The companys
immediate
-
a complete disconnect between theirstrategy and how they measure
it. Notsurprisingly, these organizations typicallyhave great
difficulty implementing theirgrowth strategies.
The nancial benets from improvedbusiness processes typically
reveal them-selves in stages. Cost savings fromincreased
operational efficiencies andprocess improvements create
short-termbenets. Revenue growth from enhancedcustomer
relationships accrues in theintermediate term. And increased
inno-vation can produce long-term revenueand margin
improvements.
Thus, a complete strategy should in-volve generating returns
from all threeof these internal processes. (See theinternal process
portion of the exhibitMobils Strategy Map.)
Mobils internal process objectivesincluded building the
franchise by devel-oping new products and services, suchas sales
from convenience stores; and
enhancing customer value by trainingdealers to become better
managers andby helping them generate prots fromnongasoline products
and services. Theplan was that if dealers could captureincreased
revenues and prots fromproducts other than gasoline, they couldthen
rely less on gasoline sales, allowingMobil to capture a larger prot
share ofits sales of gasoline to dealers.
For its customer intimacy strategy,Mobil had to excel at
understanding itsconsumer segments. And because Mobildoesnt sell
directly to consumers, thecompany also had to concentrate
onbuilding best-in-class franchise teams.
Interestingly, Mobil placed a heavyemphasis on objectives to
improve itsbasic rening and distribution opera-tions, such as
lowering operating costs,reducing the downtime of equipment,and
improving product quality and thenumber of on-time deliveries.
When a company such as Mobil
adopts a customer intimacy strategy, itusually focuses on its
customer manage-ment processes. But Mobils differentia-tion
occurred at the dealer locations, notat its own facilities, which
basically pro-duced commodity products (gasoline,heating oil, and
jet fuel). So Mobil couldnot charge its dealers higher prices
tomake up for any higher costs incurred inits basic manufacturing
and distributionoperations. Consequently, the companyhad to focus
heavily on achieving opera-tional excellence throughout its
valuechain of operations.
Finally, as part of both its operational-excellence and
corporate-citizen themes,Mobil wanted to eliminate environ-mental
and safety accidents. Executivesbelieved that if there were
injuries andother problems at work, then employeeswere probably not
paying sufficientattention to their jobs.
Learning and Growth Perspective.The foundation of any strategy
map is the
revenue growth
delight theconsumer
products on spec,on time
revenue growth
volume growth net margin
delight theconsumer
win-win dealerrelations
nongasoline products and services
best-in-classfranchiseteam
functionalexcellence
personal growth
processimprovement
products on spec,on time
volume growth net margin
win-win dealerrelations
nongasoline products and services
best-in-classfranchiseteam
functionalexcellence
personal growth
processimprovement
FinancialPerspective
CustomerPerspective
InternalProcessPerspective
Learningand GrowthPerspective
Strategy maps can help a company
detect major gaps in the strategies
being implemented at lower levels in
the organization. At Mobil, senior man-
agers noticed that one business unit had
no objectives or metrics for dealers, as
shown below left. Had this unit discov-
ered how to bypass Mobil dealers and sell
gasoline directly to consumers? Another
business unit had no measure for quality,
as shown below right. Had this unit some-
how perfected its operations?
What s Missing?
Having Trouble with Your Strategy? Then Map It T O O L K I T
harvard business review SeptemberOctober 2000 9
-
learning and growth perspective, whichdenes the core
competencies and skills,the technologies, and the corporate
cul-ture needed to support an organizationsstrategy. These
objectives enable a com-pany to align its human resources
andinformation technology with its strategy.Specically, the
organization must deter-mine how it will satisfy the
requirementsfrom critical internal processes, the differ-entiated
value proposition, and customerrelationships. Although executive
teamsreadily acknowledge the importance ofthe learning and growth
perspective,they generally have trouble dening thecorresponding
objectives.
Mobil identied that its employeesneeded to gain a broader
understandingof the marketing and rening businessfrom end to end.
Additionally, the com-pany knew it had to nurture the leader-ship
skills that were necessary for itsmanagers to articulate the
companysvision and develop employees. Mobilidentied key
technologies that it had todevelop, including automated
equipmentfor monitoring the rening processesand extensive databases
and tools toanalyze consumers buying experiences.
Upon completing its learning andgrowth perspective, Mobil now
had acomplete strategy map linked across thefour major
perspectives, from whichMobils different business units and
ser-vice departments could develop theirown detailed maps for their
respectiveoperations. This process helped the com-pany detect and
ll major gaps in thestrategies being implemented at lowerlevels of
the organization. For example,senior management noticed that
onebusiness unit had no objectives or met-rics for dealers (see the
exhibit WhatsMissing?). Had this unit discovered howto bypass
dealers and sell gasolinedirectly to consumers? Were dealer
rela-tionships no longer strategic for thisunit? Another business
unit had no mea-sure for quality. Had the unit achievedperfection?
Strategy maps can helpuncover and remedy such omissions.
Strategy maps also help identify whenscorecards are not truly
strategic. Manyorganizations have built stakeholderscorecards, not
strategy scorecards, bydeveloping a seemingly balanced mea-surement
system around three dominantgroups of constituents: employees,
cus-tomers, and shareholders. A strategy,however, must describe how
a company
10 harvard business review SeptemberOctober 2000
T O O L K I T Having Trouble with Your Strategy? Then Map It
a strong differentiator for Mobils valueproposition of fast,
friendly service. From1997 on, executives modied Mobils bal-anced
scorecard to include new objec-tives for the number of consumers
anddealers that adopted Speedpass.
With all its employees now aligned tothe new strategy, Mobil
North AmericanMarketing and Rening executed aremarkable turnaround
in less than twoyears to become the industrys protleader from 1995
up through its mergerwith Exxon in late 1999. The divisionincreased
its return on capital employedfrom 6% to 16%; sales growth
exceededthe industry average by more than 2%annually; cash expenses
decreased by20%; and in 1998, the divisions operat-ing cash ow was
more than $1 billionper year higher than at the launch of thenew
strategy.
These impressive nancial resultswere driven by improvements
through-out Mobils strategy map: mystery-shop-per scores and dealer
quality increasedeach year; the number of consumersusing Speedpass
grew by one millionannually; environmental and safety acci-dents
plunged between 60% and 80%;lost oil-renery yields due to
systemsdowntime dropped by 70%; and em-ployee awareness and
commitment tothe strategy more than quadrupled.
Not an Art FormWe do not claim to have made a scienceof
strategy; the formulation of greatstrategies is an art, and it will
alwaysremain so. But the description of strat-egy should not be an
art. If people candescribe strategy in a more disciplinedway, they
will increase the likelihood ofits successful implementation.
Strategymaps will help organizations view theirstrategies in a
cohesive, integrated, andsystematic way. They often expose gapsin
strategies, enabling executives to takeearly corrective actions.
Executives canalso use the maps as the foundation fora management
system that can help anorganization implement its growth
ini-tiatives effectively and rapidly.
Strategy implies the movement of anorganization from its present
positionto a desirable but uncertain future posi-tion. Because the
organization has neverbeen to this future place, the pathway toit
consists of a series of linked hypothe-ses. A strategy map species
these cause-and-effect relationships, which makes
will achieve its desired outcome of satis-fying employees,
customers, and share-holders. The how must include thevalue
proposition in the customer per-spective; the innovation, customer
man-agement, and operating processes in theinternal process
perspective; and theemployee skills and information tech-nology
capabilities in the learning andgrowth perspective. These elements
areas fundamental to the strategy as theprojected outcome of the
strategy.
Another limitation occurs when com-panies build key performance
indicator(KPI) scorecards. For example, one nan-cial services
organization identied thefour Ps in its balanced scorecard:
prots,portfolio (the volume of loans), process(the percentage of
processes that are ISOcertied), and people (the diversity ofnew
employees). Although this approachwas more balanced than using
justnancial measures, a comparison of thefour Ps with a strategy
map revealed several missing components: no cus-tomer measures,
only a single internal-process metric which was focused onan
initiative, not an outcome and nodefined role for information
technol-ogy, a strange omission for a nancialservices organization.
In actuality, KPIscorecards are an ad hoc collection ofmeasures, a
checklist, or perhaps ele-ments in a compensation plan, but
theydont describe a coherent strategy. Un-less the link to strategy
has been clearlythought through, a KPI scorecard can bea dangerous
illusion.
Perhaps the greatest benet of strat-egy maps is their ability to
communicatestrategy to an entire organization. Thepower of doing so
is amply demon-strated by the story of how Mobil devel-oped
Speedpass, a small device carriedon a keychain that, when waved in
frontof a photocell on a gasoline pump, iden-ties the consumer and
charges the ap-propriate credit or debit card for thepurchase. The
idea for Speedpass camefrom a planning manager in the market-ing
technology group who learned fromMobils balanced scorecard about
theimportance of speed in the purchasingtransaction. He came up
with the con-cept of a device that could automaticallyhandle the
entire purchasing transac-tion. He worked with a
gasoline-pumpmanufacturer and a semiconductor com-pany to turn that
idea into reality. Afterits introduction, Speedpass soon became
-
them explicit and testable. The key, then,to implementing
strategy is to have every-one in the organization clearly
under-stand the underlying hypotheses, to alignall organizational
units and resourceswith those hypotheses, to test the hypoth-eses
continually, and to use those resultsto adapt as required.
1. See Robert S. Kaplan and David P. Nortons, TheBalanced
Scorecard: Translating Strategy into Action(Harvard Business School
Press, 1996).
2. These three generic value propositions wereinitially
articulated in Michael Treacy and FredWiersemas The Discipline of
Market Leaders(Addison-Wesley, 1995).
To place an order, call 1-800-988-0886.
Having Trouble with Your Strategy? Then Map It T O O L K I T
harvard business review SeptemberOctober 2000 11
Product no. 5165
-
ARTICLES
The Balanced ScorecardMeasures thatDrive Performance by Robert
S. Kaplan andDavid P. Norton (Harvard Business
Review,JanuaryFebruary 1992, Product no. 4096)This article
introduced the balanced score-cardand lays the foundation for
under-standing strategy maps. It clarifies why nosingle perspective
fully captures a companyshealth. Instead, balance four
perspectivesfinancial, customer, internal businessprocesses, and
innovation and learningandtrack performance in each.
Putting the Balanced Scorecard to Work byRobert S. Kaplan and
David P. Norton (Har-vard Business Review, SeptemberOctober1993,
Product no. 4118)Before building your strategy map, learn howto
create a balanced scorecard that reflectsyour companys mission and
strategy. Definecorporate objectives and metrics within eachof the
four scorecard perspectives. These met-rics will clarify how
different youll look tocustomers and shareholders when you
reachyour goals. They will also indicate how yourinternal
processes, as well as your ability toinnovate and grow, should
change.
Using the Balanced Scorecard as a StrategicManagement System by
Robert S. Kaplanand David P. Norton (Harvard BusinessReview,
JanuaryFebruary 1996, Product no.4126)A strategy map helps
employees know howtheir everyday actions support the companysgoals.
This article outlines four steps forensuring that those short-term
actions leadto the right outcomes: 1) Communicate strat-egy
throughout the organization. 2) Alignunit and individual goals with
the strategy. 3)Link strategic objectives to long-term targetsand
budgets. 4) Conduct performance reviewsto hone the strategy.
BOOKS
The Balanced Scorecard: Translating Strategyinto Action by
Robert S. Kaplan and David P.Norton (Harvard Business School Press,
1996,Product no. 6513)Your balanced scorecard and strategy maphelp
you focus on implementing strategy. Thisbook provides greater
insight into how tochoose objectives and metrics to guide
yourstrategy execution. Extended examples showhow actual companies
have used these tools.
The Strategy-Focused Organization: HowBalanced Scorecard
Companies Thrive in theNew Business Environment by Robert S.Kaplan
and David P. Norton (Harvard BusinessSchool Press, 2000, Product
no. 2506)This latest book by Kaplan and Nortonexpands on the theme
of strategy focus andexecution. They emphasize the importanceof
making strategy absolutely clear toand acontinuous process
foreveryone. Drawingon 10 years of research into more than
200companies, the authors use in-depth caseexamples to show how
balanced scorecardadopters have taken this groundbreaking toolto
the next levelputting strategy at the cen-ter of management
processes and systems.This research resulted in a series of
industry-specific strategy maps that any company canuse to build
its own.
NEWSLET TER
Balanced Scorecard ReportThis newsletter is published by the
BalancedScorecard Collaborative and HarvardBusiness School
Publishing. It brings you themost current thinking of scorecard
origina-tors Robert S. Kaplan and David P. Norton,along with
exclusive field reports, case stud-ies, and analysis.
Having Trouble with Your Strategy? Then Map ItE X P L O R I N G
F U R T H E R . . .
more . . .
-
VIDEO
Measuring Corporate Performance: The Bal-anced ScorecardManaging
Future Perfor-mance by Robert S. Kaplan and David P.Norton (Harvard
Business School Publishing,1993, Product no. 5444A (VHS), 5444B
(PAL))Released soon after the publication of thefirst balanced
scorecard article, TheBalanced Scorecard: Measures that
DrivePerformance, this video uses in-depth com-pany examples
(including an underwater construction company and a financial
ser-vices firm) to demonstrate the basic conceptsand value of the
balanced scorecard and its four perspectives. It also shows
theprocesses these companies used to createtheir scorecards.
CD-ROM
Balancing the Corporate Scorecard 2.0 byRobert S. Kaplan and
David P. Norton(Harvard Business School Publishing, 1999,Product
no. 2271)This CD-ROM interactive simulation allowsyou to practice
building and using a balancedscorecard by running the fictitious
SentraSoftware company. You first receive a tutorialon the balanced
scorecard. Then you runthe company from a control panel,
makingpricing, headcount, and investment decisions,while building
your own scorecard. Coachingand debriefing segments augment your
learn-ing experience.
Having Trouble with Your Strategy? Then Map ItE X P L O R I N G
F U R T H E R . . .
U.S. and Canada: 800-988-0886
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