2 - Strategy Maps Flashcards
What does strategy describe in an organization?
How an organization intends to create sustained value for its shareholders.
How does creating value from intangible assets differ from tangible assets?
Value creation from intangible assets is indirect, contextual, and potential.
What is meant by ‘value creation is indirect’ in the context of intangible assets?
Improvements in intangible assets affect financial outcomes through chains of cause-and-effect relationships.
Give an example of how intangible assets can lead to financial outcomes.
Employee training in TQM improves process quality, leading to customer satisfaction and increased sales.
What does it mean that value is contextual?
The value of an intangible asset depends on its alignment with the strategy.
What is the significance of potential value in intangible assets?
The cost of investing in an intangible asset is a poor estimate of its value, as potential value may not be realized without appropriate internal processes.
Why are intangible assets often bundled?
They seldom create value by themselves and require effective combination with other assets.
What is the Balanced Scorecard strategy map used for?
To illustrate how strategy links intangible assets to value-creating processes.
What are lag indicators in the financial perspective?
Measures such as ROI, shareholder value, profitability, revenue growth, and cost per unit.
What does the customer perspective define?
The value proposition for targeted customers.
What is the core of strategy execution?
Consistent alignment of actions and capabilities with the customer value proposition.
What does the internal process perspective identify?
The critical few processes that are expected to have the greatest impact on the strategy.
Fill in the blank: The learning and growth perspective identifies the _______ that are most important to the strategy.
intangible assets
What links the objectives in the four perspectives of the strategy map?
Cause-and-effect relationships.
What does an organization’s mission statement define?
The reason for the organization’s existence and guiding values.
What is a vision statement?
A concise statement defining mid- to long-term goals of the organization.
What is the role of strategy in an organization?
To define how the mission and vision will be achieved.
According to Michael Porter, what is the essence of strategy?
Selecting the set of activities in which an organization will excel to create a sustainable difference.
What are the two basic approaches to improve financial performance?
- Revenue growth
- Productivity
How can companies generate profitable revenue growth?
- Deepening relationships with existing customers
- Selling new products
- Expanding to new customer segments and markets
What are the two ways to achieve productivity improvements?
- Reducing costs
- Utilizing financial and physical assets more efficiently
What is the ultimate objective for profit-maximizing companies in the financial perspective?
Sustaining growth in shareholder value.
What is a differentiated value proposition?
A description of how the organization will create sustainable value for targeted segments.
List common measures of successful outcomes in the customer perspective.
- Customer satisfaction
- Customer retention
- Customer acquisition
- Customer profitability
- Market share
- Account share
True or False: Merely satisfying customers is a strategy.
False.
What should a strategy identify regarding customer segments?
Specific customer segments that the company is targeting for growth and profitability.
What is the primary goal of organizations regarding customer measures?
To improve satisfaction, retention, and market share.
Why is merely satisfying and retaining customers not considered a strategy?
A strategy should identify specific customer segments targeted for growth and profitability.
What type of customers does Southwest Airlines target?
Price-sensitive customers.
Which customers does Neiman Marcus target?
Customers with high disposable incomes willing to pay more for high-end merchandise.
What does a value proposition define?
The company’s strategy for the customer, describing the unique mix of product, price, service, relationship, and image.
List key objectives for a low total cost value proposition.
- Attractive prices
- Excellent and consistent quality
- Short lead times
- Ease of purchase
- Good selection
What do companies like Sony and Mercedes emphasize in their value proposition?
Product innovation and leadership.
What are the objectives for companies following a product leadership strategy?
- Features and functionalities valued by leading-edge customers
- Speed, size, accuracy, power consumption, etc.
What is an example of a company that provides complete customer solutions?
IBM.
What are the objectives for companies delivering a customer solutions value proposition?
- Completeness of the solution
- Exceptional service
- Quality of the relationship
What does a lock-in strategy aim to create?
High switching costs for customers.
Give an example of a company that successfully employs a lock-in strategy.
eBay.
What do the objectives and measures for a value proposition define?
An organization’s strategy.
What are the four clusters of internal processes?
- Operations management processes
- Customer management processes
- Innovation processes
- Regulatory and social processes
What do operations management processes involve?
Producing and delivering existing products and services.
Identify four sets of customer management processes.
- Select targeted customers
- Acquire the targeted customers
- Retain customers
- Grow business with customers
What do innovation processes focus on?
Developing new products, processes, and services.
What do regulatory and social processes help organizations achieve?
Earn the right to operate in communities and countries.
What dimensions do companies manage regarding their regulatory and social performance?
- Environment
- Safety and health
- Employment practices
- Community investment
What is the importance of aligning intangible assets with the strategy?
To create value.
What are the three categories of intangible assets?
- Human capital
- Information capital
- Organization capital
What role does the Balanced Scorecard play in strategy execution?
It translates strategy map objectives into measures and targets.
What are strategic initiatives?
Action programs launched to achieve targets for measures.
What should action plans for strategic initiatives be aligned around?
Strategic themes.
What is an example of a strategic theme for a low-cost airline?
Quick ground turnaround.
What is the core theme of the action plan for the low-cost airline?
Quick ground turnaround
This theme contributes to on-time departures and arrivals, increasing customer satisfaction and future revenue.
How does the quick ground turnaround theme benefit the airline financially?
It enables the airline to reduce costs by operating with fewer planes and flight crews, allowing lower fares while earning profits above cost of capital.
What are the intangible assets required for the quick ground turnaround strategy?
New skills for ramp agents, improved information systems, alignment of the ground crew
These assets are crucial for strategy execution.
What is the purpose of the Balanced Scorecard in the context of the strategy map?
It measures and targets strategic objectives in the strategy map.
How many initiatives has the company identified as necessary for the strategy to succeed?
Eight initiatives
Each initiative affects one or two objectives and is essential for maintaining cause-and-effect relationships.
What happens if one of the identified initiatives is deleted?
A critical objective will be missed, breaking the chain of cause-and-effect relationships.
What does the strategy map provide?
A visual representation of the strategy
It shows how objectives in the four perspectives integrate to describe the strategy.
How many measures are typically required in the Balanced Scorecard associated with a strategy map?
About twenty to thirty measures.
True or False: The Balanced Scorecard can be viewed as twenty-five independent measures.
False
Viewing it this way complicates understanding; it should be seen as an integrated system.
What do the internal and learning and growth perspectives focus on?
Creating and delivering value propositions for customers and improving intangible assets.
What critical processes are highlighted in the strategy map?
Operations management, customer management, innovation, regulatory and social processes.
What is the mission of St. Mary’s Duluth Clinic (SMDC)?
Enhancing the health status of the people served through various commitments like promoting personal health and providing expert medical services.
What was the outcome of the merger between St. Mary’s Hospital and Duluth Clinic?
The merger was expected to bring economic stability but resulted in a deficit due to changes in medical coverage and cost reimbursement.
What strategy did CEO Peter Person implement to address SMDC’s challenges?
The Balanced Scorecard (BSC).
What are the three distinct customer groups identified by SMDC?
Primary care patients, specialty care patients and referring providers, payers.
What value proposition does SMDC offer to primary care patients?
Customer intimacy.
What is the value proposition for specialty care patients and referring physicians?
Product leadership.
What strategy does SMDC use for payers?
Low total cost.
What does SMDC focus on in its internal process perspective for primary care patients?
Outstanding customer service.
What is the objective of SMDC’s learning and growth perspective?
Optimize employee and organizational ability to change and improve.
What significant results did SMDC achieve three years after launching its BSC effort?
A $23 million increase in profitability, stabilized costs, decreased accounts receivable, improved appointment access and patient satisfaction.
What does SMDC believe is necessary to optimize performance?
Clear communication of strategy and understanding of employee roles.
What is the role of the Balanced Scorecard in SMDC’s management?
A tool for performance management and strategic decision making.
Fill in the blank: The strategy map helps identify the specific capabilities in the organization’s _______.
Intangible assets.
