Strategy Mapping and the Balanced Scorecard Explained

Introduction

Strategy mapping is an approach to strategy implementation that flows from the balanced scorecard approach to formulation and measurement. Strategy mapping allows for a clearer understanding of the dynamics of strategy, especially at the implementation level. The framework was developed to accomplish three things: set appropriate objectives, establish a dominant value proposition, and find critical strategies that support that position. The strategies relate to the four different elements of the balanced scorecard (Armitage & Scholey, 2006). Murby and Gould (2005) reinforce the idea that the balanced scorecard does not directly address strategy formulation, so the strategy mapping process acts as a set of guidelines for formulation in light of the findings of the balanced scorecard development process.

The Strategic Mapping Process

Armitage and Scholey (2006) outline the six steps of strategy mapping. The first step is to specify an overriding objective; the second is to choose the value proposition; the third is to set the financial strategies; and the fourth is to set the customer strategies. These are followed by executing the internal perspective strategies and then planning the learning and growth strategies. The first step reflects the need of the business to answer the question: "Over the next few years, what will it take for the organization to succeed?" Once the overriding objective has been established, the second step is to identify the value proposition. Treacy and Wiersema (1993) propose three value propositions: customer intimacy, operational excellence, and product leadership. The company must therefore determine which of these approaches to value creation it will use to pursue excellence.

The following four items of the strategic mapping process essentially involve creating tactical moves to reach the objectives outlined in the balanced scorecard. In that respect, they are simply a logical follow-up to the scorecard. The strategy mapping process, however, merely dictates that these things must be done without providing much guidance as to how they should be done. In other words, this part of strategic mapping becomes redundant once the balanced scorecard has been put into place, as it lacks the critical link between theories, objectives, and concrete action.

Another conceptual weakness in the strategy mapping process is its emphasis on the financial perspective. The overriding objective of any business is to enhance shareholder wealth — if one overriding objective is to be chosen, this is it. Among the four perspectives, the strategy mapping process that Armitage and Scholey (2006) propose asks the organization to consider the financial perspective first. Structurally, therefore, there is considerable emphasis on the financial perspective. This runs counter to the logic of the balanced scorecard — indeed, this is the precise logic the scorecard seeks to eliminate. There is a lack of congruence at the philosophical level between Armitage and Scholey's strategic mapping and the balanced scorecard.

Relationship to Performance Management

The balanced scorecard emphasizes performance management through the establishment of objectives and measures that correspond to those objectives. In theory, philosophical incongruence notwithstanding, the strategy mapping process seeks to develop the precise tactics that will allow the organization to meet these objectives. The performance management objectives are set within the balanced scorecard and serve as a control for the strategies that should flow from the strategy mapping process. The role that strategy mapping plays here is in managerial discipline — by providing a framework that managers work through, they can think about and ensure that the strategies they develop are directly linked to the objectives.

With performance measures in the scorecard, management has a means of testing whether its strategies are meeting those objectives. When they are not, management can investigate the cause. Any number of internal and external factors could be responsible, but one thing management will want to examine is the congruence between the strategy and the measures. When measures fall below expectations, this is sometimes because the strategy is not congruent with the objectives. Having all of these elements in place forces management to consider these links carefully.

Conclusion

The strategy map is intended to work in concert with the balanced scorecard in order to convert strategic objectives and their measures into actual strategy. This is where strategy mapping gets tricky. It provides, on paper, an excellent framework for understanding some of the different types of strategies that can be implemented to meet different value propositions. But the Glacier Inn case is instructive, because it suggests that strategy mapping is a classic case of garbage in, garbage out. The balanced scorecard encourages specificity and an attention to strategic balance. Strategy mapping seems to move away from this, and in that sense is not necessarily going to enhance the balanced scorecard approach. This is unfortunate, because the balanced scorecard does need a framework to adapt its ideas into a coherent set of managerial actions.