The 3 Biggest Mistakes Companies Make When Mapping Their Strategy
2 July 2021
One of the most powerful management tool available today is a plan-on-a-page or strategy map – that provides a visual representation of an organisation’s strategy on a single page. These one-page tools describe how value is created by company or government organisation. Those that get the map right and are able to identify the most critical strategic goals for their organisation can go on to select the right key performance indicators (KPIs) as well as supporting strategic initiatives and action plans. Get the map wrong and everything else will be wrong, thus wasting much time, energy and resources.
Sadly, my experience and research strongly suggest that many organisations do indeed get their strategic map wrong. Here are 3 common mistakes that I see a lot and that I would like you to avoid:
1. Creating an operational, rather than a strategic map
Most obvious, perhaps, is that the plan-on-a-page or strategy map is simply too big – 30, 40 or 50 objectives is not uncommon (and sometimes more). As well as becoming unwieldy to manage, a large map is typically describes everything the company does and not what it should do strategically. As a result the organisation basically reverts back to being operationally, as opposed to strategically focused.
A plan-on-a-page or strategy map is an agreement by the senior team of the critical drivers of strategic success and their outcomes. The goal should be to agree on the 15-20 objectives will drive future value. Once this is achieved, the leadership team (an indeed everyone else) can start singing from the same hymn sheet (or map), so to speak.
2. Not mapping and testing the relationships between strategic goals
Although many organisations say they have a one-page strategy map only a minority have something I would call a true plan-on-a-page or strategy map. What many companies call a strategy map is often simply a bunch of strategic objectives laid out on one page. The problem is that it is not a map. A plan-on-a-page or strategy map describes the relationships between objectives and how the various goals underpin each other to deliver the desired outcomes. The cause-and-effect relationships between the goals describe the business logic and are something that can be tested to check whether the chosen objectives really do drive performance over time. By analysing the relationships between objectives organisations are able to understand the intricacies of value creation and report this to the senior leadership team to enable richer data-driven conversations and decisions. With a plethora of powerful analytical tool now available, there is no excuse for organisations to not test their strategies.
3. Confusing key concepts and terms
There is continued confusion about the difference between objectives, targets, initiatives and key performance indicators. The failure to properly distinguish these components has led to the design of many poor strategy maps and scorecards.
Beginning with objectives and initiatives, at the simplest level an objective describes what the organisation wishes to achieve (a statement of strategic priorities) while an initiative describes how the organisation will deliver the objective (the initiatives launched). For example, “implement a customer relationship management CRM system” is not an objective – it is an initiative to support an objective such as “deliver excellent customer management”. As a general guide, if progress is measured according to the completion of tasks or milestones then it is an initiative; an objective is tracked through KPIs.
A key performance indicator (KPI) tracks progress to a strategic objective through targets that can alter month by month or quarter by quarter (whatever the reporting Cycle might be) depending on a number of variables. For example, customer satisfaction scores can vary based on a host of factors – 85% this month might alter to 80% or 90% or whatever in the next. An initiative is a project or action that needs to be completed and is tracked through milestones of completion of tasks. For example, an initiative might be to implement a CRM system and month by month this will increase from, say, 20% to 30% to 40%. The score generally moves in one direction.
I hope that by avoiding these mistakes you will be able to develop a plan-on-a-page that really is the powerful tool it can be to help your organisation deliver its goals and achieve success.
Evidence shows that those organizations that visually map their strategy into meaningful cause-and-effect maps tend to have a significantly better understanding of strategy, are able to extract more value from their performance management system, and more importantly perform better. Universally, our case study examples point to the real benefits of enabling a better understanding of the strategy.
Note too that research with 157 companies conducted by the US-based Wharton School found that only 23% of companies consistently built, analyzed, and tested causal models. However, the survey also found that those organizations which used Strategy Maps had a 2.95% higher Return on assets and 5.14% higher Return on Equity than companies that didn’t use cause-and-effect models. (2)
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