While the ITO strategy framework takes the form of a balanced scorecard (BSC) strategy map, it can be legitimately applied to any discussion of ITO strategy, even if there is no intent to fully develop the ITO strategy map, objectives, targets, and initiatives that constitute a proper BSC. Given the propensity of most ITOs to excessively focus their change agendas on the domains of cost and quality, with insufficient focus on the equally important dolmans of agility and innovation, the framework provides the basis for a balanced change agenda. When used as the basis for a BSC strategy map, the framework contains and organizes the recommended inventory of 20 to 30 strategic objectives for the ITO.

Value Creation Dimension

The four perspectives that constitute the value creation dimension follow the generalized model that can be applied in both for- and non-profit organizations, which applies to business units and support groups inside the enterprise. The names of the four perspectives: Capabilities and Assets, Internal Process, Partner, and Enterprise Results – describe how the ITO creates value. The IT organization develops and sustains its capabilities and assets, which it employs to execute its internal processes, in order to deliver valued services to its partners within the enterprise, enabling those partners to achieve and deliver desired results to the enterprise and its external stakeholders.

Of course, the most important focus in the Capabilities and Assets perspective is the people that make up the ITO, but their skills and knowledge perform in the context of both ITO and enterprise strategy; nearly every ITO’s leadership is explicit about their desire to change the culture.

Every sustainable ITO has well-established processes for service delivery, and this is where the bulk of management energy is applied. But the model invites equal consideration of processes for establishing and enhancing alliances with internal partners, and engaging with those partners to develop innovative applications of technology to create new value for the enterprise.

Nearly all of the dozens of ITOs with whom I’ve worked recognize the importance of satisfying their internal business unit and support group ‘customers’ and understand that calling them customers sends the wrong message. By naming this perspective Partner, the framework reflects the shared desire on the part of the ITO and the groups it serves to achieve a true partnership in their relationship. And the ITO and its partners share, and are fundamentally guided by, their desire to achieve exceptional Enterprise Results.

Organizational Evolution Dimension

The domains of Competency and Contribution overlay and bisect the Partner and Process perspectives to ensure that the ITO doesn’t aspire to mere competence, which is necessary but not sufficient to realize the ITO’s full potential. As the IT organization demonstrates its competency in managing costs and delivering quality services, it establishes the credibility to collaborate with its partners to contribute to enterprise value creation. At the highest level, a journey from competency to contribution represents the aspiration of nearly every ITO.

Process Themes

The three themes in the Process perspective elaborate this evolution from competency to contribution focus. On a foundation of its processes for Operational Excellence, the IT organization expands its focus to build and manage Partner Alliances and lead delivery of innovative Solutions. By allocating equal space to each of these themes in the framework, ITO leadership is invited to move beyond the status quo focus on operations and aspire to higher goals.

It’s Only a Framework

This structure can enable the kind of leadership team discussions necessary at the onset of the change program. One powerful way to begin is to place a (virtual) Post-it note on the appropriate spot in the framework for every change initiative currently underway in the ITO – there is a pretty good chance that they won’t be evenly distributed. The implicit question, “Is this where we need to be focusing our efforts?”

Of course, the perspectives, domains, and themes presented here have generic that I’ve chosen to convey the concepts on which they are based. They can be renamed to fit your ITO’s culture and existing vocabulary. It is vital to use the language is meaningful to the intended audience; this can entail preserving existing vocabulary, or even deliberately creating new language to convey the urgency of the change program.

Needless to say, in future posts, I will have far more to say about each of the areas in the framework, as well as a set of generic strategic objectives to populate the framework.

Does the framework make sense in your ITO? If you already have a strategy map, how does it compare? Please offer your comments and insights below.

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Carefully Balance Autonomy and Mandates to Answer the ‘What’ Question

The ‘what’ question entails the actual content of strategy maps and measures. Unsurprisingly, there have been a variety of approaches used, with mixed results.

One such approach is to simply cascade the enterprise-level strategy map intact to subordinate units, and requiring them to select their own measures, which may be unique, subordinate to, or identical to enterprise-level measures. Sometimes there are no strategy maps at all at subordinate levels. But business and support units each have their own internal value proposition, and the top-level strategy map is rarely a good fit at subordinate levels. The motivation for this approach may not be benign; it has been employed to both eliminate the effort of creating subordinate strategy maps, and to offload the effort of collection measurement data to the subordinates. This approach is likely to create resentment at the subordinate level, and rarely results in a sustainable change program. Avoid this approach if at all possible. 

A more balanced approach is to require that subordinates follow the established vertical and horizontal structure of the parent strategy, but give them the freedom to establish their own objectives and measures. The reward from this approach is much higher engagement and buy-in for subordinate leadership teams, but the risk is fragmented or unaligned strategic messages. It is best to ensure that the same facilitator(s) who guided development of the higher-level strategy also facilitate development of the subordinates’ strategies – the facilitator can guide leadership teams to a better-aligned change agenda. It is important that subordinate and parent strategy maps resemble one another (I describe it as a ‘family resemblance’) and that there are no obviously conflicting strategic objectives. An excess of autonomy at subordinate levels will fragment and confuse the strategic intent.

The endless additional variations on approaches to managing cascaded content simply cannot be captured properly here. Please submit comments with your organization’s approach, and how well it is working.

The ‘Who’ Question Helps to Answer the ‘How’ Question, and Informs the ‘When’ Question

The ‘Who’ question is far easier to answer, as in, ‘Who facilitates the cascade?’ As the organization cascades its strategy deeper and deeper, the number of parallel efforts quickly multiplies. To save time and money, the pragmatic approach has been to enable third- and fourth- tier groups to self-facilitate their strategy development. Don’t do this. An expert, objective facilitator, (whether an outside consultant or from the enterprise’s own strategy office) is absolutely essential to the success of each step in the cascading. Self-facilitated meetings are likely to create poor quality BSCs, or none at all. Another unwise approach is to have the strategy create the strategy map and measures for the subordinate organization, and simply provide it to them as a mandate. This easily alienates the subordinate organization to the entire process, and loses any possibility of true engagement with the change agenda.

The ‘How’ question is answered by the choice of facilitator. An expert facilitator makes good decisions about the process of creating the BSC on the basis of his or her past experience, and tailor the approach to the unique characteristics of each subordinate organization. There is no one right way to make or cascade strategy in an organization; sadly, there are many ways the process can go awry. Expert facilitation is insurance against bad outcomes.

We now return to the ‘When’ question. Leaders want to sustain the momentum of enterprise-level strategy development, and aggressively pursue rapid cascading. But the enterprise probably doesn’t have the facilitation capacity for too many such efforts simultaneously, and this is where dangerous shortcuts are likely to be considered. It is far better to develop a high-quality cascade over time than one that is rushed and poorly-executed. A carefully planned and executed cascade is an essential ingredient to an effective and sustainable strategic management effort.

Agree with these ideas? Disagree? Seek clarification? Please comment below with your own cascading experience and questions. I hope we’ll have a robust dialog here.

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Look Beyond the Organization Chart to Answer the ‘Where’ Question

The easy and obvious approach to deciding where to cascade in the organization entails looking at the organization chart, and deciding which business and support units should get their own BSCs. So simple and obvious that leaders miss the fact that there are other approaches that may be more effective.

When an organization’s structure changes slowly over time, it is usually due to the political pressure to preserve leadership roles for certain individuals, as well as the natural resistance to change. These are the organizations whose members see themselves as working in ‘silos.’ The effect of a static organization structure may be to sub-optimize the organization’s effectiveness. The organization’s value proposition may need to evolve to meet external opportunities and challenges, but that evolution is constrained by an assumption that the existing structure is sacred. When decisions about the strategy itself are made in the context of the assumed permanence of the organization structure, it can be said that ‘Strategy Follows Structure.’ This is an unnecessary and prospectively costly constraint on the change program.

But some organizations restructure too frequently. There, the absence of certainty creates an underlying level of anxiety for staff members and managers, and valuable energy is devoted to personal political posturing (for the next re-org) instead of value creation. These organizations may be better poised to anticipate and respond to external opportunities and challenges, but I am not convinced. In one such client enterprise, a paralysis in accomplishing change resulted from the relative impermanence of people and groups.

And some organizations use matrix structures. While not inherently dysfunctional (some matrixes actually do work!), this approach requires staff members and managers to hone their political skills to navigate the challenges of conflicting leadership messages. There is no doubt that matrix organizations are less efficient, due to the overhead cost of overlapping (and sometimes competing) management structures.  

The controlling principle for answering the ‘Where’ question should be ‘Structure Follows Strategy.’ Look at the newly-hatched strategy at the enterprise level. Will success require different parts of the organization to work closely together across boundaries? Will existing political rivalries inhibit execution? If you could start from scratch, would you draw the organization chart the same way it is now? If you are answering yes to any of these questions, it may be best to use the cascading structure to blur or erase the existing boundaries, and create ad hoc overlay structures that align with strategic themes and objectives. Such ‘theme teams’ have proven to be very effective in tearing down walls, creating better cooperation and partnerships across the enterprise. While it may not be possible to erase and redraw the incumbent organization structure, these cross-functional teams may become the primary leadership structure for accomplishing change, and can render the old silos irrelevant.

Sound scary? You bet. But the default approach of aligning strategy to the existing structure will serve to reinforce the existing structure, no matter how sub-optimal it may be. Cascading strategy can be a powerful tool for effecting (or inhibiting) positive change in an organization’s structure.

Another aspect of the ‘where’ question is about depth. Of course, the size and diversity of the organization should be a key determinate, but as one goes deeper, the size of each group with its own BSC shrinks. It is impractical to have a BSC for a very small number of people, when the overhead of sustaining that BSC represents a significant fraction of the labor pool in the group. It is better to invest energy in integrating the strategy management system with individual employee performance management processes, in partnership with front-line managers and the HR organization. But that is a topic for another post. The best guidance on depth is to go only as deep through layers of the organization as absolutely necessary to ensure alignment and staff engagement. As the number of BSCs multiplies, so does the overhead cost of the strategic management system.

A final note about organizational geography: Some organization have such highly-entrenched functional and business units and hands-off management style that strategy at the enterprise level is too generic to offer meaningful guidance to subordinate units. An alternative approach to top-down cascading that has worked in these cases was dubbed “middle-up-down” by one of my colleagues. This approach entails enabling the subordinate units to create provisional strategy maps and measures and feed them up to enterprise-level leadership for a process of review and reconciliation, followed by a downward cascade that is informed by the reconciliation. Please comment below if you’d like to learn more about this approach in a future posting.

Next: The Final Three Questions

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Many cascades follow a basic pattern: a BSC (consisting of a strategy map and associated measures) is developed for the organization as a whole, then subordinate maps and / or measures are developed for each subordinate business unit and support organization (such as Information Technology and Human Resources). But the predictable pattern quickly disappears. Subordinate organizations may be required or allowed to choose to replicate or adapt the higher level strategy map and measures, or given the freedom to create an entirely new BSC. Unfortunately, there is often too little time and energy invested in understanding and making good decisions about cascading, and there are no well-established rules. The objective of this post is to outline the key questions that should be considered when planning to cascade BSCs in any organization.

Ask the ‘When’ Question First

Before considering any of the other questions, leaders should consider the timing of cascading. In their enthusiasm to leverage a newly-hatched strategy map, they may mandate that business unit cascades be completed quickly; unsurprisingly, rapid cascading is the default recommendation of outside consultants (mea culpa). But rapid cascading has its drawbacks. The enterprise-level strategy map may lose relevance in the shadow of those created for business units. That outcome is probably okay if the enterprise is operating as a holding company, but more often than not, the enterprise seeks to leverage strategic objectives across business and operating units. When this is the case, there is a large benefit in broadly socializing the enterprise-level change agenda across the entire organization before enabling the subordinate units to participate in the cascade. Not only does this enhance the credibility of the change program, but it avoids the risk of forcing a subordinate organization to cascade before its leaders are ready.

But the best reason to manage the timing of the cascade is to enable leaders to understand and carefully consider their approach to cascading, and make informed decisions. But it is easy for leaders to assume they instinctively know the best way to cascade, and to want to sustain the momentum of their initial work.

Of course, the vary real risk in not rapidly cascading is to lose executive level buy-in for the change program. Leaders should be encouraged to publicly commit to a cascading process, but avoid releasing details of the cascading approach. Public commitment reduces (but does not eliminate) the risk of losing support, and buys the critical time and flexibility necessary for leaders to make those informed decisions.

Reach Agreement on the ‘Why’ Question

Leaders who have agreed to undertake a change program using the BSC will easily agree that cascading is a good idea. But challenging them to describe their expectations of cascading will probably yield different answers and valuable insights into each leader’s management style. Why cascade? The easy answer comes from Kaplan and Norton’s Strategy-Focused Organization: to align the organization to the strategy. But what does alignment mean? To some, it means instituting a control and feedback regime that entails populating the measures on the enterprise scorecard. To others, it means enabling and empowering subordinate units to escape from bland and imprecise objectives at the enterprise level, and to “get it right” for the subordinate organization. Others may only see the cascaded BSC as an emblem of organizational status, and are most likely to volunteer their subordinate organization to ‘go first’ in leading the cascading effort. Some may confuse or conflate the optional cascading process with the necessary change communication program, as mentioned above.

While there is some merit to each of these expectations, it is vital that leaders express and agree to their expectations for the cascading process. A shared answer to the ‘Why’ question informs the remaining decisions on cascading, and enables executives’ expectations to be realized.

Next: The ‘Where’ Question

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I’ve asserted in this blog that the purpose of all organizations is to create value, whether they are for-profit businesses (that create value for customers and owners of the business), or government and non-profit organizations (that create value for citizens, communities, and society). Reading from bottom to top, successful strategy maps describe how an organization creates value. While the four perspectives described by Kaplan and Norton (Learning and Growth, Internal Business Process, Customer, and Financial) have worked well in for-profit businesses (in many hundreds of examples), the perspectives have often been renamed by leadership teams.

The Vertical Dimension: From Perspectives to Value Creation

Most often renamed has been the Learning and Growth perspective – sometimes as “People and Knowledge,” a clearer statement of the original intent. In their more recent writings, Kaplan and Norton have broadened that intent by applying multiple labels to the bottom perspective, such as Human capital, Information capital, and Organizational capital. The next perspective in the sequence had received a variety of names, but all are about the internal processes of the organization. The top two perspectives (originally named Customer and Financial) are sometimes renamed to agree with the organization’s language preferences (e.g. ‘Partner‘ for Customer, and ‘Business Results‘ for Financial). These may seem like trivial differences, but the precise language on the strategy map has been very important to the leaders creating them.

It is the top two perspectives that have proven most problematic for non-profit and government organizations. While nearly all have recognized that having a perspective named Financial at the top of the map is simply inappropriate, some have retained a Financial perspective at the top (or moved it to the bottom of the map)in a mis-guided attempt to remain true to Kaplan and Norton’s original writings. Most other of these organizations have simply renamed (and sometimes consolidated) the top two perspectives to reflect those who benefit from their value creation.

Generically, all these organizations develop and engage their resources (such as people, information, and knowledge), to perform actions that create immediate value for a targeted set of stakeholders (such as customers or citizens), which results in the creation of consequential value for stakeholders (such as investors or members of a community). Rather than attempting to force-fit the organizations’ strategy into a predefined set of strategy map perspectives, the process of strategy map design should begin by identifying the key resources it employs and explicitly identify, segment, and name the stakeholder groups who receive value from the organization. The perspectives should be simply structured and named to reflect the organization’s unique value proposition. This is the approached that most experienced facilitators already use today in practice. There is nothing revolutionary about this proposal; it simply codifies what often occurs.

The Horizontal Dimension: From Themes to Organizational Change

There has been far more diversity in approach to organizing strategy maps on the horizontal dimension. Kaplan and Norton’s early work proposed a left-to right sequence based on a value chain from “customer need identified” on the left to “customer need satisfied” on the right that was seldom adopted in practice. As mentioned in the earlier post, Treacy and Wiersema’s three disciplines of market leaders has been a more successful organizing structure, but not consistently applied from left to right: examples published by Kaplan and Norton have shown an Operational Excellence theme place at the left, center and right of different maps. In short, there is no dimension that has consistently applied to the horizontal dimension of strategy maps.

But there is a fundamental organizing concept: change. The essence of strategy is change, and change is necessary for the survival of every organization. Maps that only capture the way in which an organization creates value today and contain objectives for process and quality improvement can hardly be called strategy maps; they don’t effectively paint a picture of a future different than today. Successful strategy maps present an image of a ‘desired future state’ for the organization; how the organization aspires to create value in the future. The view of the future is easily segmented into at least two broad themes; what we have to change (or ‘fix’) in the near term, and what we wish to be in the long term (usually between two to five years in the future). Maps that I and other practitioners have facilitated around the Competency to Contribution and the Treacy and Wiersema-influenced motifs of Operational Excellence (near term), Customer Intimacy (intermediate term) and Innovation (long term) have loosely followed this left to right thematic segmentation.

Like the proposal above to name the horizontal perspectives in the context of the organization’s value proposition, I propose that during the strategy map design process, the organization’s leaders categorize their objectives (in the Resources and Actions regions on their maps) as near-, intermediate-, or long-term, and name the themes to reflect this. As an organizing discipline for the horizontal dimension, this will make clear the change imperative of the strategy; and properly reflect the essential purpose and necessity of the organization; to create value and to change.

Practitioners of balanced scorecard and strategy mapping facilitation are especially invited to comment.

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Their early focus on the perspectives and the measures was an important step in gaining the buy-in of the early adopters of the BSC concept who were predisposed to focus on measurement. As organizations around the world began using the BSC (with mixed results), the strategy map moved much closer to the center of the BSC concept. With Kaplan and Norton’s third BSC book, Strategy Maps, the centrality of the map to the BSC concept was properly acknowledged.

In developing hundreds of strategy maps for an incredible diversity of organizations, my colleagues and I arrived at some consensus about the elements of good strategy map design. In many cases, we also had opportunity to review and comment on strategy maps that had been developed by the many organizations that weren’t our clients, and this enriched our understanding of how these organizations chose (and sometimes failed) to express their strategy. Although much was learned, strategy map design continues to evolve as a BSC discipline.

In practice, the majority of strategy maps have been represented in landscape format on a single page or screen image. Strategy maps are best designed in a facilitated workshop with every member of the organization’s leadership team. The leaders develop and agree to strategic objectives (brief statements of intent that comprise the strategy) and place them in the visual space according to a structure guided by the facilitator.

Most maps has generally been the repository of around 20 to 30 strategic objectives. Some organizations have successfully had far fewer of these objectives, but maps with few objectives have mostly suffered in clarity. Maps with more than 30 objectives have simply been too hard to read and have overwhelmed those not part of their creation.

Kaplan and Norton’s four perspectives have been quite successful to divide the vertical space of strategy maps of for-profit firms (although the perspectives are often renamed), but less so in government organizations and non-profits where primacy of financial outcomes isn’t appropriate. Variants on the original model rearrange and often rename the four original perspectives, but a consistent structure for non-profits simply hasn’t been settled.

While the four-perspective model has worked especially well to divide the vertical space on the page, there has been far less consistency on a horizontal structure. In their early work, Kaplan and Norton proposed a sequence of vertical towers containing a cause and effect sequence of objectives spanning all four perspectives, but this has been problematic. Strategic objectives often don’t fit as easily into top-to-bottom themes, and this too rigid structure has been an impediment to the design process. Arrows showing cause and effect relationship between objectives often crossed between themes, contibuting to a visual jumble on the page.

A somewhat more successful approach has been to apply a thematic structure only to the customer and process perspectives (or even the process perspective alone), and one of the best structures was influenced by Treacy and Wiersema’s The Discipline of Market Leaders. This approach divides the horizontal space into three roughly equal themes of operational efficiency, customer intimacy, and product or service innovation (which are evolved from Treacy and Wiersema’s disciplines of Operational Excellence, Customer Intimacy, and Product Leadership). While these disciplines fit many organizations, alternatives (such as my own Competency to Contribution structure) have also proven successful.

Of course, each organization’s strategy map must properly reflect it’s unique circumstances and intent. Carefully designed structures have proven a necessary prerequisite to facilitating the map development process. In the next post, I propose a new universal structure for strategy map design that builds upon the good map designs already done, and can more effectively guide map design for every organization.

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Let’s consider a simple example. In this purely hypothetical example, my wife is judging my performance in our organization (our family) by two measures: the number of calories I eat each day, and the number of days each week I exercise for at least thirty minutes. She’s even established targets for my performance; no more than 2,000 calories in a day, and at least three exercise periods a week. On the basis of those two measures, we can infer that she wants me to eat smart and to exercise. But why is my performance being measured this way? (If you have a good punchline, please leave it in the comments below.)

Of course, we could conclude that my wife wants me to lose weight. So the hypothesis implied is that if I eat smart, and if I exercise, then I will lose weight. But losing weight is only an intermediate objective. The complete cause and effect logic is far easier to show in a picture than with just words.

Each of the boxes in the picture is a strategic objective; a concise answer to the question, “What do I have to do to be successful?” By arranging the objectives with arrows as shown, we can easily read the hypothesis of cause and effect that comprise the strategy. These strategic objectives are the building blocks of strategy maps, and careful selection and arrangement of them can create an amazing level of understanding of an organization’s strategy. But reading a well-drawn strategy map is far easier than creating one.

After one especially exhausting strategy map session (usually an all-day affair), one of my clients wisely observed that “the essence of strategic planning is choosing what not to do.” In our example above, imagine starting out with only the outcome objective (Retire in comfort). My wife and I might brainstorm a series of alternative objectives that will enable us to achieve that goal (increase life insurance?!). But it would be impractical and perhaps even contradictory to simultaneously pursue all of the imagined ways to achieving the outcome objective. Thus, by ruling out alternatives, we focus the strategic energy of the organization (my family), on a few objectives that we select based on our hypotheses of cause and effect. Just remember – this is only a hypothetical example.

The power of the strategy map, and ultimately the Balanced Scorecard, is that by narrowing the description of strategy to only a few objectives on a single sheet of paper, we create a shared understanding of the direction in which we are aiming the organization. Much more about strategy map design in future posts.

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