Having Trouble with Your Strategy? Then Map It - HubSpot
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
A R T I C L E
www.hbr.org
TOOL KIT
Having Trouble with
Your Strategy? Then
Map It
by Robert S. Kaplan and David P. Norton
•
Included with this full-text Harvard Business Review article:
1 Article Summary
The Idea in Brief—the core idea
The Idea in Practice—putting the idea to work
2 Having Trouble with Your Strategy? Then Map It
12 Further Reading
A list of related materials, with annotations to guide further
exploration of the article’s ideas and applications
Product 5165TOOL KIT
Having Trouble with Your Strategy? Then Map It
The Idea in Brief The Idea in Practice
How does Mobil make sure that every W HY STRATEGY MAPS? • Internal Processes. Identify operational,
gas station owner understands the com- Strategy maps are essential in the information customer-relationship, and innovation
pany’s strategy—and implements it each age, when intangible assets—customer rela- processes to support your customer and
time a customer drives up to his pumps? tionships, employee skills, the ability to inno- financial goals.
How did Mobil become the industry’s vate—are competitive advantages. But these Example:
profit leader and boost its cash flow by $1 assets have value only within the context of a Mobil reduced environmental and safety in-
billion+ per year? By using a strategy strategy. cidents (operational), built best-in-class
map—a powerful new tool built on the
For example, a growth-oriented strategy franchise teams (customer relationships),
balanced scorecard.
might require in-depth customer knowledge, and developed non-gasoline services (in-
The balanced scorecard measures your
sales training, and incentive-based compen- novation).
company’s performance from four perspec-
tives—financial, customer, internal pro- sation. But none of these, alone, would be • Learning and Growth. Define the skills,
cesses, and learning and growth. A strategy enough to implement that strategy. Strategy technologies, and corporate culture
map is a visual framework for the corporate maps quantify the value of tangible and intan- needed to support your strategy.
objectives within those four areas. The au- gible assets—linking them all to your over-
arching strategy. Example:
thors created strategy map templates for
Mobil’s objectives were: increase employee
various industries, including retail, telecom-
BUILDING YOUR STRATEGY MAP knowledge of refining business; nurture
munications, and e-commerce.
leadership skills necessary to articulate its
Step 1.
Strategy maps put into focus the often- vision.
Clarify your mission and strategic vision. Mobil
blurry line of sight between your corporate
sought “to be the best integrated refiner- Mobil’s strategy map linked the four perspec-
strategy and what your employees do
marketer in the U.S. by efficiently delivering tives, providing all its business units clear di-
every day—significantly enhancing collab-
unprecedented value to customers.” rection for creating their own more detailed
oration and coordination.
maps.
Step 2.
Specify objectives in the four scorecard areas
COPYRIGHT © 2000 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.
to realize your company’s vision.
• Financial. Balance revenue growth and
productivity improvement.
Example:
Mobil grew revenue by selling more non-
gasoline products and services and more
premium gas. It improved productivity by
slashing operating expenses (e.g., reducing
refinery downtime).
• Customer. Differentiate your firm from
competitors. Choose one of these value
propositions: operational excellence, cus-
tomer intimacy, or product leadership.
Example:
Mobil emphasized customer intimacy, tar-
geting premium customers by offering fast,
friendly, and safe service. Satisfied custom-
ers gladly paid more.
page 1The 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.
TOOL KIT
Having Trouble with
Your Strategy? Then
Map It
by Robert S. Kaplan and David P. Norton
Imagine that you are a general taking your give employees a clear line of sight into how
troops into foreign territory. Obviously, you their jobs are linked to the overall objectives
would need detailed maps showing the impor- of the organization, enabling them to work in
COPYRIGHT © 2000 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.
tant towns and villages, the surrounding land- a coordinated, collaborative fashion toward
scape, key structures like bridges and tunnels, the company’s desired goals. The maps pro-
and the roads and highways that traverse the vide a visual representation of a company’s
region. Without such information, you critical objectives and the crucial relation-
couldn’t communicate your campaign strategy ships among them that drive organizational
to your field officers and the rest of your performance.
troops. Strategy maps can depict objectives for reve-
Unfortunately, many top executives are try- nue growth; targeted customer markets in
ing to do just that. When attempting to imple- which profitable growth will occur; value prop-
ment their business strategies, they give em- ositions that will lead to customers doing more
ployees only limited descriptions of what they business and at higher margins; the key role of
should do and why those tasks are important. innovation and excellence in products, ser-
Without clearer and more detailed informa- vices, and processes; and the investments re-
tion, it’s no wonder that many companies have quired in people and systems to generate and
failed in executing their strategies. After all, sustain the projected growth.
how can people carry out a plan that they Strategy maps show the cause-and-effect
don’t fully understand? Organizations need links by which specific improvements create
tools for communicating both their strategy desired outcomes—for example, how faster
and the processes and systems that will help process-cycle times and enhanced employee
them implement that strategy. capabilities will increase retention of custom-
Strategy maps provide such a tool. They ers and thus increase a company’s revenues.
harvard business review • september–october 2000 page 2Having Trouble with Your Strategy? Then Map It •• •T OOL K IT
From a larger perspective, strategy maps build the right strategic capabilities and effi-
show how an organization will convert its initi- ciencies (the internal processes) that deliver
atives and resources—including intangible as- specific value to the market (the customers),
sets such as corporate culture and employee which will eventually lead to higher share-
knowledge—into tangible outcomes. holder value (the financials).
Since we introduced the concept in 1992, we
Why Strategy Maps? have worked with hundreds of executive teams
In the industrial age, companies created value from various organizations, in both the private
by transforming raw materials into finished and public sectors. From this extensive re-
products. The economy was primarily based search, we have noticed certain patterns and
on tangible assets—inventory, land, factories, have brought them into a common visual
and equipment—and an organization could framework—a strategy map—that embeds the
describe and document its business strategy different items on an organization’s balanced
by using financial tools such as general led- scorecard into a cause-and-effect chain, con-
gers, income statements, and balance sheets. necting desired outcomes with the drivers of
In the information age, businesses must in- those results.
creasingly create and deploy intangible as- We have developed strategy maps for com-
sets—for instance, customer relationships; em- panies in various industries, including insur-
ployee skills and knowledge; information ance, banking, retail, health care, chemicals,
technologies; and a corporate culture that en- energy, telecommunications, and e-commerce.
courages innovation, problem solving, and gen- The maps have also been useful for nonprofit
eral organizational improvements. organizations and government units. From this
Even though intangible assets have be- experience, we have developed a standard tem-
come major sources of competitive advan- plate that executives can use to develop their
tage, no tools existed to describe them and own strategy maps. (See the exhibit “The Bal-
the value they can create. The main difficulty anced Scorecard Strategy Map.”) The template
is that the value of intangible assets depends contains four distinct regions—financial, cus-
on their organizational context and a com- tomer, internal process, and learning and
pany’s strategy. For example, a growth-ori- growth—that correspond to the four perspec-
ented sales strategy might require knowledge tives of the balanced scorecard.
about customers, additional training for sales- The template provides a common frame-
people, new databases and information sys- work and language that can be used to de-
tems, a different organizational structure, and scribe any strategy, much like financial state-
an incentive-based compensation program. ments provide a generally accepted structure
Investing in just one of those items—or in a for describing financial performance. A strat-
Robert S. Kaplan (rkaplan@hbs.edu) is few of them but not all—would cause the egy map enables an organization to describe
the Marvin Bower Professor of Leader- strategy to fail. The value of an intangible and illustrate, in clear and general language, its
ship Development at Harvard Business asset such as a customer database cannot be objectives, initiatives, and targets; the mea-
School in Boston. David P. Norton considered separately from the organizational sures used to assess its performance (such as
(dnorton@bscol.com) is founder and processes that will transform it and other as- market share and customer surveys); and the
president of the Balanced Scorecard sets—both intangible and tangible—into cus- linkages that are the foundation for strategic
Collaborative (www.bscol.com) based tomer and financial outcomes. The value does direction.
in Lincoln, Massachusetts. This article is not reside in any individual intangible asset. To understand how a strategy map is built,
adapted from their book The Strategy- It arises from the entire set of assets and the we will study Mobil North American Market-
Focused Organization: How Balanced strategy that links them together. ing and Refining, which executed a new strat-
Scorecard Companies Thrive in the To understand how organizations create egy to reconstruct itself from a centrally con-
New Business Environment (Harvard value in the information age, we developed the trolled manufacturer of commodity products
Business School Press, September balanced scorecard, which measures a com- to a decentralized, customer-driven organiza-
2000). The strategy maps concept was pany’s performance from four major perspec- tion. As a result, Mobil increased its operating
introduced in issues of The Balanced tives: financial, customer, internal process, and cash flow by more than $1 billion per year and
Scorecard Report, a newsletter pub- learning and growth.1 Briefly summarized, bal- became the industry’s profit leader.
lished jointly by the Balanced Scorecard anced scorecards tell you the knowledge, skills,
Collaborative and Harvard Business and systems that your employees will need From the Top Down
School Publishing. (their learning and growth) to innovate and The best way to build strategy maps is from
harvard business review • september–october 2000 page 3Having Trouble with Your Strategy? Then Map It •• •T OOL K IT
the top down, starting with the destination ductivity. (See the financial portion of the ex-
and then charting the routes that will lead hibit “Mobil’s Strategy Map.”)
there. Corporate executives should first The revenue growth strategy called for
review their mission statement and their core Mobil to expand sales outside of gasoline by of-
values—why their company exists and what fering convenience store products and services,
it believes in. With that information, manag- ancillary automotive services (car washes, oil
ers can develop a strategic vision, or what the changes, and minor repairs), automotive prod-
company wants to become. This vision ucts (oil, antifreeze, and wiper fluid), and com-
should create a clear picture of the com- mon replacement parts (tires and wiper
pany’s overall goal—for example, to become blades). Also, the company would sell more
the profit leader in an industry. A strategy premium brands to customers, and it would in-
must then define the logic of how to arrive at crease sales faster than the industry average. In
that destination. terms of productivity, Mobil wanted to slash
Financial Perspective. Building a strategy operating expenses per gallon sold to the low-
map typically starts with a financial strategy est level in the industry and extract more from
for increasing shareholder value. (Nonprofit existing assets—for example, by reducing the
and government units often place their cus- downtime at its oil refineries and increasing
tomers or constituents—not the financials—at their yields.
the top of their strategy maps.) Companies Customer Perspective. The core of any
have two basic levers for their financial strat- business strategy is the customer value propo-
egy: revenue growth and productivity. The sition, which describes the unique mix of
former generally has two components: build product and service attributes, customer rela-
the franchise with revenue from new markets, tions, and corporate image that a company of-
new products, and new customers; and in- fers. It defines how the organization will dif-
crease value to existing customers by deepen- ferentiate itself from competitors to attract,
ing relationships with them through expanded retain, and deepen relationships with targeted
sales—for example, cross-selling products or customers. The value proposition is crucial be-
offering bundled products instead of single cause it helps an organization connect its in-
products. The productivity strategy also usu- ternal processes to improved outcomes with
ally has two parts: improve the company’s cost its customers.
structure by reducing direct and indirect ex- Typically, the value proposition is chosen
penses, and use assets more efficiently by re- from among three differentiators: operational
ducing the working and fixed capital needed to excellence (for example, McDonald’s and Dell
support a given level of business. Computer), customer intimacy (for example,
In general, the productivity strategy yields Home Depot and IBM in the 1960s and 1970s),
results sooner than the growth strategy. But and product leadership (for example, Intel and
one of the principal contributions of a strategy Sony).2 Companies strive to excel in one of the
map is to highlight the opportunities for en- three areas while maintaining threshold stan-
hancing financial performance through reve- dards in the other two. By identifying its cus-
nue growth, not just by cost reduction and im- tomer value proposition, a company will then
proved asset utilization. Also, balancing the know which classes and types of customers to
two strategies helps to ensure that cost and target. In our research, we have found that al-
asset reductions do not compromise a com- though a clear definition of the value proposi-
pany’s growth opportunities with customers. tion is the single most important step in devel-
Mobil’s stated strategic vision was “to be the oping a strategy, approximately three-quarters
best integrated refiner-marketer in the United of executive teams do not have consensus
States by efficiently delivering unprecedented about this basic information.
value to customers.” The company’s high-level The inset of the exhibit “The Balanced
financial goal was to increase its return on cap- Scorecard Strategy Map” highlights the differ-
ital employed by more than six percentage ent objectives for the three generic strategy
points within three years. To achieve that, ex- concepts of operational excellence, customer
ecutives used all four of the drivers of a finan- intimacy, and product leadership. Specifically,
cial strategy that we break out in the strategy companies that pursue a strategy of opera-
map—two for revenue growth and two for pro- tional excellence need to excel at competitive
harvard business review • september–october 2000 page 4Having Trouble with Your Strategy? Then Map It •• •T OOL K IT
pricing, product quality and selection, speedy oline purchasers, while consumer segments
order fulfillment, and on-time delivery. For representing nearly 60% of the market might
customer intimacy, an organization must stress be willing to pay significant price premiums for
the quality of its relationships with customers, gasoline if they could buy at stations that were
including exceptional service and the com- fast, friendly, and outfitted with excellent con-
pleteness of the solutions it offers. And compa- venience stores. With this information, Mobil
nies that pursue a product leadership strategy made the crucial decision to adopt a “differen-
must concentrate on the functionality, fea- tiated value proposition.” The company would
tures, and overall performance of its products target the premium customer segments by of-
or services. fering them immediate access to gasoline
Mobil, in the past, had attempted to sell a pumps, each equipped with a self-payment
full range of products and services to all con- mechanism; safe, well-lit stations; clean re-
sumers, while still matching the low prices of strooms; convenience stores stocked with
nearby discount stations. But this unfocused fresh, high-quality merchandise; and friendly
strategy had failed, leading to poor financial employees.
performance in the early ’90s. Through market Mobil decided that the consumer’s buying
research, Mobil discovered that price-sensitive experience was so central to its strategy that it
consumers represented only about 20% of gas- invested in a new system for measuring its
harvard business review • september–october 2000 page 5Having Trouble with Your Strategy? Then Map It •• •T OOL K IT
progress in this area. Each month, the com- profitability and dealer satisfaction.
pany sent “mystery shoppers” to purchase fuel Thus, Mobil’s complete customer strategy
and a snack at every Mobil station nationwide motivated independent dealers to deliver a
and then asked the shoppers to evaluate their great buying experience that would attract an
buying experience based on 23 specific criteria. increasing share of targeted consumers. These
Thus, Mobil could use a fairly simple set of consumers would buy products and services at
metrics (share of targeted customer segments premium prices, increasing profits for both
and a summary score from the mystery shop- Mobil and its dealers, who would then con-
pers) for its consumer objectives. tinue to be motivated to offer the great buying
But Mobil does not sell directly to consum- experience. And this virtuous cycle would gen-
ers. The company’s immediate customers are erate the revenue growth for Mobil’s financial
the independent owners of gasoline stations. strategy. Note that the objectives in the cus-
These franchised retailers purchase gasoline tomer perspective portion of Mobil’s strategy
and other products from Mobil and sell them map were not generic, undifferentiated items
to consumers in Mobil-branded stations. Be- like “customer satisfaction.” Instead, they were
cause dealers were such a critical part of the specific and focused on the company’s strategy.
new strategy, Mobil included two additional Internal Process Perspective. Once an or-
metrics to its customer perspective: dealer ganization has a clear picture of its customer
The Balanced
Scorecard
Strategy Map
Strategy maps show how an organi-
zation plans to convert its various
assets into desired outcomes. Com-
panies 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 em-
ployees need certain knowledge,
skills, and systems (learning and
growth perspective) to innovate and
build the right strategic capabilities
and efficiencies (internal process
perspective) so that they can deliver
specific value to the market (cus-
tomer perspective), which will lead
to higher shareholder value (finan-
cial perspective). For the customer
perspective, companies typically se-
lect one of three strategies: opera-
tional excellence, customer inti-
macy, or product leadership.
harvard business review • september–october 2000 page 6Having Trouble with Your Strategy? Then Map It •• •T OOL K IT
and financial perspectives, it can then deter-
mine the means by which it will achieve the Mobil’s
differentiated value proposition for customers
and the productivity improvements to reach
Strategy Map
its financial objectives. The internal process
Shown here is a map for the strategy that
perspective captures these critical organiza-
Mobil North American Marketing and Re-
tional activities, which fall into four high-level
fining used to transform itself from a cen-
processes: build the franchise by innovating
trally controlled manufacturer of com-
with new products and services and by pene-
modity products to a decentralized
trating new markets and customer segments;
customer-driven organization. A major
increase customer value by deepening rela-
part of the strategy was to target consum-
tionships with existing customers; achieve op-
ers who were willing to pay price premi-
erational excellence by improving supply
ums for gasoline if they could buy at fast,
chain management, the cost, quality, and cycle
friendly stations that were outfitted with
time of internal processes, asset utilization,
excellent convenience stores. Their pur-
and capacity management; and become a
chases enabled Mobil to increase its profit
good corporate citizen by establishing effec-
margins and its revenue from nongaso-
tive relationships with external stakeholders.
line products. Using the strategy map
An important caveat to remember here is
shown here, Mobil increased its operating
that while many companies espouse a strategy
cash flow by more than $1 billion per year.
that calls for innovation or for developing
value-adding customer relationships, they mis-
takenly choose to measure only the cost and
quality of their operations—and not their in-
novations or their customer management pro-
cesses. These companies have a complete dis-
connect between their strategy and how they
measure it. Not surprisingly, these organiza-
tions typically have great difficulty implement-
ing their growth strategies.
The financial benefits from improved busi-
ness processes typically reveal themselves in
stages. Cost savings from increased opera-
tional efficiencies and process improvements
create short-term benefits. Revenue growth
from enhanced customer relationships accrues
in the intermediate term. And increased inno-
vation can produce long-term revenue and
margin improvements.
Thus, a complete strategy should involve
generating returns from all three of these in-
ternal processes. (See the internal process por-
**To account for Mobil’s independent-
tion of the exhibit “Mobil’s Strategy Map.”)
dealer customers—not just consum-
Mobil’s internal process objectives in-
ers—the company adapted the strategy
cluded building the franchise by developing
map template to factor in dealer rela-
new products and services, such as sales from
tionships.
convenience stores; and enhancing customer
value by training dealers to become better
managers and by helping them generate prof-
its from nongasoline products and services.
The plan was that if dealers could capture in-
creased revenues and profits from products
other than gasoline, they could then rely less
on gasoline sales, allowing Mobil to capture a
harvard business review • september–october 2000 page 7Having Trouble with Your Strategy? Then Map It •• •T OOL K IT harvard business review • september–october 2000 page 8
Having Trouble with Your Strategy? Then Map It •• •T OOL K IT
larger profit share of its sales of gasoline to turing and distribution operations. Conse-
dealers. quently, the company had to focus heavily on
For its customer intimacy strategy, Mobil achieving operational excellence throughout
had to excel at understanding its consumer seg- its value chain of operations.
ments. And because Mobil doesn’t sell directly Finally, as part of both its operational-excel-
to consumers, the company also had to concen- lence and corporate-citizen themes, Mobil
trate on building best-in-class franchise teams. wanted to eliminate environmental and safety
Interestingly, Mobil placed a heavy empha- accidents. Executives believed that if there
sis on objectives to improve its basic refining were injuries and other problems at work,
and distribution operations, such as lowering then employees were probably not paying suf-
operating costs, reducing the downtime of ficient attention to their jobs.
equipment, and improving product quality Learning and Growth Perspective. The
and the number of on-time deliveries. foundation of any strategy map is the learning
When a company such as Mobil adopts a and growth perspective, which defines the
customer intimacy strategy, it usually focuses core competencies and skills, the technologies,
on its customer management processes. But and the corporate culture needed to support
Mobil’s differentiation occurred at the dealer an organization’s strategy. These objectives
locations, not at its own facilities, which basi- enable a company to align its human re-
cally produced commodity products (gasoline, sources and information technology with its
heating oil, and jet fuel). So Mobil could not strategy. Specifically, the organization must
charge its dealers higher prices to make up for determine how it will satisfy the requirements
any higher costs incurred in its basic manufac- from critical internal processes, the differenti-
harvard business review • september–october 2000 page 9Having Trouble with Your Strategy? Then Map It •• •T OOL K IT
ated value proposition, and customer relation- strategy.
ships. Although executive teams readily ac- Another limitation occurs when companies
knowledge the importance of the learning and build key performance indicator (KPI) score-
growth perspective, they generally have trou- cards. For example, one financial services or-
ble defining the corresponding objectives. ganization identified the four Ps in its bal-
Mobil identified that its employees needed anced scorecard: profits, portfolio (the
to gain a broader understanding of the mar- volume of loans), process (the percentage of
keting and refining business from end to end. processes that are ISO certified), and people
Additionally, the company knew it had to nur- (the diversity of new employees). Although
ture the leadership skills that were necessary this approach was more balanced than using
for its managers to articulate the company’s just financial measures, a comparison of the
vision and develop employees. Mobil identi- four Ps with a strategy map revealed several
fied key technologies that it had to develop, missing components: no customer measures,
including automated equipment for monitor- only a single internal-process metric—which
ing the refining processes and extensive data- was focused on an initiative, not an out-
bases and tools to analyze consumers’ buying come—and no defined role for information
experiences. technology, a strange omission for a financial
Upon completing its learning and growth services organization. In actuality, KPI score-
perspective, Mobil now had a complete strat- cards are an ad hoc collection of measures, a
egy map linked across the four major perspec- checklist, or perhaps elements in a compensa-
tives, from which Mobil’s different business tion plan, but they don’t describe a coherent
units and service departments could develop strategy. Unless the link to strategy has been
their own detailed maps for their respective clearly thought through, a KPI scorecard can
operations. This process helped the company be a dangerous illusion.
detect and fill major gaps in the strategies Perhaps the greatest benefit of strategy
being implemented at lower levels of the orga- maps is their ability to communicate strategy
nization. For example, senior management no- to an entire organization. The power of doing
ticed that one business unit had no objectives so is amply demonstrated by the story of how
or metrics for dealers (see the exhibit “What’s Mobil developed Speedpass, a small device
Missing?”). Had this unit discovered how to by- carried on a keychain that, when waved in
pass dealers and sell gasoline directly to con- front of a photocell on a gasoline pump, iden-
sumers? Were dealer relationships no longer tifies the consumer and charges the appropri-
strategic for this unit? Another business unit ate credit or debit card for the purchase. The
had no measure for quality. Had the unit idea for Speedpass came from a planning
achieved perfection? Strategy maps can help manager in the marketing technology group
uncover and remedy such omissions. who learned from Mobil’s balanced scorecard
Strategy maps also help identify when about the importance of speed in the pur-
scorecards are not truly strategic. Many organi- chasing transaction. He came up with the
zations have built stakeholder scorecards, not concept of a device that could automatically
strategy scorecards, by developing a seemingly handle the entire purchasing transaction. He
balanced measurement system around three worked with a gasoline-pump manufacturer
dominant groups of constituents: employees, and a semiconductor company to turn that
customers, and shareholders. A strategy, how- idea into reality. After its introduction, Speed-
ever, must describe how a company will pass soon became a strong differentiator for
achieve its desired outcome of satisfying em- Mobil’s value proposition of fast, friendly ser-
ployees, customers, and shareholders. The vice. From 1997 on, executives modified Mo-
“how” must include the value proposition in bil’s balanced scorecard to include new objec-
the customer perspective; the innovation, cus- tives for the number of consumers and
tomer management, and operating processes dealers that adopted Speedpass.
in the internal process perspective; and the With all its employees now aligned to the
employee skills and information technology new strategy, Mobil North American Market-
capabilities in the learning and growth per- ing and Refining executed a remarkable turn-
spective. These elements are as fundamental around in less than two years to become the in-
to the strategy as the projected outcome of the dustry’s profit leader from 1995 up through its
harvard business review • september–october 2000 page 10Having Trouble with Your Strategy? Then Map It •• •T OOL K IT
merger with Exxon in late 1999. The division executives to take early corrective actions. Ex-
increased its return on capital employed from ecutives can also use the maps as the founda-
6% to 16%; sales growth exceeded the industry tion for a management system that can help
average by more than 2% annually; cash ex- an organization implement its growth initia-
penses decreased by 20%; and in 1998, the divi- tives effectively and rapidly.
sion’s operating cash flow was more than $1 bil- Strategy implies the movement of an orga-
lion per year higher than at the launch of the nization from its present position to a desir-
new strategy. able but uncertain future position. Because the
These impressive financial results were organization has never been to this future
driven by improvements throughout Mobil’s place, the pathway to it consists of a series of
strategy map: mystery-shopper scores and linked hypotheses. A strategy map specifies
dealer quality increased each year; the num- these cause-and-effect relationships, which
ber of consumers using Speedpass grew by makes them explicit and testable. The key,
one million annually; environmental and then, to implementing strategy is to have ev-
safety accidents plunged between 60% and eryone in the organization clearly understand
80%; lost oil-refinery yields due to systems the underlying hypotheses, to align all organi-
downtime dropped by 70%; and employee zational units and resources with those hy-
awareness and commitment to the strategy potheses, to test the hypotheses continually,
more than quadrupled. and to use those results to adapt as required.
Not an Art Form 1. See Robert S. Kaplan and David P. Norton’s, The Balanced
Scorecard: Translating Strategy into Action (Harvard Busi-
We do not claim to have made a science of
ness School Press, 1996).
strategy; the formulation of great strategies is 2. These three generic value propositions were initially ar-
an art, and it will always remain so. But the ticulated in Michael Treacy and Fred Wiersema’s The Disci-
pline of Market Leaders (Addison-Wesley, 1995).
description of strategy should not be an art. If
people can describe strategy in a more disci-
plined way, they will increase the likelihood of Reprint R00509
its successful implementation. Strategy maps Harvard Business Review OnPoint 5165
will help organizations view their strategies in To order, see the next page
a cohesive, integrated, and systematic way. or call 800-988-0886 or 617-783-7500
They often expose gaps in strategies, enabling or go to www.hbr.org
harvard business review • september–october 2000 page 11TOOL KIT
Having Trouble with Your Strategy? Then Map It
Further Reading
ARTICLE BOOK
The Balanced Scorecard—Measures That The Strategy-Focused Organization: How
Drive Performance Balanced Scorecard Companies Thrive in
by Robert S. Kaplan and David P. Norton the New Business Environment
Harvard Business Review by Robert S. Kaplan and David P. Norton
January–February 1992 Harvard Business School Press
Product no. 4096 2000
Product no. 2506
This article introduces the Balanced Scorecard
methodology—and lays the foundation for In this book, Balanced Scorecard originators
understanding strategy maps. It clarifies why Kaplan and Norton introduce a new approach
no single perspective fully captures a com- that makes strategy a continuous process
pany’s health. Instead, balance four perspec- owned not just by top management, but by
tives—financial, customers, internal business everyone. Drawing on ten years of research on
processes, and innovation and learning—and more than 200 companies, the authors use in-
track performance in each. depth case examples to illustrate how to cre-
ate a performance management framework
that puts strategy at the center of key manage-
ment processes and systems. They also pro-
vide a series of industry-specific strategy maps
that any company can use to help build its
own.
To Order
For reprints, Harvard Business Review
OnPoint orders, and subscriptions
to Harvard Business Review:
Call 800-988-0886 or 617-783-7500.
Go to www.hbr.org
For customized and quantity orders
of reprints and Harvard Business
Review OnPoint products:
Call Rich Gravelin at
617-783-7626,
or e-mail him at
rgravelin@hbsp.harvard.edu
page 12You can also read
