2 - Strategy Maps

Question 1

What does strategy describe in an organization?

Answer 1

How an organization intends to create sustained value for its shareholders.

Question 2

How does creating value from intangible assets differ from tangible assets?

Answer 2

Value creation from intangible assets is indirect, contextual, and potential.

Question 3

What is meant by ‘value creation is indirect’ in the context of intangible assets?

Answer 3

Improvements in intangible assets affect financial outcomes through chains of cause-and-effect relationships.

Question 4

Give an example of how intangible assets can lead to financial outcomes.

Answer 4

Employee training in TQM improves process quality, leading to customer satisfaction and increased sales.

Question 5

What does it mean that value is contextual?

Answer 5

The value of an intangible asset depends on its alignment with the strategy.

Question 6

What is the significance of potential value in intangible assets?

Answer 6

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.

Question 7

Why are intangible assets often bundled?

Answer 7

They seldom create value by themselves and require effective combination with other assets.

Question 8

What is the Balanced Scorecard strategy map used for?

Answer 8

To illustrate how strategy links intangible assets to value-creating processes.

Question 9

What are lag indicators in the financial perspective?

Answer 9

Measures such as ROI, shareholder value, profitability, revenue growth, and cost per unit.

Question 10

What does the customer perspective define?

Answer 10

The value proposition for targeted customers.

Question 11

What is the core of strategy execution?

Answer 11

Consistent alignment of actions and capabilities with the customer value proposition.

Question 12

What does the internal process perspective identify?

Answer 12

The critical few processes that are expected to have the greatest impact on the strategy.

Question 13

Fill in the blank: The learning and growth perspective identifies the _______ that are most important to the strategy.

Answer 13

intangible assets

Question 14

What links the objectives in the four perspectives of the strategy map?

Answer 14

Cause-and-effect relationships.

Question 15

What does an organization’s mission statement define?

Answer 15

The reason for the organization’s existence and guiding values.

Question 16

What is a vision statement?

Answer 16

A concise statement defining mid- to long-term goals of the organization.

Question 17

What is the role of strategy in an organization?

Answer 17

To define how the mission and vision will be achieved.

Question 18

According to Michael Porter, what is the essence of strategy?

Answer 18

Selecting the set of activities in which an organization will excel to create a sustainable difference.

Question 19

What are the two basic approaches to improve financial performance?

Answer 19

• Revenue growth
• Productivity

Question 20

How can companies generate profitable revenue growth?

Answer 20

• Deepening relationships with existing customers
• Selling new products
• Expanding to new customer segments and markets

Question 21

What are the two ways to achieve productivity improvements?

Answer 21

• Reducing costs
• Utilizing financial and physical assets more efficiently

Question 22

What is the ultimate objective for profit-maximizing companies in the financial perspective?

Answer 22

Sustaining growth in shareholder value.

Question 23

What is a differentiated value proposition?

Answer 23

A description of how the organization will create sustainable value for targeted segments.

Question 24

List common measures of successful outcomes in the customer perspective.

Answer 24

• Customer satisfaction
• Customer retention
• Customer acquisition
• Customer profitability
• Market share
• Account share

Question 25

True or False: Merely satisfying customers is a strategy.

Answer 25

False.

Question 26

What should a strategy identify regarding customer segments?

Answer 26

Specific customer segments that the company is targeting for growth and profitability.

Question 27

What is the primary goal of organizations regarding customer measures?

Answer 27

To improve satisfaction, retention, and market share.

Question 28

Why is merely satisfying and retaining customers not considered a strategy?

Answer 28

A strategy should identify specific customer segments targeted for growth and profitability.

Question 29

What type of customers does Southwest Airlines target?

Answer 29

Price-sensitive customers.

Question 30

Which customers does Neiman Marcus target?

Answer 30

Customers with high disposable incomes willing to pay more for high-end merchandise.

Question 31

What does a value proposition define?

Answer 31

The company’s strategy for the customer, describing the unique mix of product, price, service, relationship, and image.

Question 32

List key objectives for a low total cost value proposition.

Answer 32

* Attractive prices * Excellent and consistent quality * Short lead times * Ease of purchase * Good selection

Question 33

What do companies like Sony and Mercedes emphasize in their value proposition?

Answer 33

Product innovation and leadership.

Question 34

What are the objectives for companies following a product leadership strategy?

Answer 34

* Features and functionalities valued by leading-edge customers * Speed, size, accuracy, power consumption, etc.

Question 35

What is an example of a company that provides complete customer solutions?

Answer 35

IBM.

Question 36

What are the objectives for companies delivering a customer solutions value proposition?

Answer 36

* Completeness of the solution * Exceptional service * Quality of the relationship

Question 37

What does a lock-in strategy aim to create?

Answer 37

High switching costs for customers.

Question 38

Give an example of a company that successfully employs a lock-in strategy.

Answer 38

eBay.

Question 39

What do the objectives and measures for a value proposition define?

Answer 39

An organization’s strategy.

Question 40

What are the four clusters of internal processes?

Answer 40

* Operations management processes * Customer management processes * Innovation processes * Regulatory and social processes

Question 41

What do operations management processes involve?

Answer 41

Producing and delivering existing products and services.

Question 42

Identify four sets of customer management processes.

Answer 42

* Select targeted customers * Acquire the targeted customers * Retain customers * Grow business with customers

Question 43

What do innovation processes focus on?

Answer 43

Developing new products, processes, and services.

Question 44

What do regulatory and social processes help organizations achieve?

Answer 44

Earn the right to operate in communities and countries.

Question 45

What dimensions do companies manage regarding their regulatory and social performance?

Answer 45

* Environment * Safety and health * Employment practices * Community investment

Question 46

What is the importance of aligning intangible assets with the strategy?

Answer 46

To create value.

Question 47

What are the three categories of intangible assets?

Answer 47

* Human capital * Information capital * Organization capital

Question 48

What role does the Balanced Scorecard play in strategy execution?

Answer 48

It translates strategy map objectives into measures and targets.

Question 49

What are strategic initiatives?

Answer 49

Action programs launched to achieve targets for measures.

Question 50

What should action plans for strategic initiatives be aligned around?

Answer 50

Strategic themes.

Question 51

What is an example of a strategic theme for a low-cost airline?

Answer 51

Quick ground turnaround.

Question 52

What is the core theme of the action plan for the low-cost airline?

Answer 52

Quick ground turnaround ## Footnote This theme contributes to on-time departures and arrivals, increasing customer satisfaction and future revenue.

Question 53

How does the quick ground turnaround theme benefit the airline financially?

Answer 53

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.

Question 54

What are the intangible assets required for the quick ground turnaround strategy?

Answer 54

New skills for ramp agents, improved information systems, alignment of the ground crew ## Footnote These assets are crucial for strategy execution.

Question 55

What is the purpose of the Balanced Scorecard in the context of the strategy map?

Answer 55

It measures and targets strategic objectives in the strategy map.

Question 56

How many initiatives has the company identified as necessary for the strategy to succeed?

Answer 56

Eight initiatives ## Footnote Each initiative affects one or two objectives and is essential for maintaining cause-and-effect relationships.

Question 57

What happens if one of the identified initiatives is deleted?

Answer 57

A critical objective will be missed, breaking the chain of cause-and-effect relationships.

Question 58

What does the strategy map provide?

Answer 58

A visual representation of the strategy ## Footnote It shows how objectives in the four perspectives integrate to describe the strategy.

Question 59

How many measures are typically required in the Balanced Scorecard associated with a strategy map?

Answer 59

About twenty to thirty measures.

Question 60

True or False: The Balanced Scorecard can be viewed as twenty-five independent measures.

Answer 60

False ## Footnote Viewing it this way complicates understanding; it should be seen as an integrated system.

Question 61

What do the internal and learning and growth perspectives focus on?

Answer 61

Creating and delivering value propositions for customers and improving intangible assets.

Question 62

What critical processes are highlighted in the strategy map?

Answer 62

Operations management, customer management, innovation, regulatory and social processes.

Question 63

What is the mission of St. Mary’s Duluth Clinic (SMDC)?

Answer 63

Enhancing the health status of the people served through various commitments like promoting personal health and providing expert medical services.

Question 64

What was the outcome of the merger between St. Mary’s Hospital and Duluth Clinic?

Answer 64

The merger was expected to bring economic stability but resulted in a deficit due to changes in medical coverage and cost reimbursement.

Question 65

What strategy did CEO Peter Person implement to address SMDC's challenges?

Answer 65

The Balanced Scorecard (BSC).

Question 66

What are the three distinct customer groups identified by SMDC?

Answer 66

Primary care patients, specialty care patients and referring providers, payers.

Question 67

What value proposition does SMDC offer to primary care patients?

Answer 67

Customer intimacy.

Question 68

What is the value proposition for specialty care patients and referring physicians?

Answer 68

Product leadership.

Question 69

What strategy does SMDC use for payers?

Answer 69

Low total cost.

Question 70

What does SMDC focus on in its internal process perspective for primary care patients?

Answer 70

Outstanding customer service.

Question 71

What is the objective of SMDC’s learning and growth perspective?

Answer 71

Optimize employee and organizational ability to change and improve.

Question 72

What significant results did SMDC achieve three years after launching its BSC effort?

Answer 72

A $23 million increase in profitability, stabilized costs, decreased accounts receivable, improved appointment access and patient satisfaction.

Question 73

What does SMDC believe is necessary to optimize performance?

Answer 73

Clear communication of strategy and understanding of employee roles.

Question 74

What is the role of the Balanced Scorecard in SMDC’s management?

Answer 74

A tool for performance management and strategic decision making.

Question 75

Fill in the blank: The strategy map helps identify the specific capabilities in the organization’s _______.

Answer 75

Intangible assets.