Strategy is about change and improvement, so Strategy maps have to reflect that change and balanced scorecards have to be able to track that change to manage performance. Modern, third and fourth generation, balanced scorecards have strategy maps. These contain the objectives from which balanced scorecards can develop their measures, targets, actions, responsibilities.
Strategy is fundamentally about change. So it is vital to describe what will bring about that change. The strategy map’s cause and effect model teases out and describes how these changes will occur. How will the market and competition change in the future? How will we influence and affect that market and customers? How will we change in the future? How can we profit from these changes to improve our finances and overall value? These are all questions that are explored and answered during the strategic thinking and planning process and are embodied in the cause and effect model.
The great advantage of strategy maps is that they explain how the strategy will come about; what will be different by the end of the strategy and where the focus of attention should be to achieve it. They explain how the organisation will be different from various perspectives and how the change will come about. Failure to explain how change will come about is called “Strategy by hope and magic” The strategy map helps to avoid this.
The cause and effect model provides a predictive model of business performance. Rather than tracking whether you have achieved the result, eventual results, the cause and effect model tells you whether you are making progress towards the end result. It moves the emphasis of tracking strategy from, how will we know we have succeeded, to how will we know we are succeeding? This cause and effect model is fundamental to strategy and strategy mapping, so we build it into the design from the start.
Phil Jones, Fourth Generation Balanced Scorecard specialist