Vertical and Horizontal Dimensions of Strategy – Part I

In their early work describing and promoting the balanced scorecard as a tool for strategic management, authors (and my former bosses) Bob Kaplan and Dave Norton presented their four perspectives (Financial, Customer, Internal Business Process, Learning and Growth) from which to measure business performance and motivate behavior in an organization. While the four perspectives were presented as a framework for selecting performance measures, there was little said about the physical presentation of these perspectives, the strategy map.

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.