Mapping mavens: how private and public companies gain from strategy mapping. (Business Strategies).

In the April 2003 issue of Management, we explained the general principles of strategy mapping. This month, we provide examples of organizations that have successfully employed strategy maps. By "successful," we mean a significant performance improvement that would have been unlikely without this management tool.

Strategy maps have been developed for companies in insurance, banking, manufacturing, health care, telecommunications, e-business and in many not-for-profit entities. A list of all these organizations would he lengthy indeed, but these are a few examples:

Private sector examples include Mobil NA Marketing and Refining, Shell Services; AT&T Canada, Siemens IC Mobile (telecommunications); UPS; National Bank, Bank of Tokyo; Zeneca Ag Products, Agrichem (agriculture manufacturing); CIGNA Property and Casualty Division (insurance); and Nova Scotia Power. Government and non-profit sector examples include General Services Complex, US, Ministry of Defense, UK (government); University of California, San Diego, University of Waterloo; Duke Children's Hospital, May Institute; and United Way, Chatham, Ont.

Note the diversity of industry type and organization size. This is a powerful feature of strategy maps -- they use concepts that can be adapted for various corporate contexts.

What do these organizations have in common? First, all are aware of the limitations of managing "by the numbers" and have adapted their management processes to place strategy -- its formulation, communication and execution -- at the centre of organizational and employee activities. Second, they have migrated from first to second generation balanced scorecard users. Whereas the first (and still most common) generation provides organizations with an improved, and more balanced, performance measurement system, second generation users rely primarily on those measures that assist in measuring ring and monitoring their strategy. This subtle change demands far more discipline on the measurement process and is an effective antidote to strategy failure. With the decision to make strategy the central organizational focus, these firms have developed maps as tools that their stakeholders can use to visualize, communicate, focus effort, test assumptions and measure progress toward strategic objectives.

These organizations claim their efforts have improved all aspects of their operations, and financial results have followed. In a few short years, for instance, Mobil went from a poorly performing, "all-things-to-all-people," undifferentiated firm into an organization whose strategy was predicated on a combination of new niche growth opportunities and productivity improvements. Its strategy map provided the blueprint by which its dealers, business unit managers and employees were able to align their activities to the strategy. When it merged into ExxonMobil in 1999, it had achieved industry-wide profit leadership.

Nova Scotia Power, Inc (NSPI), while in a very different sector, also used the principles of strategy mapping. The company supplies more than 97% of the generation, transmission and distribution of electrical power to 450,000 customers in Nova Scotia.

In 1998, fixed prices and cost pressures forced NSPI to re-think its strategy. Unlike Mobil, it focused almost exclusively on a productivity and asset use financial strategy. This also meant a different customer value proposition -- one rooted in operational excellence through cost management procedures. Its four perspectives were based on:

* Managing costs,

* Building customer loyalty,

* Building the business, and

* Developing employee commitment.

The pursuit of these strategies led to impressive results, both financial and non-financial. Improved revenues and effective cost management (at no sacrifice to employees, customers or community) led to steady profit increases from 1998 to 2001 for its parent company, Emera. From a non-financial perspective, productivity, employee commitment, progress on environmental issues and customer satisfaction all improved dramatically.

The Master of Business, Entrepreneurship and Technology Program

Strategy maps are becoming more common in private sector firms like Mobil and NSPI. They have become equally effective and popular in government, not-for-profit and crown corporations. Maps in these sectors generally use the same four perspectives' as a standard balanced scorecard, but because "profit" or "financial returns" are not the primary goal, the customer/client/citizen perspective tends to dominate the other three perspectives. The University of Waterloo's new Master of Business, Entrepreneurship and Technology (MBET) illustrates such a transformation. It reflects the direction many publicly subsidized organizations are heading - they are considered non-profit entities but are expected to be self-sufficient.

As with other examples discussed above, the program's champions used their vision statement as the basis for their various strategies. As shown in Figure 1, however, the placement of the financial and customer perspectives differs slightly. A business must be profitable so it builds an extra margin on its costs. In education, health, and not-for-profit organizations, service, not profit, is the defining characteristic. Because it wasn't expected to make a profit, the traditional map with the financial perspective on top was inappropriate as the MBET driving perspective. However, the self-sufficiency requirement meant that the program developers had to create a program that recognized its financial obligations. Consequently, the MBET map departs from the traditional "stacked" approach to mapping strategy and places the customer and financial perspectives side by side. Depicting its relative importance, the customer perspective takes most of the space, and denotes the program's value proposition -- the offer of a differentiated program designed to attract a specific subset of customers.

The financial perspective focuses on the goal of self-sufficiency and the strategies to achieve it. While some public sector funding is available, the bulk of the program's funding comes from students, the development of successful outreach programs and outside donors who believe in the program's vision and objectives.

Four broad strategic themes in the internal perspective were developed to manage the financial and customer perspectives. First, the content and delivery mechanism of the academic program was created to be consistent with the vision and the types of customers the program wishes to attract. Second, a faculty team was built from various existing university departments to deliver an innovative program. Third, a support system was required to assist students, manage intra-university activities, and develop relationships with the community. The fourth theme in the internal perspective is operational excellence - providing the quality promised to customers without running a deficit. This is critical to achieve self-sufficiency and means leveraging shared resources and finding synergies wherever possible.

Figure 1 is a high level or corporate level map. At a glance, it indicates the vision, value proposition, and strategies an enterprise chooses to achieve its goal. However, this is just the start. These broad strategic themes not only provide the overview, they act as a springboard for management to drill down and act.

For instance, the customer dimension contains the value proposition - a "unique differentiated pro gram focused on producing tomorrow's businesses." But what does that mean? The challenge was for the program's leaders to create and communicate this value proposition in a way that would excite and attract the desired students, employers and donors. Figure 2 highlights a small portion of the MBET value proposition map. It provides enormous value as a planning tool for specific individuals/teams, a communication tool for internal stakeholders and as a marketing tool to promote the program.

As a second drill down example, Figure 3 takes the "Build the Support System" strategic theme from Figure 1 and decomposes it into four sub-themes. Figure 4 takes one of these, "Building the Advisory Council," and explains what the advisory council members are expected to pursue and what is required to attract and retain these key individuals.

Strategy mapping, then, begins with an overall picture of the strategies that an organization must master to achieve its vision. All stakeholders should be able to grasp what the firm is trying to accomplish and the ways it plans to do so. Drill downs take the larger picture and create operations that managers and employees can plan and implement.

To fulfill customer and financial goals, a continuous program of innovation and learning must support internal processes. Figure 1 illustrates the MBET approach to this. First, faculty was encouraged to enhance competencies necessary for program and personal growth. Second, the use of technology is maximized in the program for both efficiency and professional image, and to capture faculty competencies and program innovations and retain them in the MBET knowledge base. Finally, because aligned goals have a high correlation with organizational success, every effort is made to link MBET faculty research to the program's objectives.

These examples demonstrate the versatility of strategy mapping. By tailoring the basic architecture to suit an organization's needs, strategy mapping can be applied to organizations of all sizes in the private, regulated and not-for-profit sectors. And this makes sense. Every organization has a strategy that requires execution, so every organization has the potential to benefit from strategy mapping. And let's not forget -- strategy mapping provides the essential elements necessary for the creation of a balanced scorecard. As strategy maps become better known, we can expect to see many more examples of this management tool.

Howard Armitage, CMA FCMA, PhD, is the Gordon H. Cowperthwaite Professor of Accounting and director of the centre for business, entrepreneurship and technology at the University of WaterLoo. Cam Scholey, CMA, CMC, MBA, (www.amii.ws) is president of Advance Management Initiatives, Inc., an author and a Lecturer.

(1.) Strategy maps don't have to be restricted to four perspectives. Some companies believe chat community responsibility is important enough to require an additional perspective. Others may include specific perspectives for suppliers or employees. In general, however, designers try to stick with 4-5 perspectives.