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Strategy maps: converting intangible assets into tangible outcomes.

Do we need another book on strategy? With metalcasting facilities closing at a rate of two per week over the last few years, the answer may be yes.

Yet, it is safe to say that most metalcasting executives would rather undergo a root canal than take on strategy formulation and execution responsibilities. The reason: it is outside most executives' area of experience and realm of competence--and getting strategy wrong can seriously damage a company. If you are the person responsible for strategy, you are where the buck stops. You can bob and weave if things go wrong, but you can't hide.

This whole process raises awkward questions, such as what's a top executive? (Ultimately, it's someone who does strategy right.) This brings us to the question--what is strategy? In their third book, Strategy Maps: Converting Intangible Assets into Tangible Outcomes, (Harvard Business School Press, 2004) Robert S. Kaplan and David P. Norton delve further into strategy.

The need to do so arises from a look into the history of strategy. In 1985, most metalcasting facilities still followed mass-production principles to make operating decisions. Japan and Europe began flexing their manufacturing muscles. As competition heated up, OEMs started demanding components "faster, better and at less cost" from their suppliers. Out of this turmoil, a new age in American manufacturing was ushered in.

I remember plant managers of that era struggling over their end-of-month, 200-page, IBM printouts trying to figure out what to focus on, what to change, how to avoid mistakes and how to meet the numbers. These reports typically contained 70-80 metrics that were 30-60 days old--everything from absenteeism, setup time, inventory levels and operating expenses to earned hours, scrap, rework, schedule adherence and various "efficiencies." The data were overwhelming and unmanageable. In the distance, the drums of synchronous, lean manufacturing and re-engineering were being beat, and a new manufacturing "strategy" of continuous operational improvement invaded the shop floor.

Enter Kaplan and Norton with a book called The Balanced Scorecard, which was designed to give managers a simple "dashboard" of a few key indicators that told them how things were going in real time, not one or two months after the fact. At last, managers could manage what mattered; they had a tool to focus on the things that drove operational improvements that mattered to customers. Or did they?

What if you defined throughput as parts or tons produced instead of sales? You may produce lots of components and productivity might look good, but financial performance could worsen if those components sat in finished goods for years. So Kaplan and Norton wrote a second book: The Strategy-Focused Organization (enter the word "strategy"). The idea is that if you're not balancing the right measurements on your scorecard or describing them precisely, your strategy won't produce good results. The Strategy-Focused Organization was supposed to "provide a more comprehensive approach for how to manage the strategy." Wait! Do you mean The Balanced Scorecard was not comprehensive enough to manage strategy? This brings us to the third book in the series, Strategy Maps.

This is a good and potentially useful book. With OEM loyalty to casting suppliers at low ebb, low-cost competitors on the rise and U.S. metalcasters increasingly burdened by heavy social and environmental obligations, there has never been a more critical time for leaders to become first-rate strategists. But it is useful to appreciate Kaplan's and Norton's struggle to help.

They have, through a series of useful books, attempted to crystallize the lessons learned and the wisdom and the insights that allow managers to lead their organizations effectively. With scoreboards and maps, they have offered tools that can be picked up and mastered to produce valuable outcomes. Yet every time they finish a book, they discover another wrinkle that is needed to pin down what every executive needs to know.

It seems executives always need to know one thing more.

My take on this brief review of strategy, as it impacts U.S. manufacturers in general and metalcasting facilities and their suppliers in particular, is that what your organization needs first is a strategist. If you have one of the proven talents, these books may prove invaluable. But someone who is not recognized as a strategist within the organization will have a tough time translating new ideas into competitive advantage. Kaplan's and Norton's books will help a strategist become more effective at strategy execution. But they will not by themselves make a non-strategist effective. Invest first in developing a strategist, and then sharpen his/her skills with the ideas of leading thinkers.
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Title Annotation:Novel Solutions
Author:Libby, William J.
Publication:Modern Casting
Geographic Code:1USA
Date:Dec 1, 2004
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