Strategy maps have always been an important and essential part of most businesses. A strategy map translates an organization’s strategic objectives into a visual graphic that represents the current plan and understanding of cause-and-effect relationships among performance measures. The Strategy mapping creation and planning process, if done correctly, forces managers to translate what they need to achieve into simple and measurable performance outcomes that are then used to monitor progress toward realization of strategic objectives.
A Strategy map also becomes a great communication and goal alignment tool helping employees understand how they can best direct their actions and resources to help the organization execute the plan and achieve its strategic objectives.
But many organizations today face an ever-evolving fast paced business environment, encountering changes to operating conditions - some predictable and some are difficult to foresee - all frequently and potentially impacting strategy maps and their effectiveness. The frequency and magnitude of such changes have increased in recent years, with examples ranging from major technological breakthroughs (e.g., AI) to pandemics to geopolitical conflicts, all with the potential to significantly impact how businesses operate, survive and essentially win.
So how does this "fast changing real world" impact the accuracy and effectiveness of Strategy maps? Could the the value of developing and communicating a strategy map become questionable given the likelihood that it will quickly become outdated as the organization’s business environment evolves? Additionally, would using an outdated and inaccurate strategy map for decision-making purposes end up harming rather than benefiting the organization? Let's dig into this.
But first, let's be very clear, data has proven that a well constructed strategy map is an essential and useful tool when it’s accurate, but we also know based on data that it can also cause problems when it becomes outdated as the organization’s business environment evolves.
An Accurate Strategy Map in fast paced Business
When a strategy map accurately represents the cause-and-effect relationships focused on setting the course for investment, resource allocation and execution in the right areas, we see a 90% success rate. This result supports the idea that an accurate strategy is an extremely powerful tool to help managers direct their attention, effort, and resources to enable the organization to achieve its strategic objectives.
An Inaccurate Strategy Map in fast paced Business
What happens when the competitive landscape for a company quickly evolves such that the expected outcomes change from the one represented by the initially accurate strategy map? That is, what happens when a strategy map becomes outdated? An outdated strategy map will actually do the opposite of an accurate strategy map and put businesses into the group of 90% failures of strategy execution.
The trick to avoiding an inaccurate strategy map is to somehow "re-train" how leaders and managers approach their decision making process. All humans, in general, have a tendency to process information by looking for and interpreting information that is consistent with their current beliefs. This tendency has a name - it's called "confirmation bias". Since all leaders and managers are indeed human, this tendency applies to them as well. There are a number of articles, research papers and books written on the topic of "confirmation bias" - all we need to understand here is "confirmation bias" is one of the key reasons strategy maps become inaccurate in today's changing and fast paced business world. Leaders simply do not immediately see the crippling effect this has a what once was an accurate strategy map because they do not have the mind set of continuously testing and re-testing their initial assumptions and hypothesis.
How can this be fixed? Keep reading, the answers may surprise you and be something you can do right now without changing your culture!
Hypothesis Testing
We hear all about various consulting companies discuss "top down" and "bottom up" approaches in order to solve problems and achieve objectives. In the top down approach, there is a repeating cycle of forming and testing a hypotheses following these "simple" steps:
Form a hypothesis about the problem or objective and determine the data needed to test the hypothesis
Gather and analyze data, comparing the result to the hypothesis
Update the model of the problem/objective space and form a new hypothesis
Repeat
So, at a high level, applying hypothesis testing "process" to your strategy map should keep your strategy map accurate by forcing leaders and managers to continuously challenge their initial hypothesis.
But what about the details, how is this done in the real world? This seems like a big culture change to move from the way we think now to a new way of thinking.
Let's take a look at Key Performance Indicators ... or KPIs, and how they can help.
Key Performance Indicators (KPIs)
Let's make sure we all understand definitions.
Indicators are statistical values to measure current conditions as well as forecast trends and outcomes. A Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives. Examples of business objectives can range from predictability, early ROI, and innovation, to lower costs, quality, and product fit.
So why am I introducing KPIs in this discussion? In basic analysis, we use indicators that quantify current conditions to provide insight into the future. Lagging indicators quantify current conditions. Leading indicators provide insight into the future. See where I'm going with this? Let's continue with more definition ...
A "Lagging Indicator"
Lagging indicators are typically “output” oriented. They are easy to measure but hard to improve or influence. A lagging indicator is one that usually follows an event. The importance of a lagging indicator is its ability to confirm that a pattern is occurring. Here is an example: Many organizations have a goal to deliver some kind of scope on a specific release date. Items Delivered with that scope is a clear lagging indicator that is easy to measure by simply "Go look at a list of items that are done and delivered".
But how do you reach your future release objective of items delivered? Let's look at leading indicators.
A "Leading Indicator"
These indicators are easier to influence but hard(er) to measure. It's harder because you have to put processes and tools in place in order to measure them. When you start building product with specific scope, a lot of what you will understand and build will emerge over time. With changing business environments, you don’t know exactly what the level of effort is, until you finish. And given shifting business priorities and dependencies, your lagging indicator is also a moving target. If you use leading indicators, you can see if you’re tracking in the right direction. You can use the leading indicators to make changes to behavior or environment helping keep your strategy map updated and accurate!
Leading and lagging indicators will evolve over time with potential new values added every day, week, month, quarter or year. These values will impact and hone actions, initiatives and overall objectives ensuring your strategy is current and up to date based on market conditions and customer needs. Maintaining these values through automation tools and process is a must have to keep your strategy map accurate and effective - keeping you in the 5-10% successful companies executing their strategy. This automation is what you can do today without the need to change your culture and mindset that exists today. How is this possible? This is where tools like VNCDesigner come in ...
VNCDesigner - Accurate Strategy Maps - Forever!
VNCDesigner is a fully automated strategy planning and execution platform with the ability to connect to multiple data sources that keep strategy maps, objectives, actions, KPIs and outcomes current and accurate through planning and execution. VNCDesigner is designed based on the balanced scorecard business model with heavy emphasis on the proper use of KPIs including leading and lagging indicators where values can be fed automatically through your choice of connected third party sources and measured in time intervals that you define for as long as the strategy map needs to be planned and executed.
This automation enables and simply forces managers and leaders to evolve their hypotheses providing fresh data driven cause-and-effect relationships that deliver better business decisions that reflect changing business environments. Essentially, your strategy map stays accurate forever!
This is just one, although huge, benefit of using VNCDesigner Strategy Planning and Execution Platform. Contact us to get involved in our FREE pre-launch VNCDesigner beta program or simply to discuss stratgey and your needs. We are always here to help!
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