Concentrated Knowledgeª for the Busy Executive ¥ www.summary.com Vol. 26, No. 4 (2 parts) Part 1, April 2004 ¥ Order # 26-09 IE STRATEGIC MANAGEMENT FILE:

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Converting Intangible Assets Into Tangible Outcomes STRATEGY MAPS

THE SUMMARY IN BRIEF More than 75 percent of the average company’s market value comes from intangible assets that traditional metrics don’t measure. The Balanced By Robert S. Kaplan and Scorecard is a revolutionary performance measurement system that allows David P. Norton organizations to quantify critical intangible assets, such as people, informa- tion and culture. Now the people who first developed the Balanced Scorecard, Robert S. Kaplan and David P. Norton, have created a powerful new tool based on their ongoing research. The strategy map allows compa- nies to describe the links between intangible assets and value creation so CONTENTS all aspects of strategy can be implemented in a manner that ensures sus- Strategy Maps tained value creation. Pages 2, 3 The strategy map allows managers to align investments in people, tech- Value-Creating Processes nology and organization capital for the greatest impact. By paying close Pages 3, 4, 5 attention to improving internal processes such as operations, customer rela- tionships, innovation and culture — and making proper investments in Manage Risk intangible assets — human capital, information capital, and organization Page 3 capital management can implement a structured plan to achieve strategic Innovation Through success. Operations Page 4 What You’ll Learn In This Summary Intangible Assets Pages 5, 6, 7 ✓ Which organizational processes are most critical for enhancing produc- Triple Bottom-Line tivity. Strategy Map ✓ How to understand a strategy map and the cause-and-effect relation- Page 5 ships between processes and intangible assets. ✓ Building Strategies and How to manage internal processes to achieve your differentiated value Strategy Maps proposition. Pages 7, 8 ✓ How to define and measure intangible assets and then integrate and align them with strategy for true value. IBM’s Complete Customer ✓ Solution How to develop a customized strategy map for your company based on your unique strategy and goals. Page 8 ✓ How to plan an implementation campaign based on the strategy map.

Published by Soundview Executive Book Summaries, P.O. Box 1053, Concordville, Pennsylvania 19331 USA ©2004 Soundview Executive Book Summaries ¥ All rights reserved. Reproduction in whole or part is prohibited. STRATEGY MAPS by Robert S. Kaplan and David P. Norton — THE COMPLETE SUMMARY

A Strategy Map Represents How the Organization Creates Value Productivity Strategy Long-Term Growth Strategy Financial Shareholder Value Perspective Improve Cost Increase Asset Expand Revenue Enhance Structure Utilization Opportunities Customer Value

Customer Customer Value Proposition Perspective Price Quality Availability Selection Functionality Service Partnership Brand Product/Services Attributes Relationship Image

Operations Management Customer Management Innovation Regulatory and Social Internal Processes Processes Processes Processes Perspective • Supply • Distribution • Selection • Retention • Opportunity ID • Design/Develop • Environment • Employment • Production • Risk Management • Acquisition • Growth • R&D Portfolio • Launch • Safety and Health • Community

Human Capital Learning and Growth Information Capital Perspective Organization Capital Culture Leadership Alignment Teamwork

Strategy Maps also identifies the specific capabilities in the organiza- tion’s intangible assets that are required for delivering A strategy describes how an organization can create exceptional performance in critical internal processes. sustained value for its shareholders, customers and com- The strategy map is based on several principles, includ- munities. Most organizations have different methods of ing the following: communication, alignment and implementation, but the ● Balanced Scorecard (BSC) is an effective way for non- Strategy balances the contradictory forces of profits and public-sector organizations to describe short-term financial objectives for cost reduction and strategies for creating value. The BSC includes the lag- increased productivity, and the long-term objective of ging indicators of financial performance and customer profitable revenue growth. ● value proposition, and the leading indicators of internal Strategy is based on a differentiated customer processes as well as learning and growth. (continued on page 3)

Measure With the Strategy Map The authors: Robert S. Kaplan is the Marvin Bower The strategy map is a visual framework of the cause- Professor of Leadership Development at Harvard Business and-effect relationships among the components of an School and chairman of the Balanced Scorecard organization’s strategy, and it is used to integrate the Collaborative. David P. Norton is co-founder and president four perspectives of a BSC — financial, customer, inter- of the Balanced Scorecard Collaborative. Book Copyright© 2004 by Harvard Business School nal, and learning and growth. It provides a uniform and Publishing Corp. Summarized by permission of the pub- consistent way to describe strategy so the objectives and lisher, Harvard Business School Press, 60 Harvard Way, measures on the BSC can be established and managed. Boston, MA 02163. 454 pages. $35.00. ISBN 1-59139- It illustrates the time-based dynamics of a strategy and 134-2. the relationships that link desired outcomes in the cus- Summary Copyright© 2004 by Soundview Executive tomer and financial perspectives to outstanding perfor- Book Summaries. www.summary.com, 800-521-1227, mance in critical internal processes. These processes in 610-558-9495. turn create and deliver the organization’s value proposi- tion to targeted customers and promote productivity For Additional Information on the authors, go to: objectives in the financial perspective. The strategy map http://my.summary.com Published by Soundview Executive Book Summaries (ISSN 0747-2196), P.O. Box 1053, Concordville, PA 19331 Soundview USA, a division of Concentrated Knowledge Corporation. Published monthly. Subscriptions: $195 per year in U.S., Executive Book Summaries¨ Canada & Mexico, and $275 to all other countries. Periodicals postage paid at Concordville, PA and additional offices. Postmaster: Send address changes to Soundview, P.O. Box 1053, Concordville, PA 19331. Copyright © 2004 by GREER MCPHADEN – Senior Contributing Editor Soundview Executive Book Summaries. DEBRA A. DEPRINZIO – Art and Design Available formats: Summaries are available in print, audio and electronic formats. To subscribe, call us at CHRIS LAUER – Managing Editor 1-800-521-1227 (1-610-558-9495 outside U.S. & Canada), or order on the Internet at www.summary.com. CHRISTOPHER G. MURRAY – Editor-in-Chief Multiple-subscription discounts and Corporate Site Licenses are also available. GEORGE Y. C LEMENT – Publisher 2 Soundview Executive Book Summaries¨ Strategy Maps — SUMMARY Strategy Maps (continued from page 2) Manage Risk value proposition, because satisfying customers is the source of sustainable value creation. Companies can manage risk by modifying opera- ● tions. For example, Microsoft uses an operating poli- Value is created through internal business cy of employing large numbers of temporary work- processes. Strategy maps and BSCs describe what the ers who can be laid off if business slows down. organization hopes to achieve, that is, strategic themes. Disney built its major theme parks in areas where ● Strategy consists of simultaneous, complemen- weather is generally pleasant and predictable: tary themes or clusters of internal processes that deliv- Anaheim, Calif., and Orlando, Fla. This lowers the er benefits at different points in time. volatility of theme park revenues due to weather con- ● Strategic alignment determines the value of ditions. Companies can also take operating actions intangible assets. The three components in the learning to reduce the risk that their products or services will and growth perspective are human, information and be made technologically obsolete by competitors or organization capital. ■ by employee actions that can damage their brand and company reputation.

Value-Creating Processes service. There are a few processes that companies must focus 4. Manage risk. Do more than just avoid income and on to deliver a differentiating value proposition and that cash-flow fluctuations. Create shareholder value in ways are most critical for enhancing productivity and main- that investors cannot accomplish on their own. Reduce taining an organization’s franchise to operate. costs of financial distress, such as bankruptcy; moderate ● Operations Management. Producing and deliver- the risk faced by important nondiversified investors; ing products and services to customers. decrease taxes; reduce monitoring costs; and lower the ● Customer Management. Establishing and leverag- cost of capital. ing customer relationships. Activity-based management (ABM) and total quality ● Innovation. Developing new products, services, management (TQM) are two ways to help employees processes and relationships. make fundamental improvements in operating processes ● Regulatory and Social. Conforming to regulations by determining the cost of a process and then improving and societal expectations and building stronger commu- it. The five steps of ABM are: nities. 1. Develop the business case. Executives practicing the art of strategy must identify 2. Establish priorities. the critical few processes that are the most important for 3. Provide cost justification. creating and delivering their differentiating customer 4. Track the benefits. value proposition. 5. Measure performance for ongoing improvement. Operations Management Processes Strategy maps can provide significant value to compa- There are four ways organizations can improve their nies using other quality programs in these four ways: operations management processes to deliver goods and 1. They provide explicit and testable causal link- services: ages between strategy and reality. 1. Develop and sustain supplier relationships. The 2. They establish targets beyond existing best prac- best suppliers are low-cost, not just low-price. Lower tices. the total cost of acquiring goods or services by: working 3. They identify entirely new processes that are with suppliers to achieve just-in-time capability; seeking critical for achieving strategic objectives. their new ideas and suggestions; outsourcing; and estab- 4. They set strategic priorities for process enhance- lishing supplier partnerships to provide services directly ments. to customers. 2. Produce products and services. Lower the cost of Customer Management Processes production by continuously improving process quality, In the past, customer management focused on transac- process responsiveness, fixed asset utilization, and tions — promoting and selling the company’s products. working capital efficiency. 3. Distribute and deliver products and services to (continued on page 4) customers. Deliver responsively to customers, lower the For Additional Information about Activity-Based Management, cost to serve them, and enhance the quality of delivery go to: http://my.summary.com Soundview Executive Book Summaries¨ 3 Strategy Maps — SUMMARY Value-Creating Processes Financial measures include sales from new products (continued from page 3) and revenue mix versus target. Learning and growth linkages require strong support from information tech- Building customer relationships was not a priority. Now nology, such as databases; employee competencies, such that technology allows customers to launch their own as customer marketing and service; and a customer-cen- transactions, the balance of power has shifted to them. tric culture and climate. Customer management processes must help the compa- ny acquire, sustain and grow long-term, profitable rela- Innovation Processes tionships with targeted customers. Maintaining competitive advantage requires continual Customer management must: innovation to drive customer acquisition and growth, ● Select customers. Identify attractive segments, craft margin enhancement, and customer loyalty. Despite its a value proposition to appeal to those segments, and importance, innovation is often overlooked in favor of create a brand image that will attract those segments to other management processes. the company’s products and services. Managing innovation should include four important ● Acquire customers. Communicate the company’s processes: value proposition to the market, secure prospects, con- 1. Identify opportunities for new products and ser- vert them to customers, and build dealer relationships. vices. Anticipate future customer needs by consulting ● Retain customers. Ensure quality, create value- external sources and customers. Develop new, more added partnerships, correct problems, and transform cus- effective, or safer products to meet their needs. tomers into highly satisfied raving fans. 2. Manage the research and development portfolio. ● Grow relationships with customers. Get to know Actively manage the product/offer portfolio that customers, build relationships with them, and increase includes a mix of different kinds of projects: new sci- the company’s share in customers’ purchasing activity. ence and technology; entirely new products; the next Customer management processes focus on the rela- generation of existing products; enhanced features for tionship and image dimensions of the basic customer specific market segments; and alliance projects through value proposition. Effectively acquiring customers acquisitions, licensing or subcontracting. improves the customer perspective of the strategy map. 3. Design and develop new products and services. The effects of the financial perspective of the strategy Use a specific development process with explicit goals come primarily through related revenue growth. to bring new concepts to market. Develop a concept, plan a product, and engage in detailed product and process engineering. Manage the project portfolio, Innovation Through Operations reduce development cycle time, and manage develop- ment cycle cost. Identifying the specific functionality of a product or 4. Bring new products and services to market. service that is of interest to the customer and being When new products are developed, manage a rapid first-to-market are both important objectives for the launch, effectively produce the new products, and effec- innovation process to provide customers with the tively market, distribute and sell the new products. value proposition. For example, continuous reductions in the size of the basic memory or processing chip in Excellent innovation processes affect different areas of semiconductors generate advantages in speed and the strategy map. They offer customers a value proposi- functionality of the device. And for innovative compa- tion by supplying specific performance attributes in a nies, being six months late in product innovation timely manner and extending existing or new products could be more costly than a 20 percent overrun. A into new markets. The financial aspect of the strategy third customer objective is to innovate by extending map achieves revenue growth and enhanced margins existing or new products into new markets. Honda’s from innovative products and services that offer distinct excellence in engine performance was originally devel- advantages over competitor products. For innovation, the oped for motorcycles and cars. Now the company has learning and growth perspective of organizations needs entered other segments such as lawnmowers and expertise in the underlying science and technology for backup engines for utilities. Canon’s product leader- new products; a high-level information technology to cre- ship in optics for cameras has been leveraged into ate and deliver products; teamwork both within the com- products for printers, copiers and medical electronics. pany and with external idea sources; and a culture that E-Bay expanded its consumer auction capability into a (continued on page 5) powerful tool for selling used and reconditioned com- mercial equipment. For Additional Information on structured innovation processes, go to: http://my.summary.com

4 Soundview Executive Book Summaries¨ Strategy Maps — SUMMARY Value-Creating Processes (continued from page 4) Triple Bottom-Line Strategy Map emphasizes innovation, disruption and change. Amanco is a company in Latin America that pro- Regulatory and Social Processes duces and markets plastic pipes and fittings for fluid transportation. Its mission is to profitably produce At a minimum, companies must comply with national and sell complete, innovative, world-class solutions and local regulations on the environment, employee for the transportation and control of fluids while health and safety, and hiring and employer practices to operating in a framework of ethics, eco-efficiency avoid shutdowns or litigation. They should also strive to and social responsibility. In 2002, the company enhance their reputations among customers, investors, revised an earlier sustainability scorecard to align their community, and potential and current employees. better with the BSC framework. Be as rigorous in assessing returns from community The company’s strategy map shows Amanco’s investments as other investments. commitment to triple bottom-line performance: 1. Environment. Because of extensive regulation, 1.Create economic value sustainably. organizations are forced to consider issues like energy 2.Generate value through a system of corporate and resource consumption, water emissions, solid waste social responsibility. production and disposal, and aggregate environmental 3.Generate value through environmental man- measures. To leverage their environmental capabilities agement. to create shareholder value, organizations reduce costs The financial, customer, process and technology with waste management, differentiate their products by dimensions support this strategy with specific objec- offering environmentally friendly products, manage tives and targets: 10 percent annual sales increases; their competitors by creating voluntary standards, rede- measuring on-time delivery; adding a screening fine their markets with recycling programs, and manage phase to product development to determine health risk by providing their people with better information. and environmental impact; using e-business to cre- 2. Safety and health performance. Different mea- ate a deeper knowledge of customer needs; and sures include Occupational Safety and Health measuring job satisfaction. Administration (OSHA) requirements, lost workdays, Amanco adds a fifth dimension: environmental accidents and illnesses per hours worked, off-the-job and social. The environmental performance objec- injuries, or employee exposures to hazardous com- tives are to reduce per-unit inputs and wastes from pounds. Determine what makes the most sense to your products and processes by measuring per-unit ener- organization given your strategy and other processes. gy and water consumption and the waste and scrap 3. Employment practices. Much of the quantitative of raw materials. Its social impacts objectives relate reporting about employment practices focuses on to community development projects throughout achieving employee diversity. Companies should not Latin America; each operating company must imple- just have employee practices on their BSC to comply ment at least one project with a nongovernmental organization (NGO) in a local community. with regulatory reporting standards, but to explicitly The company now communicates the strategy drive the strategy toward enhancing shareholder value. more objectively and clearly, so executives and 4. Community investment. This can be achieved employees better understand strategic goals and the through employee volunteerism, corporate foundations, triple bottom line. and other philanthropic efforts. Though many compa- nies report on the investments they make in community- based organizations, there are no measures for evaluat- and growth perspective of the BSC shows how an orga- ing the outcomes. Executives should demand tangible nization can align its intangible assets to its strategy. returns from community-based programs as they would There are objectives and measures for three components from any other investment. ■ of intangible assets: human capital, information capital, and organization capital. They must be aligned with the objectives for the internal processes and integrated with Intangible Assets each other so there are synergies among them. Three Intangible assets are invaluable to sustainable value targeted approaches are strategic job families, the strate- creation, but their value derives from their interrelation gic IT portfolio, and the organization change agenda. and cannot be measured independently. Their soft nature (continued on page 6) makes measurement more subjective than financial mea- surements of organizational performance. The learning For Additional Information on a Strategic Readiness Report, go to: http://my.summary.com

Soundview Executive Book Summaries¨ 5 Strategy Maps — SUMMARY Intangible Assets required by successful occupants in a position. Use the (continued from page 5) profile when recruiting, hiring, training and developing people for that position. Aligning Intangible Assets to Strategy Step 3: Assess human capital readiness. Drawing Strategic alignment is the dominant principle in creat- from approaches ranging from self assessments to 360- ing value from intangible assets. Even if IT and HR are degree feedback, evaluate an individual’s performance both well developed in your company, they are probably and potential in these critical job families. Provide indi- not strategically aligned. The strategy map and BSC viduals with a clear understanding of their objectives, enable organizations to describe intangible assets, align meaningful competency and performance feedback, and and integrate them to the strategy, and measure the a practical approach for future personal development. If assets and their alignment. a strategy map reveals the need for strategic job families The typical strategy maps and BSC focus on strategic that don’t exist yet, create new job profiles based on the competencies, strategic information, culture, leadership, competencies required for the new processes. alignment and teamwork. The strategy map creates Step 4: The human capital development program. alignment and integration by providing a common point Under the strategic job family model, the organization of reference for the enterprise strategy. The internal per- concentrates HR programs on the critical few jobs that spective identifies the critical few processes that create are pivotal to the strategy. This focus creates speed of desired outcomes for customers and shareholders. action and efficient spending, but this approach implies Identify the strategic job families, define their compe- that many jobs are nonstrategic. The strategic values tencies, their portfolio of technology investments, and model assumes that strategy is everyone’s job and part the culture they need. Then, by developing, aligning and of everyone’s objectives and actions. Both models are integrating your intangible assets to these few strategic legitimate, but don’t work well as one integrated pro- processes, you can create the greatest returns. gram. They should be segregated and funded separately. Finally, you measure the intangible assets. Their value Closing competency gaps in strategic job families does not come from how much they cost, but how well should be the basis for reporting on strategic human they align to the strategic priorities of the enterprise. capital readiness. The strategic values model provides Prepare a Strategic Readiness Profile based on the prin- the basis for a revised performance management pro- ciples of a balance sheet, where assets are ranked by gram for setting objectives for the entire work force. their liquidity. Strategic readiness, analogous to liquidi- Information Capital Readiness ty, describes the status of intangible assets and their ability to convert to higher sales and lower spending — Information capital (IC) is the raw material for creat- cash. Strategic readiness is converted into tangible value ing value in the new economy. IC includes systems, when internal processes increase revenue and profit. A databases, libraries and networks, and makes informa- Strategic Readiness Report shows consolidated snap- tion and knowledge available to the organization. IC has shots of the ability of each class of intangible asset to value only in the context of the strategy. fulfill its strategic role by defining the asset, aligning it To align IC with the company’s strategy: to the strategy, and measuring the degree of readiness. 1. Describe information capital. IC has two compo- Human Capital Readiness nents: technology infrastructure, such as mainframes and communication networks; and information capital Companies must develop a measure of human capital applications, a package of information, knowledge and readiness to represent the availability of employee technology. Information capital applications build on the skills, talent and know-how to perform the internal infrastructure to support the organization’s key internal processes critical to the strategy’s success. processes. They can affect business transactions, ana- To do this, companies must: lyze information, or transform the prevailing business Step 1: Identify strategic job families. All jobs are model of the enterprise. Together, technology infrastruc- important to the organization but some jobs have a ture and information capital applications form the infor- much greater impact on the strategy than others. mation capital portfolio. Step 2: Build the competency profile. One way to 2. Align information capital to the strategy. do this is to interview those who best understand the job Typically, 90 percent of the sizable annual expenses for requirements of a job family and create a competency a typical IT budget go to existing applications, with lit- profile detailing the knowledge, skills and values (continued on page 7)

For Additional Information on strategic job families, For Additional Information about describing information capital, go to: http://my.summary.com go to: http://my.summary.com

6 Soundview Executive Book Summaries¨ Strategy Maps — SUMMARY Intangible Assets development process must have a leadership competen- (continued from page 6) cy model to guide the development process, and compa- nies focused on leadership competencies must have tle left for the discretionary investment that funds strate- leadership development programs. gic alignment. Companies can increase operating effi- 3. Alignment. Alignment requires all employees to be ciencies to provide more discretionary money, but too empowered in the same direction. First, leaders must much new informational capital too quickly cannot be create awareness of the high-level strategic objectives to effectively absorbed. Depending on the strategy, 5 to 15 all employees in ways they can understand. Next, they percent of the budget is the goal for total information must ensure that individuals and teams have local objec- capital spending. This spending can either replace obso- tives and rewards that contribute to achieving targets for lete systems with state-of-the-art technology or apply high-level strategic objectives. totally new technology to new applications. 4. Teamwork and knowledge sharing. There’s no 3. Measure information capital readiness. greater waste than a good idea used only once. Information capital strategic readiness measures the Companies must generate, organize and develop knowl- degree of preparedness of the organization’s information edge, and distribute it through a “push system” or by capital to support the enterprise’s strategy. The most fre- providing easy access when people are searching for quently used approach is a numerical indicator that existing information relevant to their immediate needs. identifies the status of each application. Management provides the subjective judgment for where to invest The strategy map and a BSC should focus on these resources to create strategic readiness. Greater rigor can attributes as they relate to the company’s change agen- come from more quantitative, objective assessments of da. Use the strategic objective and the measure you are their application portfolios, such as surveying users using for each attribute to create an organization capital about their satisfaction with each application, financial readiness report and determine the organizational analysis of each application, and technical audits of the changes required to implement the strategy. infrastructure of each application. Management should create targets for each of the mea- sures that represent a significant improvement from Organization Capital Readiness existing performance. HR can then develop a program Organization capital is the ability of the organization that aligns HR organization investments to the enter- to mobilize and sustain the process of change required prise strategy. ■ to execute the strategy. It provides the capability for For Additional Information about measuring climate and culture, integration and alignment of intangible and tangible go to: http://my.summary.com assets with the strategy by changing behavior based on the strategy map. Organization capital is typically built on four compo- nents: Building Strategies and 1. Culture. The predominant attitudes and behaviors Strategy Maps that characterize the functioning of an organization An organization’s strategy map and BSC should tell a should back up the organization’s strategy. The BSC story that differentiates the organization from competi- forces the ambiguous replies to employee surveys to be tors. It should show the interrelationships among the defined more precisely. There are models for measuring organization’s internal processes and intangible assets culture and climate, but all are imperfect due to their that create sustainable competitive advantage. incredible subjectivity. One option is to design a ques- Customizing Your Strategy Map tionnaire specifically to evaluate the company’s value proposition. No organization can excel at every internal process 2. Leadership. Leadership to manage transformation- and learning and growth objective. They differ in priori- al change is a core requirement for becoming a strategy- ty based on the strategy. Keep in mind Michael Porter’s focused organization. Two approaches have been used argument that “[p]ositions built on systems of activities to define the role of leadership. The leadership develop- are far more substantial than those built on individual ment process focuses on how leaders are developed in activities.” an organization. The leadership competency model A sustainable strategy seeks to capture the most value focuses on what a leader should be by describing appro- from the entire value chain. priate traits. Process developments use objective, verifi- Total value creation can be split into three segments: able indicators, such as key positions without successors ● Value captured by supplier. The prices paid to or number of external hires. Companies focused on the (continued on page 8) Soundview Executive Book Summaries¨ 7 Strategy Maps — SUMMARY Building Strategies and Strategy Maps (continued from page 7) IBM’s Complete employees and suppliers less opportunity cost for pro- Customer Solution viding products and services to the company. ● Value captured by company. Net price received IBM dominated the computer industry from 1960 from customers less prices paid to employees and sup- to 1980. The company did not offer the lowest pliers for products or services sold. prices; it did not often deliver its new products on ● Value captured by customers. The difference time; and its products were not the most technically advanced, most powerful or fastest. But IBM did between the maximum price customers are willing to pay offer its customers a complete personalized solution for products and services and the actual prices they paid. to their problems. The company provided hardware, Value created is distributed among these three value software, installation, field service, training, educa- participants depending on their relative strength and tion and consulting. Bonding with the customer in bargaining power. this way enabled IBM to earn exceptional returns Strategies position the company where it can capture over a long period of time until technology changed value and make an attractive profit. Undifferentiated and the company could not keep up. products allow customers to capture most of the value created. No matter what sustainable strategy a company uses, it should develop a customized strategy map that ing the cause-and-effect relationships in the strategy represents its value proposition, and its alignment of map; define the time line by determining how strategic internal processes and learning and growth capabilities themes will create value in short-, medium- and long- that will deliver superior financial performance. term horizons to create sustained value creation; and select the initiatives, the ultimate drivers of change that ● A low total cost strategy requires delivering con- will close the gaps between projected and current per- sistent quality, reduced product acquisition time for cus- formance. tomers, and a somewhat limited selection. These compa- nies should focus on operation management processes. Planning the campaign is a six-step process to con- duct scenario planning exercises while the strategy map ● A product leadership strategy requires being first- is being built: to-market, capturing high market share where switching costs are large, and extending superior functionality of 1. Define the shareholder/stakeholder value gap. their products into multiple market segments. These Define the overarching objectives and measures, identi- companies should highlight innovation processes. fy the targets and value gap, and allocate the value gap ● A complete customer solution strategy requires to growth and productivity goals. building long-term relationships with customers, devel- 2. Reconcile the customer value proposition. oping complete customer solutions, providing excellent Clarify target customer segments and customer value service, and forging quality relationships. These compa- propositions, select measures, and reconcile customer nies need to focus on customer management processes. objectives with financial growth goals. ● Lock-in strategies require creating high switching 3. Establish the value time line. Show how the value costs for customers, creating industry standards, or sell- gap will be closed over the established planning horizon ing an initial product that needs endless upkeep, such as by allocating it to different themes. a razor that continually requires new blades. Companies 4. Identify strategic themes. Identify the critical few relying on this strategy need to put attention into many processes that have the greatest impact and establish types of internal processes. measures and targets. Planning the Campaign 5. Create strategic asset readiness. After defining the human, information and organization capital A strategy map is a one-page representation of the required to support the strategy, assess the readiness of cause-and-effect linkages among the objectives for both the assets to support the strategy, and establish measures the outcomes and drivers of strategy. The objectives in and targets. the map are converted to the BSC of measures, targets and initiatives. But the strategy map is only a static rep- 6. Identify and fund the strategic initiatives. Clarify resentation. In order to create a dynamic strategy, man- and secure funding for the strategy after establishing agers must quantify by establishing targets and validat- specific initiatives required to support the processes and to develop the intangible assets. ■

For Additional Information on a lock-in strategy, For Additional Information on planning the campaign, go to: http://my.summary.com go to: http://my.summary.com 8 Soundview Executive Book Summaries¨