18 Strategy Map and Causal Links (Preliminary Draft)
Stijn Masschelein
The second incarnation of the balanced scorecard emerged with the introduction of strategy maps. These maps illustrate the causal links between the measures in the balanced scorecard and as such they are a visual representation of the firm’s long-term strategy. A causal link indicates that an improvement in one measure (e.g. customer
satisfaction) is expected to lead to improvements in another measure (e.g. profitability). The causal link highlights an underlying relation between two measures. The crucial part in the development of strategy maps is the articulation of the firm’s strategy. Because strategy maps and the balanced scorecard are a quantitative representation of the strategy it requires more precision in thinking about the strategy than most firms were used to. Firms reported little difficulties in developing the measures however the links between the measures proved to be more a work of art.
An example of a Generic Strategy Map.
The result of strategy maps is that firms no longer use the balanced scorecard just for monitoring the strategy but also for the development and day to day implementation and communication of the strategy. Firms are no longer constrained to compare cost and benefits variances but they can follow-up their performance of the firm in different domains with operational and customer based measures. Because the balanced scorecard is a concise but quantified representation of the strategy, the balanced scorecard is used to discover and improve the activities that are crucial for the strategy.
