Strategy mapping: making a strategy map step by step

What is a strategy map?

A strategy map is a visualisation of the critical success factors of an organisation and their cause-and-effect relationships, which forms the link between strategy, operational activities and measurable indicators.

The map is a proven instrument that helps to translate strategy into action. With it you close the gap between global strategic statements and specific strategic goals, and it is a handy tool for analysing important information. The map is in principle free-form: there are no specific rules about what it must look like. Making one does follow a method. For the compact one-page variant see strategy map on a single page.

Strategy map and the balanced scorecard

Many managers discover that the strategy just will not ‘land’ in their organisation. A big problem is that strategic intentions seem concrete but remain abstract in practice. Because the connection between the strategic objectives cannot be made, it also proves impossible to draw up a good balanced scorecard with well-operationalised success factors. As a result employees take decisions and actions that do not fit the strategic objectives.

How do you make a strategy map?

• The mission: what does the organisation want to be, and for whom?
• The blocks: the most critical processes of the organisation.
• The arrows: the dependencies between the blocks.

The map shows how the various parts of the strategy are connected and can reinforce each other. It offers a powerful visualisation of the strategy; insight into the organisation, its processes and KPIs; an instrument for scenario planning and investment decisions; a tool to develop the organisation and its employees; clear communication; and ultimately higher performance, more satisfied customers, better margins and more revenue.

The process of strategy mapping

Strategy mapping is making a ‘map with the route to organisational success’. The strategic concept and the business model are visualised on it. The route runs along the critical success factors (CSFs): hotspots, the subjects that determine the success of the strategy and on which the management spotlight must always shine.

Finding the hotspots

A mapping session is the ideal means. The steering assignment and the strategy serve as input. During the session managers and directors select the critical success factors of their organisation. A CSF appears on the map if it is necessary to follow progress on that hotspot with indicators: progress that is so important it may not be compromised. Think of flying on time, no empty shelves in the supermarket, quality improvement or fast handling on the ground. Although several organisations use such CSFs, they are not universal: a CSF must be a driver of strategic success for the organisation in question. The collection of CSFs and their relationships is therefore unique.

A picture says more than 1,000 words

The strategy map makes the strategy come alive in the heads of managers. People develop mental models of the environment they are part of, and mental models steer behaviour and action. Strategy mapping is a creative process: you make a mental model. The selected CSFs and their cause-and-effect relationships are visualised in a diagram. Precisely by indicating the causal relationships, a picture of the strategy emerges that says far more than 1,000 words on paper. Making it also stimulates the participants: would the modelled strategy really work in practice? That leads to an iterative process in which the strategy gradually unfolds and the business formula becomes ever clearer.

The strategy map of Kaplan and Norton

Kaplan and Norton developed a successful approach in which the strategy only really takes shape through mapping sessions: strategy mapping clarifies and sharpens the initial strategic objectives. Their approach has four steps:

1. Financial. Determine how to improve financial performance by increasing revenue and improving productivity. For higher revenue: sell more of the existing product, sell to customers in new market segments or sell new products. Productivity improves by reducing direct and indirect costs and making better use of the means of production.
2. Customer. Determine how you structurally add value for selected customer segments. Four possible strategies: cost leadership, product leadership, offering a total solution and binding customers to a system (system lock-in).
3. Internal processes. Align your internal processes with the financial goals and the chosen way of adding value: not only the operational processes, but also customer management, innovation and social processes. Effective process management plays a very important role here.
4. Learning and growth. Bring human capital, information capital and organisational capital into line with your strategy, and name them explicitly in strategy formation.

Their recipe assumes that a strategy development process takes place during mapping; step 2 in particular contains many elements for shaping the strategy. The mapping process is even so effective that it can set in motion the collective development of a completely new strategy.

Strategy mapping according to the outside-in method

Another way is based on consistently thinking from the outside in, starting from a central objective:

1. Determine the central objective. The mission and the various strategic goals can often be traced back to one overall objective to which the others must contribute. In the profit sector the financial perspective is decisive: revenue, profit or growth of capital. For non-profit organisations and government bodies the objectives relate to the social function. In all cases the number of objectives remains limited.
2. Establish the external characteristics. By which factors can customers or citizens recognise the organisation, and which are of great importance to them? Examples: product quality, fast delivery, sustainability of products, optimal service or ethical business conduct.
3. Establish the internal characteristics. What must the organisation do internally to meet the defined external characteristics? What is needed to achieve the quality or the desired delivery speed?
4. Test the strategy map. Look critically at the end result, for example with a checklist.

Kaplan and Norton versus outside-in

Two step-by-step plans for the same map.

What you need before a mapping session

• The steering assignment: the mission and strategic objectives drawn up by top management. That gives the group a clear focus.
• The answer of top management to some fundamental questions about the best fit with the environment; the top is, after all, responsible for scenario planning and exploring the environment.
• The view of the leadership on issues such as: how do we respond to developments in the environment, what are opportunities, what is the best survival strategy and how do we beat the competition?

In this way top management gives the mapping process direction. It comes down to asking the management team good questions. For example: how can we respond to the growing demand for total solutions without driving up costs too much? Or: the exploration of the environment shows that the competition keeps stepping up the pace of innovation. How can we respond to that?

Further reading

• Strategy map on a single page
• Strategy
• Strategic goals
• Performance indicators

Sources

• Kaplan, R.S. and Norton, D.P., Strategy Maps: Converting Intangible Assets into Tangible Outcomes.

About the author

Mark de Kort has been active in the world of data since 1994, from developing software for business intelligence and scorecarding to setting up and improving BI architectures. He still works hands-on, from data preparation and modeling to building dashboards.

About Diamond Decisions

Diamond Decisions helps organizations become better by enabling better decisions. We don’t start with data, dashboards or AI, but with the decision that needs to improve, and work back from there to KPIs, data and technology. We do that in four steps: inspiration and alignment, business modeling, analytics and data platform and data-driven decision makers. That way BI and AI don’t remain an IT project, but deliver value every day.