Strategy Map

Definition

A strategy map is a visual representation of an organization's strategic objectives and the causal relationships between them. It is a key component of the Balanced Scorecard framework, which provides a comprehensive view of an organization's performance from four perspectives: financial, customer, internal business processes, and learning and growth.

5 Must Know Facts For Your Next Test

1. A strategy map provides a visual framework for describing and communicating an organization's strategy in a clear and concise manner.
2. The strategy map aligns an organization's intangible assets, such as employee skills and information technology, with its value-creating internal processes to produce desired outcomes for customers and, ultimately, improved financial performance.
3. The four perspectives of the Balanced Scorecard (financial, customer, internal business processes, and learning and growth) are typically represented as layers in a strategy map, with cause-and-effect relationships linking the objectives across the layers.
4. The strategy map helps organizations identify the critical few strategic objectives that are most important for achieving their vision and then measure progress towards those objectives using the Balanced Scorecard.
5. Developing a strategy map requires a deep understanding of the organization's strategy, the causal linkages between strategic objectives, and the key performance indicators that will be used to measure progress.

Review Questions

• Explain how a strategy map aligns an organization's intangible assets with its value-creating internal processes to produce desired outcomes for customers and improved financial performance.
  • A strategy map provides a visual framework for describing and communicating an organization's strategy by linking the four perspectives of the Balanced Scorecard. The learning and growth perspective represents the organization's intangible assets, such as employee skills and information technology. These assets enable improvements in the internal business processes perspective, which in turn lead to better outcomes for customers in the customer perspective. Ultimately, these customer-focused improvements drive improved financial performance, which is represented in the financial perspective. The strategy map helps organizations identify the critical few strategic objectives that are most important for achieving their vision and then measure progress towards those objectives using the Balanced Scorecard.
• Describe the key components of a strategy map and how they are connected through cause-and-effect relationships.
  • The key components of a strategy map are the strategic objectives, which are organized into the four perspectives of the Balanced Scorecard: financial, customer, internal business processes, and learning and growth. These strategic objectives are connected through cause-and-effect relationships, where improvements in one area (e.g., employee skills) lead to improvements in another area (e.g., internal processes), which then lead to improvements in a third area (e.g., customer satisfaction). The strategy map aligns an organization's intangible assets, such as employee skills and information technology, with its value-creating internal processes to produce desired outcomes for customers and, ultimately, improved financial performance.
• Evaluate the role of the strategy map in the Balanced Scorecard framework and how it helps organizations translate their vision and strategy into a set of performance objectives, measures, targets, and initiatives.
  • The strategy map is a critical component of the Balanced Scorecard framework, as it provides a visual representation of an organization's strategic objectives and the causal relationships between them. By identifying the key strategic objectives and the connections between them, the strategy map helps organizations translate their vision and strategy into a comprehensive set of performance objectives, measures, targets, and initiatives across the four perspectives of the Balanced Scorecard. This alignment ensures that the organization's intangible assets, internal processes, customer outcomes, and financial performance are all working together to achieve the desired strategic outcomes. The strategy map serves as a communication tool to help stakeholders understand the organization's strategy and how the different elements of the Balanced Scorecard are linked together to drive success.

Related terms

Balanced Scorecard: A strategic performance management framework that helps organizations translate their vision and strategy into a set of performance objectives, measures, targets, and initiatives across four perspectives: financial, customer, internal business processes, and learning and growth.

Cause-and-Effect Relationships: The logical connections between the strategic objectives in a strategy map, where improvements in one area (e.g., employee skills) lead to improvements in another area (e.g., internal processes), which then lead to improvements in a third area (e.g., customer satisfaction).

Strategic Objectives: Specific, measurable goals that an organization aims to achieve in order to execute its strategy and realize its vision.