The balanced scorecard allows managers to look at the business from four important perspectives: Within each of these perspectives a business should seek to identify a series of goals (CSFs) and meas… All rights reserved. Mobil decided that the consumer’s buying experience was so central to its strategy that it invested in a new system for measuring its progress in this area. It is based on the four Balanced Scorecard Perspectives: Financial, Customer, Internal Processes and … This process helped the company detect and fill major gaps in the strategies being implemented at lower levels of the organization. The maps provide a visual representation of a company’s critical objectives and the crucial relationships among them that drive organizational performance. David P. Norton (Co‐founder and president of the Balanced Scorecard Collaborative in Lincoln, Massachusetts (www.bscol.com). As a result, Mobil increased its operating cash flow by more than $1 billion per year and became the industry’s profit leader. Had this unit discovered how to bypass dealers and sell gasoline directly to consumers? Companies can use the template here to develop their own strategy maps, which are based on the balanced scorecard. The internal process perspective captures these critical organizational activities, which fall into four high-level processes: build the franchise by innovating with new products and services and by penetrating new markets and customer segments; increase customer value by deepening relationships with existing customers; achieve operational excellence by improving supply chain management, the cost, quality, and cycle time of internal processes, asset utilization, and capacity management; and become a good corporate citizen by establishing effective relationships with external stakeholders. A major feature of strategy maps is that they distinguish between strategies, and they offer communication platforms for strategy implementation. To understand how a strategy map is built, we will study Mobil North American Marketing and Refining, which executed a new strategy to reconstruct itself from a centrally controlled manufacturer of commodity products to a decentralized, customer-driven organization. Unless the link to strategy has been clearly thought through, a KPI scorecard can be a dangerous illusion. A typical strategy map organizes objectives into four categories or perspectives. Their “balanced scorecard” format depicts the following perspectives: Financial: Setting financial goals for the organization or a department; Customer: Ensuring customers’ objectives are met PowerPoint format will … Mobil’s stated strategic vision was “to be the best integrated refiner-marketer in the United States by efficiently delivering unprecedented value to customers.” The company’s high-level financial goal was to increase its return on capital employed by more than six percentage points within three years. A strategy map is an effective vehicle for IT strategy elaboration. (See the exhibit “The Balanced Scorecard Strategy Map.”) The template contains four distinct regions—financial, customer, internal process, and learning and growth—that correspond to the four perspectives of the balanced scorecard. A strategy map is a simple graphic that shows a logical, cause-and-effect connection between strategic objectives (shown as ovals on the map). How does Mobil make sure that every gas station owner understands the company’s strategy—and implements it each time a customer drives up to his pumps? These perspectives were developed by Doctors Robert S. Kaplan and David P. Norton as part of their Balanced Scorecard framework for strategic planning and management. Copyright © 2020 Harvard Business School Publishing. But these assets have value only within the context of a strategy. Thus, Mobil’s complete customer strategy motivated independent dealers to deliver a great buying experience that would attract an increasing share of targeted consumers. 13+ Strategy Map Templates – Free Sample, Example, Format Download! Strategy maps also help identify when scorecards are not truly strategic. A strategy map template will help you create a holistic view of the entire firm. He worked with a gasoline-pump manufacturer and a semiconductor company to turn that idea into reality. Another business unit had no measure for quality. ... Drs. Although this approach was more balanced than using just financial measures, a comparison of the four Ps with a strategy map revealed several missing components: no customer measures, only a single internal-process metric—which was focused on an initiative, not an outcome—and no defined role for information technology, a strange omission for a financial services organization. Clarify your mission and strategic vision. Thus, Mobil could use a fairly simple set of metrics (share of targeted customer segments and a summary score from the mystery shoppers) for its consumer objectives. All prices are in US dollars, Local Tax May Apply! Part 1. Since this first incarnation Kaplan and Norton’s thinking has moved on, and the perspectives are now organised in a sequence – hence the map idea. own the Strategy Map and discuss and agree its content. Also, balancing the two strategies helps to ensure that cost and asset reductions do not compromise a company’s growth opportunities with customers. Strategy maps will help organizations view their strategies in a cohesive, integrated, and systematic way. Strategy implies the movement of an organization from its present position to a desirable but uncertain future position. At far left, from bottom to top, the template shows how employees 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 (customer perspective), which will lead to higher shareholder value (financial perspective). Satisfied customers gladly paid more. The authors created strategy map templates for various industries, including retail, telecommunications, and e-commerce. It’s great for quickly communicating big-picture objectives to everyone in the company. Obviously, you would need detailed maps showing the important towns and villages, the surrounding landscape, key structures like bridges and tunnels, and the roads and highways that traverse the region. From 1997 on, executives modified Mobil’s balanced scorecard to include new objectives for the number of consumers and dealers that adopted Speedpass. Specify objectives in the four scorecard areas to realize your company’s vision. Robert S. Kaplan and David P. Norton, guide our research and best practices so that you are fully equipped with the latest ideas in strategy execution. The “how” must include the value proposition in the customer perspective; the innovation, customer management, and operating processes in the internal process perspective; and the employee skills and information technology capabilities in the learning and growth perspective. Learning and growth. The four perspectives for for-profit organizations include: Finance; Customer; Internal Processes Robert S. Kaplan and David P. Norton, Strategy Maps: Converting Intangible Assets into Tangible Outcomes, Harvard Business School Press, 2004 . For customer intimacy, an organization must stress the quality of its relationships with customers, including exceptional service and the completeness of the solutions it offers. The basic strategy map template, presented in Fig. But this unfocused strategy had failed, leading to poor financial performance in the early ’90s. A strategy map enables an organization to describe and illustrate, in clear and general language, its objectives, initiatives, and targets; the measures used to assess its performance (such as market share and customer surveys); and the linkages that are the foundation for strategic direction. It arises from the entire set of assets and the strategy that links them together. After all, how can people carry out a plan that they don’t fully understand? 2. The company’s immediate customers are the independent owners of gasoline stations. It is one of the most powerful elements in the balanced scorecard methodology, as it is used to quickly communicate how value is created by the organization. And this virtuous cycle would generate the revenue growth for Mobil’s financial strategy. Only logged in customers who have purchased this product may leave a review. Strategy maps … These elements are as fundamental to the strategy as the projected outcome of the strategy. Download Strategy Map and Balanced Scorecard Google Slides Templates Here >. Mobil’s internal process objectives included building the franchise by developing new products and services, such as sales from convenience stores; and enhancing customer value by training dealers to become better managers and by helping them generate profits from nongasoline products and services. These perspectives were developed by Doctors Robert S. Kaplan and David P. Norton as part of their Balanced Scorecard framework for strategic planning and management. Building a strategy map typically starts with a financial strategy for increasing shareholder value. But one of the principal contributions of a strategy map is to highlight the opportunities for enhancing financial performance through revenue growth, not just by cost reduction and improved asset utilization. Step 1. Executives believed that if there were injuries and other problems at work, then employees were probably not paying sufficient attention to their jobs. Many organizations have built stakeholder scorecards, not strategy scorecards, by developing a seemingly balanced measurement system around three dominant groups of constituents: employees, customers, and shareholders. Click here to download our Free Balanced Scorecard Template Example. And of course, if it matches your company branding and includes your logo, your team will … These impressive financial results were driven by improvements throughout Mobil’s strategy map: mystery-shopper scores and dealer quality increased each year; the number of consumers using Speedpass grew by one million annually; environmental and safety accidents plunged between 60% and 80%; lost oil-refinery yields due to systems downtime dropped by 70%; and employee awareness and commitment to the strategy more than quadrupled. The balanced scorecard includes financial measures (these reveal the results of actions already taken) and non-financial measures (these are drivers of future financial performance). Differentiate your firm from competitors. Their purchases enabled Mobil to increase its profit margins and its revenue from nongasoline products. The value of an intangible asset such as a customer database cannot be considered separately from the organizational processes that will transform it and other assets—both intangible and tangible—into customer and financial outcomes. Another limitation occurs when companies build key performance indicator (KPI) scorecards. Strategy maps quantify the value of tangible and intangible assets—linking them all to your overarching strategy. Unfortunately, many top executives are trying to do just that. A strategy, however, must describe how a company will achieve its desired outcome of satisfying employees, customers, and shareholders. Example: Mobil’s objectives were: increase employee knowledge of refining business; nurture leadership skills necessary to articulate its vision. Organizations need tools for communicating both their strategy and the processes and systems that will help them implement that strategy. The key, then, to implementing strategy is to have everyone in the organization clearly understand the underlying hypotheses, to align all organizational units and resources with those hypotheses, to test the hypotheses continually, and to use those results to adapt as required. The former generally has two components: build the franchise with revenue from new markets, new products, and new customers; and increase value to existing customers by deepening relationships with them through expanded sales—for example, cross-selling products or offering bundled products instead of single products. Over the years, other theorists have expanded on the BSC a bit, but the design that professionals use today remains essentially the same as the third generation developed in the late 1990s. Combine this free template with other tools: Porter’s five forces SWOT Analysis 4P’s of Marketing Cash flow statement These objectives enable a company to align its human resources and information technology with its strategy. Customer. But none of these, alone, would be enough to implement that strategy. Imagine that you are a general taking your troops into foreign territory. Aug 10, 2018 - MBA presentation explaining Kaplan and Norton's Balanced Scorecard Approach. The first two chapters of the book provide an introduction and an overview of the Strategy Map. Not surprisingly, these organizations typically have great difficulty implementing their growth strategies. This vision should create a clear picture of the company’s overall goal—for example, to become the profit leader in an industry. Thus, a complete strategy should involve generating returns from all three of these internal processes. Typically, the value proposition is chosen from among three differentiators: operational excellence (for example, McDonald’s and Dell Computer), customer intimacy (for example, Home Depot and IBM in the 1960s and 1970s), and product leadership (for example, Intel and Sony).2 Companies strive to excel in one of the three areas while maintaining threshold standards in the other two. Download our healthcare strategy map template packet to get healthcare specific strategy map examples to help design your heatlhcare Balanced Scorecard. Mar 18, 2016 - MBA presentation explaining Kaplan and Norton's Balanced Scorecard Approach. A strategy map specifies these cause-and-effect relationships, which makes them explicit and testable. Upon completing its learning and growth perspective, Mobil now had a complete strategy map linked across the four major perspectives, from which Mobil’s different business units and service departments could develop their own detailed maps for their respective operations. Internal processes. In actuality, KPI scorecards are an ad hoc collection of measures, a checklist, or perhaps elements in a compensation plan, but they don’t describe a coherent strategy. Also, the company would sell more premium brands to customers, and it would increase sales faster than the industry average. Example: Mobil reduced environmental and safety incidents (operational), built best-in-class franchise teams (customer relationships), and developed non-gasoline services (innovation). A strategy must then define the logic of how to arrive at that destination. These perspectives were developed by Doctors Robert S. Kaplan and David P. Norton as part of their Balanced Scorecard framework for strategic planning and management. Each month, the company sent “mystery shoppers” to purchase fuel and a snack at every Mobil station nationwide and then asked the shoppers to evaluate their buying experience based on 23 specific criteria. Thus, using a case study approach, this study attempts to investigate BSC implementation, focusing Specifically, companies that pursue a strategy of operational excellence need to excel at competitive pricing, product quality and selection, speedy order fulfillment, and on-time delivery. Many years ago Kaplan and Norton created a template to map any strategy of an enterprise onto. More than a decade ago, Robert S. Kaplan and David P. Norton introduced the Balanced Scorecard, a revolutionary performance measurement system that allowed organizations to quantify intangible assets such as people, information, and customer relationships. Using the strategy map shown here, Mobil increased its operating cash flow by more than $1 billion per year. How to Communicating and Cascade the Strategy? The four perspectives … An example of a generic strategy map can be seen below: Note: editable PowerPoint templates for all of the Strategy Maps shown in this document can be found in the ‘Resources’ section of the Intrafocus website. Strategy maps, pioneered by Balanced Scorecard founders Robert Kaplan and David Norton, allow organisations to describe and communicate their strategies concisely and succinctly and close the gap between formulation and successful implementation of strategy. We do not claim to have made a science of strategy; the formulation of great strategies is an art, and it will always remain so. Strategy maps describe how organisations create value by building on strategic You can use this template map for doing strategic planning in your organization. Why strategy maps? The value does not reside in any individual intangible asset. ... by Robert S. Kaplan and David P. Norton A summary of the original text. All rights reserved. Developing a Strategy Map The process below illustrates the four stages in which a contemporary strategy map plus the scorecard and implementation plan are developed. It maintains a solid structure while allowing for a great deal of flexibility, so it can represent virtually any segment you operate in and your unique strategy. When a company such as Mobil adopts a customer intimacy strategy, it usually focuses on its customer management processes. What are the main principles behind Strategy Maps? **To account for Mobil’s independent-dealer customers—not just consumers—the company adapted the strategy map template to factor in dealer relationships. Its objective is to translate an organization’s mission and vision into actual (operational) actions (strategic planning). It is this ‘balance’ that has proven to be so successful in the methodology over the past decade or so. When attempting to implement their business strategies, they give employees only limited descriptions of what they should do and why those tasks are important. They give employees a clear line of sight into how their jobs are linked to the overall objectives of the organization, enabling them to work in a coordinated, collaborative fashion toward the company’s desired goals. The economy was primarily based on tangible assets—inventory, land, factories, and equipment—and an organization could describe and document its business strategy by using financial tools such as general ledgers, income statements, and balance sheets. For example, senior management noticed that one business unit had no objectives or metrics for dealers (see the exhibit “What’s Missing?”). In our research, we have found that although a clear definition of the value proposition is the single most important step in developing a strategy, approximately three-quarters of executive teams do not have consensus about this basic information. Consequently, the company had to focus heavily on achieving operational excellence throughout its value chain of operations. A strategy map is a visual framework for the corporate objectives within those four areas. Their new book Strategy Maps: Converting Intangible Assets into Tangible Outcomes (Harvard Business School Press, 2004) is a sequel to their classic The Balanced Scorecard (HBSP, 1996).) Kaplan and Norton say this about strategy maps, "The key to executing your strategy is to have people understand it – including the crucial but perplexing processes by which intangible assets will be converted into tangible outcomes. How did Mobil become the industry’s profit leader and boost its cash flow by $1 billion+ per year? An important caveat to remember here is that while many companies espouse a strategy that calls for innovation or for developing value-adding customer relationships, they mistakenly choose to measure only the cost and quality of their operations—and not their innovations or their customer management processes. Strategy Maps book Strategy Maps Converting Intangible Assets into Tangible Outcomes Robert S. Kaplan and David P. Norton Harvard Business School Press The third volume of the Balanced Scorecard methodology 1 Dr Robert Kaplan and Dr David Norton are also the authors of The Balanced Scorecard – Translating Strategy And companies that pursue a product leadership strategy must concentrate on the functionality, features, and overall performance of its products or services. 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