For all three conceptual map this is the assignment about:
1. What is this article about?
To answer this question, please develop a comprehensive Concept Map with no less than 30 Concepts (boxes) from a Concept Mapping Perspective and their corresponding Linking Words from a Concept Mapping Perspective … for more information about “How to Develop a Concept Map” please refer to the “Some Learning Tips for this Learning Assignment” section below.
I need three different concepts map.
There’s the 3 articles of each one
MASTERING.1.pdf
ThenewLeader.2.pdf
TurningGreatStrategy.3.pdf
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NOT LONG AFTER ITS SUCCESSFUL IPO, the Conner Corporation (not its real
name) began to lose its way. The company’s senior executives continued their prac-
tice of holding monthly one-day management meetings, but their focus drifted.
The meetings’ agenda called for a discussion of operational issues in the morn-
ing and strategic issues in the afternoon. But with the company under pressure
to meet quarterly targets, operational items had started to crowd strategy out
of the agenda. Inevitably, the review of actual monthly and forecast quarterly
fi nancial performance revealed revenues to be lower, and expenses to be higher,
than targeted. The worried managers spent hours discussing how to close the
gap through pricing initiatives, capacity downsizing, SG&A staff cuts, and sales
hbr.org | January 2008 | Harvard Business Review 63
Successful strategy execution has two basic rules: understand the management cycle that links strategy and operations, and know what tools to apply at each stage of the cycle.
by Robert S. Kaplan and David P. Norton
the Management System
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64 Harvard Business Review | January 2008 | hbr.org
LEADERSHIP AND STRATEGY | Mastering the Management System
campaigns. One executive noted, “We have no time for
strategy. If we miss our quarterly numbers, we might cease
to exist. For us, the long term is the short term.”
Like Conner, all too many companies – including some
well-established public corporations – have learned how
Gresham’s Law applies to their management meetings:
Discussions about bad operations inevitably drive out dis-
cussions about good strategy implementation. When com-
panies fall into this trap, they soon fi nd themselves limping
along, making or closely missing their numbers each quarter
but never examining how to modify their strategy to gener-
ate better growth opportunities or how to break the pat-
tern of short-term fi nancial shortfalls. Analysts, investors,
and board members start to question the imagination and
commitment of the companies’ management.
In our experience, however, breakdowns in a company’s
management system, not managers’ lack of ability or effort,
are what cause a company’s underperformance. By manage-
ment system, we’re referring to the integrated set of processes
and tools that a company uses to develop its strategy, translate
it into operational actions, and monitor and improve the effec-
tiveness of both. The failure to balance the tensions between
strategy and operations is pervasive: Various studies done in
the past 25 years indicate that 60% to 80% of companies fall
short of the success predicted from their new strategies.
By creating a closed-loop management system, compa-
nies can avoid such shortfalls. (See the exhibit “How the
Closed-Loop Management System Links Strategy and Opera-
tions.”) The loop comprises fi ve stages, beginning with strat-
egy development, which involves applying tools, processes,
and concepts such as mission, vision, and value statements;
SWOT analysis; shareholder value management; competi-
tive positioning; and core competencies to formulate a strat-
egy statement. That statement is then translated into specifi c
objectives and initiatives, using other tools and processes,
including strategy maps and balanced scorecards. Strategy
implementation, in turn, links strategy to operations with
a third set of tools and processes, including quality and pro-
cess management, reengineering, process dashboards, rolling
forecasts, activity-based costing, resource capacity planning,
and dynamic budgeting. As implementation progresses,
managers continually review internal operational data and
external data on competitors and the business environment.
Finally, managers periodically assess the strategy, updating it
when they learn that the assumptions underlying it are obso-
lete or faulty, which starts another loop around the system.
A system such as this must be handled carefully. Often the
breakdown occurs right at the beginning, with companies
formulating grand strategies that they then fail to translate
into goals and targets that their middle and lower manag-
ers understand and strive to achieve. Even when companies
do formalize their strategic objectives, many still struggle
because they do not link these objectives to tools that sup-
port the operational improvement processes that ultimately
must deliver on the strategy’s objectives. Or, like Conner,
they decide to mix discussions of operations and strategy
at the same meeting, causing a breakdown in the strategic-
learning feedback loop.
In the following pages we draw upon our extensive re-
search and experience advising companies, as well as non-
profi t and public sector entities, to describe the design and
implementation of a system for strategic planning, opera-
tional execution, and feedback and learning. We present
a range of tools that managers can apply at the different
stages, most developed by other management experts and
some of our own design. (See “A Management System Tool
Kit” on page 67 for further reading on the tools discussed.)
We will show how these can all be integrated in a system that
links the management of strategy and operations.
ST AG
E1 Develop the Strategy The management cycle begins with articulating the com-
pany’s strategy. This usually takes place at an annual off-
site meeting during which the management team either
incrementally improves an existing strategy or, on occasion,
introduces an entirely new one. (Our experience suggests
that strategies generally have three to fi ve years of useful
life.) Developing an entirely new strategy may take two sets
of meetings, each lasting two to three days. At the fi rst, ex-
ecutives should reexamine the company’s fundamental busi-
ness assumptions and its competitive environment. After
some homework and research, the executives will hold the
second set of meetings and decide on the new strategy. Typi-
cally, the CEO, other corporate offi cers, heads of business
and regional units, and senior functional staff attend these
strategy sessions. The agenda should explore the following
questions:
What business are we in and why? This question focuses
managers on high-level strategy planning concepts. Before for-
mulating a strategy, managers need to agree on their compa-
ny’s purpose (mission), its aspiration for future results (vision),
and the internal compass that will guide its actions (values).
The mission is a brief statement, typically one or two sen-
tences, that defi nes why the organization exists, especially
what it offers to its customers and clients. The pharma-
ceutical fi rm Novartis presents a good example: “We want
to discover, develop and successfully market innovative
Robert S. Kaplan ([email protected]) is the Baker Foundation Professor at Harvard Business School in Boston. David P. Norton
([email protected]) is the founder and director of the Palladium Group, based in Lincoln, Massachusetts. They are the authors of The
Execution Premium: Linking Strategy to Operations for Competitive Advantage (Harvard Business School Press, forthcoming in 2008).
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hbr.org | January 2008 | Harvard Business Review 65
Execute processes and initiatives
Operating plan
Dashboards
Budgets
Pro forma P&Ls
results
results
performance metrics
performance metrics
ST A
G E2 TRANSLATE
THE STRATEGY
Define strategic objectives and themes
Select measures and targets
Select strategic initiatives
PLAN OPERATIONS
Improve key processes
Develop sales plan
Plan resource capacity
Prepare budgets
ST A
G E 3
DEVELOP THE STRATEGY
Define mission, vision, and values
Conduct strategic analysis
Formulate strategy
ST A
G E1
TEST AND ADAPT THE STRATEGY
Conduct profitability analysis
Conduct strategy correlation analysis
Examine emerging strategies
ST A
G E5
ST A
G E 4 MONITOR
AND LEARN
Hold strategy reviews
Hold operational reviews
Strategic plan
Strategy map
Balanced scorecard
StratEx
How the Closed-Loop Management System Links Strategy and Operations
Most companies’ underperformance is due to breakdowns between strategy and operations. This diagram describes how to forge tight links between them in a fi ve-stage system. A company begins by developing a strategy statement and then translates it into the specifi c objectives and initiatives of a strategic plan. Using the strategic plan as a guide, the company maps out the operational plans and resources needed to achieve its objectives. As managers execute the strategic and operational plans, they con- tinually monitor and learn from internal results and external data on competitors and the business environment to see if the strategy is succeeding. Finally, they periodically reassess the strategy, updat- ing it if they learn that the assumptions underlying it are out-of-date or faulty, starting another loop around the system.
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66 Harvard Business Review | January 2008 | hbr.org
LEADERSHIP AND STRATEGY | Mastering the Management System
products to prevent and cure diseases, to ease suffering and
to enhance the quality of life. We also want to provide a
shareholder return that refl ects outstanding performance
and to adequately reward those who invest ideas and work
in our company.”
The vision is a concise statement that defi nes the mid- to
long-term (three- to 10-year) goals of the organization. Cigna
Property and Casualty, an insurance company division we
worked with in the 1990s, stated its goal this way: “to be
a top-quartile specialist within 5 years.” Though short, this
vision statement contained three vital components:
Stretch goal: “top quartile” in profi tability (at the time,
Cigna P&C was at the bottom of the fourth quartile).
Defi nition of market focus: “a specialist,” not a general-
purpose underwriter, as it was at the time.
A time line for execution: “5 years” (a heartbeat in the
slow-moving insurance industry).
The stretch goal in the vision statement should truly be
a diffi cult reach for the company in its present position. The
CEO has to take the lead here; indeed, one of the principal
roles of an effective leader, as Jim Collins and Jerry Porras
noted in Built to Last, is to formulate a “big, hairy, audacious
goal (BHAG)” that challenges even well-performing orga-
nizations to become much better. The classic example is
Jack Welch’s challenge for every GE business unit to become
number one or two in its industry. In determining a stretch
goal, it pays to look at the fi nancial market’s expectations as
a benchmark, since the company’s share price usually con-
tains an implicit estimate of future profi table growth, which
can be well beyond that achievable through incremental
improvements to existing businesses. If a company is setting
a new goal, rather than reaffi rming an established goal, man-
agers may need to undertake pre-offsite research and engage
in extensive discussion at the meeting.
Finally, the values (often called core values) of a company
prescribe the attitude, behavior, and character of an organi-
zation. Value statements, which are often lengthy, describe
the desirable attitudes and behavior the company wants to
promote as well as the forbidden conduct, such as bribery,
harassment, and confl icts of interest, that employees should
defi nitely avoid. These excerpts from the value statement of
the internet service provider Earthlink illustrate the compo-
nents of value statements:
We respect the individual, and believe that individuals
who are treated with respect and given responsibility
respond by giving their best.
We are frugal. We guard and conserve the company’s
resources with at least the same vigilance that we
would use to guard and conserve our own personal
resources.
We are believers in the Golden Rule. In all our dealings
we will strive to be friendly and courteous, as well as
fair and compassionate.
•
•
•
•
•
•
We feel a sense of urgency on any matters related to
our customers. We own problems and we are always
responsive. We are customer-driven.
The reaffi rmation of mission, vision, and values puts ex-
ecutives in the right mind-set for considering the rest of the
agenda and setting the company’s fundamental guidelines.
What are the key issues we face in our business? With
mission, vision, and values established, managers undertake
a strategic analysis of the company’s external and internal
situation. The management team studies the industry’s eco-
nomics using frameworks such as Michael Porter’s fi ve forces
model (bargaining power of buyers; bargaining power of sup-
pliers; availability of substitutes; threat of new entrants; and
industry rivalry). The team assesses the external macroeco-
nomic environment of growth, interest rates, currency move-
ments, input prices, regulations, and general expectations of
the corporation’s role in society. Often this is described as a
PESTEL analysis, encompassing political, economic, social,
technological, environmental, and legal factors. Managers can
then dive into competitiveness data and consider the dynam-
ics of the company’s fi nancial, technological, and market
performance relative to its industry and competitors.
After the external analysis, managers should assess the
company’s internal capabilities and performance. One ap-
proach is to use Michael Porter’s value chain model, catego-
rizing capabilities used in the processes that create markets;
develop, produce, and deliver products and services; and sell
to customers. Or the internal analysis could identify the dis-
tinctive resources and capabilities that give the fi rm a com-
petitive advantage. Finally, unless managers are introducing
an entirely new strategy, they will want to assess the perfor-
mance of the current strategy, a topic we discuss more later.
The next step is to summarize the conclusions from the
external and internal analyses in a classic SWOT matrix, as-
sessing the ability of internal attributes and external factors
to help or hinder the company’s achievement of its vision.
The aim here is to ensure that the strategy leverages inter-
nal strengths to pursue external opportunities, while coun-
tering weaknesses and threats (internal and external factors
that undermine successful strategy execution). This analysis
will reveal a series of issues that the strategy must address:
the best role for new products and services; whether new
partners need to be acquired; what new market segments
the company might enter; and which customer segments
are contracting. These issues will become the focus of the
strategy formulation process, which often takes place at a
subsequent meeting.
How can we best compete? Finally, managers tackle
the strategy formulation itself – the statement describing the
strategy and how the company proposes to achieve it. In this
step managers decide on a course of action that will create
a sustainable competitive advantage by distinguishing the
company’s offering from competitors’ and, ultimately, will
•
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hbr.org | January 2008 | Harvard Business Review 67
A Management System Tool Kit
Where to learn more about the concepts and frameworks described in this article
Develop the Strategy
Competitive Strategy
Michael E. Porter Competitive Advantage: Creating and Sustaining Superior Performance Free Press, 1985 (republished with a new introduction, 1998)
Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors Free Press, 1980 (republished with a new introduction, 1998)
Michael E. Porter “What Is Strategy?” Harvard Business Review November–December 1996
Chris Zook and James Allen Profi t from the Core: Growth Strategy in an Era of Turbulence Harvard Business School Press, 2001
Resource-Based Strategy
Jay B. Barney Gaining and Sustaining Competitive Advantage – 3rd edition Prentice-Hall, 2006
Jay B. Barney and Delwyn N. Clark Resource-Based Theory: Creating and Sustaining Competitive Advantage Oxford University Press, 2007
David J. Collis and Cynthia A. Montgomery
“ Competing on Resources: Strategy in the 1990s” Harvard Business Review July–August 1995
Gary Hamel and C.K. Prahalad Competing for the Future Harvard Business School Press, 1994
Blue Ocean Strategy
W. Chan Kim and Renée Mauborgne Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant Harvard Business School Press, 2005
Disruptive Strategy
Clayton M. Christensen and Michael E. Raynor The Innovator’s Solution: Creating and Sustaining Successful Growth Harvard Business School Press, 2003
Emergent Strategy
Gary Hamel “Strategy Innovation and the Quest for Value” Sloan Management Review Winter 1998
Henry Mintzberg “Crafting Strategy” Harvard Business Review July–August 1987
Translate the Strategy
Robert S. Kaplan and David P. Norton The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment Harvard Business School Press, 2000
Robert S. Kaplan and David P. Norton Strategy Maps: Converting Intangible Assets into Tangible Outcomes Harvard Business School Press, 2004
Robert S. Kaplan and David P. Norton The Execution Premium: Linking Strategy to Operations for Competitive Advantage Harvard Business School Press, 2008
Plan Operations
Process Improvement
Wayne W. Eckerson Performance Dashboards: Measuring, Monitoring, and Managing Your Business John Wiley & Sons, 2006
Michael Hammer Beyond Reengineering: How the Process-Centered Organization Is Changing Our Work and Our Lives HarperBusiness, 1996
Peter S. Pande, Robert P. Neuman, and Roland R. Cavanagh The Six Sigma Way: How GE, Motorola, and Other Top Companies Are Honing Their Performance McGraw-Hill, 2000
James P. Womack, Daniel T. Jones, and Daniel Roos The Machine That Changed the World: The Story of Lean Production Macmillan, 1990
Budgeting and Planning Resource Capacity
Jeremy Hope and Robin Fraser Beyond Budgeting: How Managers Can Break Free from the Annual Performance Trap Harvard Business School Press, 2003
Robert S. Kaplan and Steven R. Anderson Time-Driven Activity-Based Costing: A Simpler and More Powerful Path to Higher Profi ts Harvard Business School Press, 2007
Test and Adapt Strategy
Dennis Campbell, Srikant Datar, Susan L. Kulp, and V.G. Narayanan
“ Testing Strategy Formulation and Implementation Using Strategically Linked Performance Measures” HBS Working Paper, 2006
Thomas H. Davenport and Jeanne G. Harris Competing on Analytics: The New Science of Winning Harvard Business School Press, 2007
Anthony J. Rucci, Steven P. Kirn, and Richard T. Quinn
“ The Employee-Customer-Profi t Chain at Sears” Harvard Business Review January–February 1998
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68 Harvard Business Review | January 2008 | hbr.org
LEADERSHIP AND STRATEGY | Mastering the Management System
lead to superior fi nancial performance. The strategy must
respond, in some form, to the following questions:
Which customers or markets will we target?
What is the value proposition that distinguishes us?
What key processes give us competitive advantage?
What are the human capital capabilities required to excel
at these key processes?
What are the technology enablers of the strategy?
What are the organizational enablers required for the
strategy?
Managers can draw upon an abundance of models and
frameworks as they formulate the strategy. Michael Porter’s
original competitive advantage framework, for example, pre-
sented the strategy decision as a choice between whether
to provide generic low-cost products and services or more
differentiated and customized ones for specifi c market and
customer segments. The Blue Ocean approach, popularized
by W. Chan Kim and Renée Mauborgne, helps companies
search for new market positions by creating new value prop-
ositions for a large customer base. Resource-based strategists
(including those in the core competencies school) empha-
size critical processes – such as innovation or continual cost
reduction – that the company does better than competitors
and can leverage into multiple markets and segments. Clay
Christensen has identifi ed how new entrants can disrupt
established markets by offering an initially less capable prod-
uct or service at a much lower price to attract a large cus-
tomer base not targeted by the market leaders.
We are agnostic with respect to these frameworks; we
have seen each one we’ve described be highly successful.
Which among them is the right choice probably depends
on a company’s circumstances and its competitive analysis.
The Porter and resource-based frameworks help companies
leverage existing competitive positions or internal capabil-
ities, whereas the Blue Ocean and disruptive technology
frameworks help them search for entirely new positions.
ST AG
E2 Translate the Strategy Once the strategy has been formulated, managers need to
translate it into objectives and measures that can be clearly
communicated to all units and employees. Our own work
on developing strategy maps and balanced scorecards has
contributed to this translation stage.
The strategy map provides a powerful tool for visualiz-
ing the strategy as a chain of cause-and-effect relationships
among strategic objectives. The chain starts with the com-
pany’s long-term fi nancial objectives and then links down
to objectives for customer loyalty and the company’s value
propositions. From there, it links to goals related to criti-
cal processes and, ultimately, to the people, the technology,
and the organizational climate and culture required for suc-
cessful strategy execution. Typically, a large corporation will
•
•
•
•
•
•
create an overall corporate strategy map and then link it to
strategy maps for each of its operating and functional units.
Even though a strategy map reduces a complex strategy
statement to a single page, we have learned that many man-
agers fi nd the multiple objectives (typically, 15 to 25) on a
map, along with their corresponding measures and targets,
somewhat complex to understand and manage. Some of
a map’s objectives relate to short-term cost reduction and
quality improvements while others refl ect long-term innova-
tion and relationship goals. Managers often fi nd it challeng-
ing to balance these myriad objectives.
In our recent work, we’ve found that companies can sim-
plify the structure and use of a strategy map by chun
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