Factors in the learning and growth perspective
The fourth and last step in Kaplan and Norton’s approach is necessary to determine which factors in the learning and growth perspective contribute to lasting and continuous value creation. The goals set in this process should ensure that the combination of employees, available technology, and company capacity can realize the company strategy.
Three kinds of capital
Kaplan and Norton distinguish three components that have to be supplied with objectives in the strategy map.
- Human capital: the availability and presence of skills, talent, and knowledge required to support the strategy.
- Information capital: the availability of information systems, networks, data, and infrastructure required to support the company strategy.
- Organization capital: The level of organizational competence in implementing the change process needed to execute the strategy.
Developing employees, technology, and culture
In practice, you can see (the problem of) organizations trying to develop their employees, technology, and culture. But this development is often driven by the managers of functional disciplines. Only a few organizations succeed at developing in line with their strategy this way. But doing so is hugely important. Organizations that succeed at this have a stronger competitive position.
Go beyond abstract desires
To achieve this, the strategy map should go further than outlining abstract desires. For example, improving competencies, increasing negotiation skills, or improving culture. The strategy map should concretely state which specific competencies are required to realize the internal business process goals from step 3.
The step-based approach by Kaplan and Norton can be typified as a reasoned, consistent way of forcing success. Through the development of causal relationships, the strategy map creators functionally develop a script. They can use this to visualize the realization of their strategy within a certain amount of time. That makes it clear which value proposition your company should present to customers in order to reach its stated financial goals.
Demands and conditions
Based on this, goals for internal processes come into view. Finally, it will become clear which demands and conditions employees, technology, and company culture should fulfill to make all this possible. Formulating goals for every element of every perspective, and working step-by-step from top to bottom, creates a coherent strategy map that tells the “story” of the strategy.
Drawing up a strategy map requires a careful hand
The time and care it takes to make a good strategy map is very worthwhile. Management, usually the ones making the map, are forced to state their position on countless issues of essential strategic value. When can you assume that they’ve done their jobs well? Here is a simple checklist to judge the value of the strategy map. A good strategy map will positively answer the following questions.
Does the strategy map…
- clearly show the business model?
- show a complete overview of the strategy?
- show plausible causal relations?
- show concrete strategic objectives?
- show recognizable critical success factors?
- offer an umbrella for managing the change and execution?
- offer a springboard to measurable performance indicators?
- offer the possibility to communicate the strategy?