It’s fair to say that every company has a strategy. Either the strategy is simply in the CEO’s head, or it is compiled in a very long and complex document, or it is represented through a strategy map .
This representation contains the essential points that will allow us to achieve our final objective and, above all, see the relationships that unite them. Just as a road map shows the path to the destination, the strategy map shows which objectives lead to the full execution of the strategy.
Let’s learn more about this concept and how it can help your business.
What is a strategy map?
A strategy map is a tool that allows organizations to describe and communicate their strategies. Strategy maps also serve as a suitable basis for the development of financial and non-financial measures that can be used to monitor the execution and functioning of the strategy.
Strategy maps can be used as a standalone tool to represent business strategy.
However, their real value is when they are used as part of a systematic strategic management process that aligns a company’s and individual objectives with a defined mission and desired strategic outcomes.
You can rely on 4 perspectives to formulate a strategy map: Financial, customer, internal learning and growth.
Financial and customer perspectives, which are outcome perspectives, are developed in response to the basic question “What do we want to achieve?” The internal learning and growth perspectives, which are action perspectives, represent “How do we plan to achieve this?”
Advantages of having a strategic map
Strategy maps describe how organizations create value by building on strategic themes such as “growth” or “productivity.” They offer a way for companies to “tell the story” of their strategic vision to employees and other stakeholders, increasing participation/engagement in the strategic process.
Strategy maps force organizations to put the onus on strategy, then measuring implementation, thus eliminating blurring of focus.
They form the appropriate basis for balanced scorecard performance measures , links to appropriate management and validation techniques, and allocate resources to initiatives and strategies that support an organization’s value propositions and core objectives.
How to make a strategic map?
The best way to create a strategic map is to work as a team, at least with the company’s management team. These are the steps you must follow:
Step 1: Define the mission and vision
Most organizations have already defined their mission and vision statements and values. While the mission is an internal statement that describes the reason for being of an organization and the purpose towards which its activities are directed, the vision statement describes the goals and objectives of the organization in the short and long term, creating a image of your future.
Mission and vision statements are essential in helping the company’s stakeholders understand what it is and what it aims to achieve.
And having them well defined will help you lay the foundations of your strategic map.
Why does your company need to invest in creating a business vision ?
Step 2: Understand your environment
Before developing your strategy, you must understand the context, landscape and sector in which your organization operates. It is equally important to identify industry trends that may affect your strategy before you start mapping it out.
When analyzing your organization’s environment, a key aspect to focus on is the different stakeholders (customers, suppliers, competitors, investors, etc.) with whom it interacts, the functions they perform, and the problems that they can create.
Step 3: Define the strategy
Once you understand the reason for the company’s existence, its general objectives and direction, as well as the environment in which the organization is located, you must focus on defining a strategy to achieve that mission and vision. Your strategy describes the set of activities you must undertake to ensure your organization creates a sustainable difference in the market.
For example, you can create a sustainable difference by offering a product that provides greater value to your customers than your competitors.
Step 4: Translate the strategy
This is where the strategy map comes into play. Help make your strategy more meaningful and actionable for your employees. In a strategy map, objectives are classified into four perspectives:
- Financial perspective
Specify plans and strategies to improve revenue and reduce costs. Financial strategies have two dimensions: revenue growth (long-term goals) and productivity (short-term goals). The primary financial objective of a strategy should be to support the growth of shareholder value and therefore should include both short-term and long-term objectives.
For example, deepening relationships with existing customers to sell more of your existing products or services or to sell entirely new products is a common revenue growth strategy.
Improved productivity can occur when companies reduce costs by cutting direct and indirect expenses, allowing them to produce the same amount of results while spending fewer resources.
- Customer perspective
Understand who the organization’s target customers are to identify the objectives and measures of the value proposition you intend to offer them. The value proposition is based on the organization’s strategy for your customers. Better communicate what the company hopes to do for its customers to stand out from the competition.
- Internal process perspective
How does the organization manage its internal processes and develop its human, informational and organizational capital to offer the differentiated value proposition of the strategy?
Internal processes help produce and deliver the value proposition for customers, and help improve processes and reduce costs to increase productivity.
Internal processes include operations management processes, customer management processes, innovation processes, and regulatory and social processes.
- Perspective of learning and growth
This section of the strategy map focuses on the skills, knowledge, and systems the organization needs to deliver the desired value.
Step 5: Highlight cause and effect relationships
Now that you have identified each of the objectives that you must meet to apply your strategy, it is time to show how the objectives relate to each other. You must represent them in such a way that the causal relationship is shown.
Step 6: Visualize the themes on your strategy map
Some organizations prefer to highlight themes on strategy maps by grouping objectives vertically. Themes highlight strategic directions and can represent areas such as sustainability, safety culture, etc.
Step 7: Waterfall Strategy Map
Corporate-level strategy maps are great for communicating core strategies to key stakeholders, and most strategy mapping exercises tend to stop at this “corporate strategy map” stage.