A practical example of bridging the gap from strategy to execution
I’ll admit, there have been times when, as the “strategy guy”, I’ve been happy to help create the strategy and even more happy to “throw it over the wall” to the operational teams to figure out how to make the strategy happen. Most business leaders don’t have that luxury — they need to own both the strategy and the execution, and admittedly, it often doesn’t go well when I’ve tried to separate the two.
One of the richest tools I’ve found for connecting strategy and execution is the Strategy Map introduced by Robert Kaplan and David Norton in their 2001 book The Strategy Focused Organization¹.
In my writings, I’ve often used the launch of Sprint Business Solutions (SBS) as an example and I’ll do that again here. I joined Sprint in 2003, shortly before the “transformation” that reorganized the company into business units defined by the markets they served. I worked with the executives named to lead the soon to be formed SBS to develop their initial strategy.
In December of 2003, SBS President Howard Janzen presented that strategy to the Sprint board. The overarching mission was to “destroy legacy industry barriers that hinder the success of our business customers.” The three pillars supporting the strategy were:
- Deepen relationships with customers to grow revenue and profits
- Be the leader in wireless/wireline integrated solutions
- Be the easiest to do business with
For each of these pillars we identified three strategic priorities and developed seven strategic programs across the three pillars to help implement the priorities. We also identified 32 key metrics to track progress toward executing the strategy.
The strategy was well received by the Board, by the Sprint management team, and by the new SBS employees, who had primarily been brought together out of the company’s previous product-aligned business units. Howard and his team stood in front of these employees with a clear and compelling plan for how they would win in the marketplace. That strategy gave employees a vision for the future and helped them make day-to-day decisions.
The Sprint corporate strategy team liked the strategy so much that they largely adopted it for the entire company for the planning cycle in 2004. The SBS strategy didn’t change significantly although we did align some of the language to match the corporate strategy.
The Strategy Map
Okay, that’s the background, but what is a Strategy Map and how does it connect strategy to execution?
In the early 1990s, Robert Kaplan and David Norton introduced their concept of the balanced scorecard². They originally wanted to supplement traditional financial performance measures with those that indicate a company’s progress in building the capabilities and gaining the intangible assets needed for future growth. The result was a management tool that reported performance through four lenses (which they called perspectives):
- Learning and Growth: “To achieve our vision, how will we sustain our ability to change and improve?”
- Internal business process: “To satisfy our shareholders and customers, what business processes must we excel at?”
- Customer: “To achieve our vision, how should we appear to our customers?”
- Financial: “To succeed financially, how should we appear to our shareholders?”
By the time Kaplan and Norton wrote an article on the topic for Harvard Business Review in January 1996², they realized that the balanced scorecard was more than just a collection of metrics, but had become the core of a new strategic management system. “Recently, we have seen some companies move beyond our early vision for the scorecard to discover its value as the cornerstone of a new strategic management system. Used this way, the scorecard addresses a serious deficiency in traditional management systems: their inability to link a company’s long-term strategy with its short-term actions.”
In The Strategy Focused Organization the pair explicitly laid out steps for implementing five key principles in their model for using the balanced scorecard to become a strategy focused organization:
- Translating the strategy to operational terms
- Aligning the organization to create synergies
- Making strategy everyone’s everyday job
- Making strategy a continual process
- Mobilizing change through executive leadership
At the core of linking strategy and operations is a tool that Kaplan and Norton call the strategy map. “A strategy map for a Balanced Scorecard makes explicit the strategy’s hypotheses. Each measure of a Balanced Scorecard becomes embedded in a chain of cause-and-effect logic that connects the desired outcomes from the strategy with the drivers that will lead to the strategic outcomes.”
So, to explain a little more clearly, the Strategy Map translates the strategy into the four perspectives. You can think of it this way:
- What needs to be true about our people and our culture if we are going to achieve the strategy? (Learning and Growth perspective)
- What needs to be true about our business if we are going to achieve the strategy? (Internal perspective — this often reflect the Pillars in the strategy)
- How will our strategy translate into value for our customers? (Customer perspective — this often closely aligns with the Purpose in the strategy)
- How will our strategy translate into value for our investors? (Financial perspective)
The Strategy Map creates a cause-and-effect relationship to emerge between these four perspectives, with the Internal and Customer perspectives being central.
If we are to achieve our strategy, what needs to be true about our business (Internal), and therefore what needs to be true about our culture and our people (Learning and Growth)? When we achieve our strategy, how will that translate into value for our customers (Customer) and therefore into value for our investors (Financial)?
For our example, here is the Strategy Map that we developed in 2004 for Sprint Business Solutions:
When you look at the Strategy Map and then reference back to the Purpose Pyramid, the one thing that will jump out is that the Internal perspective in the Strategy Map matched the Pillars of the strategy in the Purpose Pyramid. This was what had to be true of the company if it was going to achieve it’s Purpose of “destroying legacy industry barriers that hinder our customers success.” That Purpose statement did not directly appear in the Strategy Map, but from a customer’s perspective, what they would perceive was that Sprint had eliminated much of the “pain” of doing business with a telecom carrier (destroying legacy industry barriers) and was delivering valuable solutions (enabling customer success). In the course of doing those two major things, Sprint also had to establish its brand as a solutions provider.
The Learning and Growth perspective reflected the culture and employee changes required to successfully achieve the Pillars. And the Financial perspective showed how creating value for customers would translate into financial performance that would be rewarding to investors.
The one anomaly that I want to point out in this particular Strategy Map was that it (and the stated strategy) primarily only reflected half of what was critical for the company’s ongoing success. At the very top of the Strategy Map we called out two overarching strategic themes — to grow through solutions and to stabilize the core business. While the “drumbeat” that drove the business was focused on its transformation to a solutions provider, the multi-billion dollars of existing revenue still needed to be managed in the face of the significant threats identified in the Panorama of the Purpose Pyramid. This only showed up in the Financial perspective of the Strategy Map with the single box labelled “Manage Yield Declines.” While not a strategic focus, this was a very important operational aspect of the business that needed to be managed.
As helpful as the Strategy Map is for “connecting the dots” from the company’s people and culture all the way to financial performance, with the strategy at its core, especially for a business as complex as Sprint, the Strategy Map often could not capture on a single page all of the things happening within the business to execute the strategy, and how those activities would be managed. Specifically, the Plans aspect of the Purpose Pyramid was missing.
Kaplan and Norton introduced the concept of Strategic Themes as a way to focus on specific parallel aspects of the strategy. I like to consider the Pillars of the strategy as Strategic Themes and to map out the logical flow of the strategy at a greater level of detail. I also like to use this view to identify key initiatives that align with the aspects of the Strategy Map. Finally, the Strategic Themes level of mapping is also a great place to begin to call out specific metrics that can be used in monitoring the strategy to make sure that execution is staying on track.
It’s important to note the difference between strategic monitoring and operational performance monitoring. Both are important.
Almost all organizations have regular performance reports that indicate whether the organization is hitting its objectives. However, these typical performance monitoring mechanisms fail to ensure that the organization is on strategic track towards the desired end state in a number of ways as summarized below:
As you start identifying metrics that you’ll use in managing the execution of your strategy, you should keep in mind the characteristics of strategic monitoring metrics (leading, capability-focused, future oriented).
Here was the Strategic Theme mapping for “Be the Leader in Solutions”, along with the corresponding metrics and initiatives.
Once we had begun to identify specific metrics to track, we could begin building our balanced scorecard. Below is a representation of the scorecard we used in 2005 to manage the business. We chose a layout that emphasized the customer rather than financial performance. While we understood the importance of delivering financial results, we also understood that financial results would only follow if we delivered value to customers. Also note that our top level purpose had changed to “Deliver the best customer experience” to be aligned with the corporate strategy.
The Strategy Map and Strategy Themes helped us translate the strategy into specific actions we needed to take as a company and the Balanced Scorecard provided the tool for regularly monitoring our progress in executing the strategy.
¹Kaplan, Robert S., and David P. Norton. The Strategy-focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment. Boston, MA: Harvard Business School Press, 2001.
²HBRs 10 Must Reads on Strategy. Boston (Massachusetts): Harvard Business Review, 2011.