Strategy Maps (Kaplan, Norton, 2004)

Converting Intangible Assets into Tangible Outcomes

More than a decade ago, Robert S. Kaplan and David P. Norton introduced the Balanced Scorecard, a revolutionary performance measurement system that allowed organizations to quantify intangible assets such as people, information, and customer relationships. Then, in The Strategy-Focused Organization, Kaplan and Norton showed how organizations achieved breakthrough performance with a management system that put the Balanced Scorecard into action.

Now, using their ongoing research with hundreds of Balanced Scorecard adopters across the globe, the authors have created a powerful new tool-the "strategy map"-that enables companies to describe the links between intangible assets and value creation with a clarity and precision never before possible.

Kaplan and Norton argue that the most critical aspect of strategy-implementing it in a way that ensures sustained value creation-depends on managing four key internal processes: operations, customer relationships, innovation, and regulatory and social processes. The authors show how companies can use strategy maps to link those processes to desired outcomes; evaluate, measure, and improve the processes most critical to success; and target investments in human, informational, and organizational capital.

Providing a visual epiphany for executives everywhere who can't figure out why their strategy isn't working, Strategy Maps is a blueprint any organization can follow to align processes, people, and information technology for superior performance.

p.5 For maximum impact, therefore, the measurement system should focus on the entity's strategy - how it expects to create future, sustainable value. In designing Balanced Scorecards, therefore, an organization must measure the critical few parameters that represent its strategy for long-term value creation.

p.6 organizations that made the Balanced Scorecard the cornerstone of their management systems... implemented new strategies effectively and rapidly... demonstrated a fundamental principle underlying the Balanced Scorecard: "If you can measure it, you can manage it."

p.13,14 The value of these intangible assets derives from their ability to help the organization implement its strategy... the entity has a high degree of organizational readiness: It has the ability to mobilize and sustain the process of change required to execute its strategy.

p.29 The value of an intangible asset depends on its alignment with the strategy... Value is potential.

p.30 Consistent alignment of actions and capabilities with the customer value proposition is the core of strategy execution.

p.47 The art of strategy is to identify and excel at the few critical processes that are the most important to the customer value proposition. All processes should be manged well, but the few strategic processes must receive special attention and focus since these processes create the differentiation of the strategy... the value creation process is balanced between the short and long term.

p.201 The Intangible Assets Must Be Aligned with the Strategy, in Order to Create Value.

Intangible assets take on value only in the context of strategy, what they are expected to help the organization accomplish.

p.207 The strategy map (see Figure 7-1) creates alignment and integration by providing a common point of reference for the enterprise strategy. The internal perspective of the map identifies the critical few processes that create desired outcomes for customers and shareholders. The intangible assets must be aligned to these value-creating internal processes.

p.207 Companies, by developing, aligning, and integrating their human, information, and organizational capital to the critical few strategic processes, create the greatest returns from their intangible assets.

p.211 The value of intangible assets comes from how well they align to the strategic priorities of the enterprise, not by how much it costs to create them or how much they are worth on a freestanding basis. If the intangible assets are closely aligned to the strategy, they will have greater value to the organization.

p.202 Intangible assets have been described as "knowledge that exists in an organization to create differential advantage"

p.213 We introduce the concept of strategic readiness to describe the status of intangible assets to support the organization's strategy. Strategic readiness is analogous to liquidity - the higher the state of readiness, the faster intangible assets contribute to generating cash.

Strategic readiness gets converted into tangible value only when internal processes create increased levels of revenue and profit... tangible value can be derived only in the context of strategy.

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