How to Implement a New Strategy Without Disrupting Your ...

Throughout most of modern business history, corporations have attempted to unlock value by matching their structures to their strategies: Centralization by ... Youhave1freearticlesleftthismonth. Youarereadingyourlastfreearticleforthismonth. Subscribeforunlimitedaccess. Createanaccounttoread2more. Changemanagement HowtoImplementaNewStrategyWithoutDisruptingYourOrganization Strategicdreamsoftenturnintonightmaresifcompaniesstartengaginginexpensiveanddistractingrestructurings.It’sfarmoreeffectivetochooseadesignthatworksreasonablywell,thendevelopastrategicsystemtotunethestructuretothestrategy. by RobertS.Kaplan and DavidP.Norton by RobertS.Kaplan and DavidP.Norton FromtheMagazine(March2006) Tweet Post Share Save GetPDF BuyCopies Print Summary.    Throughoutmostofmodernbusinesshistory,corporationshaveattemptedtounlockvaluebymatchingtheirstructurestotheirstrategies:Centralizationbyfunction.Decentralizationbyproductcategoryorgeographicregion.Matrixorganizationsthatattemptbothatonce.Virtualorganizations.Networkedorganizations.Velcroorganizations. Butnoneoftheseapproacheshasworkedverywell.Restructuringchurnisexpensive,andnewstructuresoftencreateneworganizationalproblemsthatareastroublesomeastheonestheytrytosolve. Ittakestimeforemployeestoadapttothem,theycreatelegacysystemsthatrefusetodie,andagreatdealoftacitknowledgegetslostintheprocess.Giventhecostsanddifficultiesinvolvedinfindingstructuralwaystounlockvalue,it’sfairtoraisethequestion:Isstructuralchangetherighttoolforthejob? Theanswerisusuallyno,KaplanandNortoncontend.It’sfarlessdisruptivetochooseanorganizationaldesignthatworkswithoutmajorconflictsandthendesignacustomizedstrategicsystemtoalignthatstructuretothestrategy. Amanagementsystembasedonthebalancedscorecardframeworkisthebestwaytoalignstrategyandstructure,theauthorssuggest.Managerscanusethetoolsoftheframeworktodrivetheirunit’sperformance:strategymapstodefineandcommunicatethecompany’svaluepropositionandthescorecardtoimplementandmonitorthestrategy. Inthisarticle,theoriginatorsofthebalancedscorecarddescribehowtwohugelydifferentorganizations—DuPontandtheRoyalCanadianMountedPolice—usedcorporatescorecardsandstrategymapsorganizedaroundstrategicthemestorealizetheenormousvaluethattheirportfoliosofassets,people,andskillsrepresented.Asaresult,theydidnothavetoendureapainfulseriesofchangesthatsimplyreplacedonerigidstructurewithanother. Tweet Post Share Save GetPDF BuyCopies Print Leerenespañol Leremportuguês Throughoutmostofmodernbusinesshistory,corporationshaveattemptedtounlockvaluebymatchingtheirstructurestotheirstrategies.Asmassproductiontookholdinthenineteenthcentury,forinstance,companiesgeneratedenormouseconomiesofscalebycentralizingkeyfunctionslikeoperations,sales,andfinance.Afewdecadeslater,asfirmsdiversifiedofferingsandmovedintonewregions,arivalmodelemerged.CorporationssuchasGeneralMotorsandDuPontcreatedbusinessunitsstructuredaroundproductsandgeographicmarkets.Thesmallerbusinessunitssacrificedsomeeconomiesofscalebutweremoreflexibleandadaptabletolocalconditions. Thesetwobusinessmodels—centralizedbyfunctionversusrelativelydecentralizedbyproductandregion—proveddurableforalongtime,largelybecausetheevolutionofbusinessorganizationwasfairlyincremental.Indeed,theproductdivisionstructureremainedthedominantmodelfor50yearsormore.Butascompetitionintensifiedinthelastquarterofthetwentiethcentury,problemswithbothmodelsbecameapparent,andcompaniessearchedfornewwaystoorganizethemselvestounlockcorporatevalue. Manymultinationalsadoptedamatrixarrangementinthebeliefthattheycouldretainboththeeconomiesofscaleofcentralizedfunctionsandtheflexibilityoftheirproduct-lineandgeographicbusinessunits.Butmatrixorganizationsweredifficulttocoordinate.Managersoperatingatamatrixintersectionhadtojugglethedictatesoftwomasters,whichledtoconflictanddelay.Thebusinessprocessreengineeringmovementofthe1990sintroducedanothermodel,inwhichthecorporationorganizedarounditsvariousprocessesinsteadofitstraditionalfunctional,product,andgeographicboundaries.Butmultipleprocess-focusedunitsstillhadproblemscoordinatingandaligningtheiractivities;asiloisasilowhetheritisabusinessprocess,afunction,oraproductgroup.Morerecently,we’vebeenhearingabout“virtual”and“networked”organizationsoperatingacrosstraditionalboundariesandthe“Velcroorganization,”acompanycapableofbeingpulledapartandreassembledinnewwaystorespondtochangingopportunities. Thecontinualsearchforneworganizationalformsisdrivenbybasicchangesinthenatureofcompetitionandtheeconomy.First,advantagetodayisderivedlessfromthemanagementofphysicalandfinancialassetsandmorefromhowwellcompaniesalignsuchintangibleassetsasknowledgeworkers,R&D,andITtothedemandsoftheircustomers.Second,theopportunitiesandchallengesthatglobalizationaffordsareforcingcompaniestorevisitmanyassumptionsaboutthecontrolandmanagementofboththeirphysicalandtheirintangibleassets.Today’scomputercompany,forexample,canmanufacturecomponentsinChina,assembletheminMexico,shipthemtoEurope,andservicethepurchasersfromcallcentersinIndia.Thisdispersalcreatesdemandsfornewstructurestoaligninternalandoutsourcedunitsaroundtheworld. Ascompanieshavestruggledwiththeseissues,manyhavegottencaughtupinexpensiveandfrustratingcyclesoforganizationalchange.ABBisaclassiccase:Thecompanywentthroughonereorganizationafteranotherfollowingitsfirstexperimentwiththematrixforminthelate1980s.AsPankajGhemawatofHarvardBusinessSchooldescribesinhisNovember2003HBRarticle,“TheForgottenStrategy,”thisrestructuringchurnisexpensiveandoftencreatesneworganizationalproblemsasbadastheonestheysolve.Ittakestimeforemployeestoadapttonewstructures,andagreatdealoftacitknowledge—preciselythekindthat’sbecomemostvaluable—getslostintheprocess,asdisaffectedemployeesleave.Ontopofthat,companiesgetsaddledwiththevestigesofpreviousorganizationaldecisions,suchasobsoletelocalandregionalheadquartersandlegacyITinfrastructures.Giventhecostsanddifficultiesinvolvedinfindingstructuralwaystounlockvalue,it’sfairtoraisethequestion:Isstructuralchangetherighttoolforthejob? Giventhecostsanddifficultiesinvolvedinfindingstructuralwaystounlockvalue,it’sfairtoraisethequestion:Isstructuralchangetherighttoolforthejob? Webelievetheanswerisusuallyno.Thelessonwe’vedrawnfromourworkwithhundredsoforganizationsonstrategymapsandbalancedscorecardsisthatcompaniesdonotneedtofindtheperfectstructurefortheirstrategy.Aswewilldemonstrateinthefollowingpages,afarmoreeffectiveapproachistochooseanorganizationalstructurethatworkswithoutmajorconflictsandthendesignacustomizedstrategicsystemtoalignthatstructurewiththestrategy. Wewillseehowtwoverydifferentorganizations—DuPontEngineeringPolymersandtheRoyalCanadianMountedPolice—tooktheirexistingstructuresasgiveninthebeliefthattinkeringandrealigningauthority,responsibility,anddecisionrightswouldnotproducethemagicneededtoachievecorporate-levelsynergies.Instead,executivesinthesetwoorganizationsusedthetoolsofthebalancedscorecardstrategymanagementsystemtoguidethedecentralizedunitsintheirsearchforlocalgainevenastheyidentifiedwaysforthemtocontributetocorporatewideobjectives. WhatKindofSystemDoYouNeed? Amanagementsystemcanbedefinedasthesetofprocessesandpracticesusedtoalignandcontrolanorganization.Managementsystemsincludetheproceduresforplanningstrategyandoperations,forsettingcapitalandoperatingbudgets,formeasuringandrewardingperformance,andforreportingprogressandconductingmeetings.Itisfairtosaythat,historically,mostcompanieshavereliedentirelyonfinancialsystems—usuallycenteredonthebudget—forthesevariousprocessesandpractices.Butrelyingonthebudgetastheprimarymanagementsystemcausedshort-termfinancialconsiderationstooverwhelmlonger-termstrategicgoals.Inthe1980sand1990s,manycompaniesintroducedtotalqualitymanagementasanewmanagementsystem.ButwhileTQMenabledfirmstofocusmoreeffectivelyonprocessimprovements,theabilitytoimplementstrategyacrossorganizationalunitsremainedelusive.Companies’managementsystemswerestilltacticalandoperational,notstrategic. Inourexperience,amanagementsystembasedonthebalancedscorecardframeworkisthebestwaytoalignstrategyandstructure.Managersateverylevelinthecorporation,fromregionalsalesmanagerstogroupCEOs,canusethetoolsoftheframeworktodrivetheirunit’sperformance.Strategymapsenablemanagerstodefineandcommunicatethecause-and-effectrelationshipsthatdelivertheirunit’svalueproposition,andthescorecardisapowerfultoolforimplementingandmonitoringtheunit’sstrategy.Abalancedscorecard–basedsystem,therefore,providesbothatemplateandacommonlanguageforassemblingandcommunicatinginformationaboutvaluecreation.(WereferreadersunfamiliarwiththebalancedscorecardframeworktoourbookTheStrategy-FocusedOrganization,HarvardBusinessSchoolPress,2000). Mostofourwritingshavecenteredonimplementingstrategiesforbusinessunits,withtheiruniquecustomers,competitors,technologies,andworkforces.Morerecently,corporationshaveappliedtheframeworktotheircorporate-levelstrategytodescribehowtheheadquarterscreatesvaluebeyondwhatitsindividualbusinessandsupportunitsgenerateontheirown.Thecorporatescorecardandmapidentifyandmeasurethesourcesofcorporatevaluecreationateachoffourlevels,or“perspectives”—financial,customer,process,andlearningandgrowth. Thefinancialperspective. Evendiversifiedholdingcompaniescancreateenterprise-levelvaluebyinstitutingeffectiveprocessesforresourceallocation,forcorporategovernance,foracquiringandintegratingnewbusinessunits,andforconductingnegotiationswithexternalentitiessuchasgovernments,unions,capitalproviders,andsuppliers.Itispreciselybydoingthesethingswellthatcompaniescreatefinancialsynergies.EnterpriseswithholdingsasdiverseasthosethatmakeupKohlbergKravisRobertsandGeneralElectricaddvaluethroughsavvyacquisitionssupportedbyrobustgovernanceprocesses. Thecustomerperspective. Corporatesynergiescanalsobegeneratedbyleveragingrelationshipsacrossmultiplebusinessunitstooffercommoncustomerslowerprices,greaterconvenience,orsolutionsmorecompletethanspecializedcompetitorscanprovide.Forexample,MediaGeneralimplementedaneffectiveconvergencestrategybysharingeditorialprocessesandadvertisingcontentamongitsregionaltelevisionstations,newspapers,andinteractiveonlinemediaproperties.Thiscross-unitintegrationcreatedauniquevaluepropositionforthecommoncustomers—advertisersandsubscribers—thatwasbetterthananysinglepropertycouldofferonitsown.Customersynergiesalsoarisewhenretailcompanieslikehotelchains,consumerbanks,orquick-servicerestaurantsconsistentlydeliverthesamevaluepropositionacrossageographicallydispersednetworkofretailoutlets.HiltonHotelsandMcDonald’saregoodexampleshere. Theprocessperspective. Thethirdbalancedscorecardperspectivedescribescorporatesynergiesgainedwhenmultiplebusinessunitsreapsavingsbysharingcommonprocesses,suchaspurchasing,manufacturing,distribution,andresearch.Morethanacenturyago,StandardOilcreatedadominantadvantagethroughthescaleeconomiesofitslargerefineriesanddistributionsystem.Today,megabankslikeCitigroupandBankofAmericacreatescaleeconomiesbyintegratingandconsolidatingtheback-officeoperationsandcomputersystemsofthefinancialinstitutionstheyacquire.Companiescanalsocaptureprocesseconomiesofscopebyexploitingcorecompetenciesinspecifictechnologies—suchasoptics,miniaturization,ordisplays—acrossmultiplebusinessunits.Forexample,Canonincorporatesitsworld-classopticscapabilitiesintoproductsasdiverseascameras,binoculars,copiers,medical-imagingdevices,andsemiconductorphotolithographyequipment. Thelearningandgrowthperspective. Thefinalperspectiveenablescorporationstoexploittheirscopetocreateenterprise-levelvaluefromactivitiesrelatedtohumancapitaldevelopment(includingrecruiting,training,andleadershipdevelopmentactivities)andtoknowledgemanagement(suchasIT-basedsystemsforcapturing,storing,andcommunicatingknowledgeandbestpracticesthroughoutdiverseorganizationalunits).Byfocusingonthecareerdevelopmentopportunitiesavailableinitsfar-flungproductandgeographicunits,forexample,GEhascreatedaformidableandhugelyvaluablecadreofmanagersatalllevels.Sinceintangibleassetscanaccountfor80%ofanorganization’svalueintoday’sknowledgeeconomy,thecorporatebenefitfromeffectivecross-unitcollaboration—todevelophumancapital,forexample—isahugedriverofenterprise-levelsynergies. PuttingItAllTogether:StrategicThemes Implementingacorporatestrategysystembasedonthebalancedscorecardisnotassimpleasjustrequiringmanagersinallbusinessandsupportunitstocreateindividuallocalscorecardsandthensomehowaddingthemalltogether.Norshouldacorporatescorecardsimplybereplicateddowntheorganizationwithoutconsideringthedifferentoperatingrealitiesofeachunit. Headquartersalignscorporateandbusiness-unitstrategiesbyfirstarticulatingitstheoryofsynergyandthenencouragingthebusinessunitstodevelopstrategiesthatcontributetothoseenterprise-levelobjectiveswhilesimultaneouslyaddressingtheirlocalcompetitivesituation.Itisherethatthebulkofthecompanywidesystemscurrentlyusedformeasuringperformanceandallocatingresponsibilitiesfail.Mostsuchsystems—takethebudgetingsystem,forinstance—emphasizelocallycontrollablemeasuresandactions.Butthisemphasisencouragesbusinessunitsandfunctionstobecomesilosthatperformwellontheirlocalmeasuresbutfailtocontributetodivisionalandcorporatesynergies.ABB’srestructuringfailurescanbepartiallyattributedtoitscontinuinguseofthebudgetingsystemastheprimarycoordinatingmechanismforitscomplexmatrixstructures. Bycontrast,thediversifiedcompanyIngersoll-RandusesacorporatestrategymapandbalancedscorecardtofosterwhatCEOHerbHenkelcalls“dualcitizenship,”inwhichallemployeesnotonlyaremembersoftheirindividualbusinessunitbutalsohavearesponsibilitytocontributetocorporatepriorities.That’sbecauseeveryunit’sstrategymapandbalancedscorecardarelinkedtothecorporatescorecard.Inthisway,managersineachunithaveclearmeasuresandtargetsthattietheirownactivitiestotheenterprisevalueproposition. Severalorganizationshaveadoptedaparticularlyeffectivewaytocommunicatecorporateprioritiestobusinessandsupportsunits.Theyidentifythreetofivestrategicthemestodescribetheenterprisevalueproposition.Eachthemeconsistsofaverticalchainofcause-and-effectrelationshipslinkingobjectives,measures,andinitiativesthatspanthefourbalancedscorecardperspectives.Thecollectionofstrategicthemesarticulateshowbusinessandsupportunitscanworktogethertocreatethesynergiesnecessarytorealizetheenterprise’svalueproposition.Localmanagersusethethemestolinktheirlocalstrategiesanddeterminethecross-unitcollaborationrequiredtodeliveronthisvalueproposition. Toseethepowerofastrategictheme,consideralargefinancialservicescompanywhosevaluepropositionistoofferafullrangeofaffordableproductsandservicestothemassmarket.Itmightbreakdownthatpropositionintothreedistinctstrategicthemes:Lowerthecostofservingexistingcustomers,acquireprofitablenewcustomers,anddeepenrelationshipswithcustomersbycross-sellingthemadditionalproductsandservices. Theexhibit“MappingaStrategicTheme”showshowthecross-sellingthemeisrepresentedbylinkedobjectives,measures,andinitiativesstretchingacrossthefourperspectives.Eachobjectiveandmeasureinthethemeissupportedbyoneormorestrategicinitiatives.Thecompleteportfolioofstrategicinitiativesdefinestheresourcesandactionsrequiredtoimplementthestrategictheme.Thetheme’slearningandgrowthobjective,forexample,involvesdevelopingnewskillsforemployees(relationshipmanagementandfinancialplanning),introducingnewinformationsystems(customerdatabasesandfinancial-planningsystems),andaligningemployees’personalgoalsandincentivestomotivatethemtoachieveaprocessobjectiveofinvestingmoretimewithhigh-potentialcustomers.Thetheoryunderlyingthisstrategicthemeisthatifthelearningandgrowthobjectivesareachieved,employeeswillbeabletocross-sellcustomersmorecompletefinancialsolutions(attheprocesslevel),whichwillincreasethecompany’sshareofthecustomers’financialtransactionsandinvestmentdollars(atthecustomerlevel),ultimatelyleadingtohigherrevenuesandmargins(atthefinanciallevel). MappingaStrategicTheme Astrategicthemegroupstogetherdifferentcorporate-levelobjectives,measures,andinitiativesacrossthevariousperspectivesofthebalancedscorecardframework.Thefirstcolumnshowsforeachperspectivehowthevalue-creatingobjectivesarelinkedtothetheme.Thenextcolumnshowsforeachperspectivethemeasuresandtargetsneededtorealizetheappropriateaspectofthetheme’sobjectives.Thefinalcolumnlistsspecificcross-unitorcross-functionalprojectsaimedatrealizingsynergiesforeachperspectiveandthedollarsbudgetedforthem. It’sonethingtosetdownanumberofthemesonpaper,anothertoactuallyusethemasthebasisforcorporatestrategy.Todoso,thecompanyfollowsseveralimplementationsteps.First,throughthestrategicthemesonitscorporate-levelstrategymap,topexecutivesarticulatethetheoryforcorporateadvantage—howthewholeismorevaluablethanthesumoftheparts.Second,theyassignaseniorexecutivetoberesponsibleforeachstrategictheme.Typically,thisexecutivealsohasanotherlineorstaffposition,sincebeingathemeownerisapart-timejob.Thethemeowner’sroleiscoordinationandmonitoring;theultimateresponsibilityforexecutionremainswiththebusinessunits.Themeownersoverseeandapprovethewaythetheme’sobjectives,measures,andtargetsareappliedtotheoperatingunits’strategymapsandscorecards.Theyconveneperiodicmeetings,drawingonindividualsfromalltheaffectedbusinessunits,toreviewprogressandinitiativesandreviseactionplansrelatedtothemeobjectives.Andtheyoverseedatareportingandusethedatatoholdfact-baseddiscussionswithbusinessunitmanagersabouthowwelltheyaresupportingthetheme.Inthisway,allbusinessunitsareheldaccountablenotonlyfortheirlocalperformancebutalsofortheircontributiontocorporate-levelstrategicpriorities. Third,theexecutiveteamidentifiesthestrategicinitiatives(typicallythosethatspanbusiness-unitboundaries)thatsupporteachthemeandauthorizestheresources—moneyandpeople—requiredtoimplementeachinitiative.Executivethemeowners,alongwiththetopmanagementteam,periodicallyreviewtheperformanceoftheinitiativesandtesteachone’sunderlyingtheory.Afterall,corporatestrategiesandstrategicthemesarejusthypothesesaboutvaluecreation.Bytranslatingthehypothesesofastrategicthemeintolinkedobjectivesandmeasures,executivescantestthestrategyanddeterminewhetherthecausalconnectionsreallyexist.Ifnot,thecorporateexecutivescanandshouldrevisethethemesintendedtocreatecorporatesynergy. Abalancedscorecard–basedsystemforsettingstrategyandmeasuringperformancelinkedtogetherbyspecificstrategicthemesgivesexecutivesatcorporateheadquartersawaytocommunicatesharedprioritiesandmotivatepeopletosharethemineventhemostcomplexbusinesses.Ineffect,thethemesdescribeavirtualorganizationinwhichdecentralizedunitspursuetheirlocalstrategieswhilesimultaneouslycontributingtocorporatepriorities.Let’sturnnowtolookindetailatacoupleoforganizationsthathaveusedstrategicthemesinthisinnovativeway. OvercomingSilosatDuPont In2000,theDuPontEngineeringPolymers(EP)divisionhad$2.5billioninsalesandemployed4,500peoplein30facilitiesaroundtheworld.EP,likemanymultinationalandmultiproductorganizations,washavingtroubleimplementingacoherentstrategyacrossitseightglobalproductbusinesses,threeregions,andsixsharedserviceunits.Duringthefiveyearsbeforeadoptingthescorecard,EP’sprofitsgrewatacompoundannualrateof10%,butthiswasachievedmainlybycuttingcostsandimprovingproductivity,sinceannualrevenuegrowthwasstalledatonly2.5%.CraigNaylor,DuPontgroupvicepresidentandEP’sgeneralmanager,sawthatthebalancedscorecardcouldalignallemployees,businessunits,andsharedservicesaroundacommonstrategyinvolvingnotonlyproductivityimprovementsbutalsorevenuegrowth. EP’sseniormanagementteam,withtheassistanceofconsultantFrancisGouillart,builtadivisionalbalancedscorecardstrategymapthatcontainedfivestrategicthemesdescribinghowtheunitscouldaligntheiractionstodeliverthefinancialobjectivesofrevenuegrowthandcostreduction.SpecificallyEPwould: DeployprocessimprovementtoolssuchasSixSigmatodeliversignificantproductivityimprovements. Throughlogisticsexcellence,reducetheorder-to-cashcycleandshortenleadtimesforcustomers. Focusonproducingandsellingexistingproductsandapplicationswiththehighestmargins,andintroducenewproductsandapplications. Bringcompletesolutionstotargetedcustomersbyofferingauniquepackageofrobustproducts,lowcost,andexcellenceinsupply. Deviseentirelynewwaysofreachingandservicingend-usecustomers. Thesequenceofthemescorrespondedtothetimeframesrequiredforsuccessfulimplementation:Improvingoperatingprocessesandlogisticswoulddeliverresultsinthenearterm(nineto15months).Itwouldtaketwotothreeyearstocreatenewportfoliosofproductsthatcouldprovidemorecompletecustomersolutions.Realizingthebenefitsofdevelopingandinstallinganentirelynewbusinessmodeltoreachnewcustomerswouldtakethreetofouryears. DuPontEPviewedthefivethemesastheDNAofitsstrategy,thecodethatwouldbeembeddedineverybusinessunitandsharedserviceunit.Itdevelopedstrategymapsandassignedaseniormanagerforeachtheme(themapsforeachareshownintheexhibit“MappingCorporateStrategyatDuPont”).Itthencascadedthehigh-levelstrategicthemesdowntheorganization.Eachmajorgeographicregionandproductunitbuiltitsownscorecard,whichhighlighteditsuniqueobjectivesandinitiativesforlocalstrategybutalsomadeclearhowitwouldimplementthefivethemeslocally.Thisapproachmadeopportunitiesforsynergyacrossbusinessunitsfarmorevisible.Andallsixsupportunitsbuilttheirscorecardstofurtherthebusinessunits’strategies. MappingCorporateStrategyatDuPont DuPont’sEngineeringPolymers(EP)divisioncreatedacorporate-levelstrategymapthatconsistedoffivedistinctthemes,eachrepresentedbyaverticalchainofcause-and-effectrelationshipsthatspansthefourbalancedscorecardperspectives.Forinstance,thefinancialobjectiveforthethemeofoperationalexcellenceistominimizeoperatingcosts,whichwillrequireoptimizingassetutilizationattheprocesslevel,whichinturnrequiresintegrationwithanewsalesmodel,describedinthelearningandgrowthperspective. EP,however,facedaclassicconflict.Thelocalunitsandtheiremployeeswantedtofocusonrunningtheirbusinessesefficientlyday-to-day.ItwasdifficulttogetthemtopayattentiontoinitiativesrelatingtoEP’sfivenewstrategicthemesamidalltheotherprogramsalreadyunderway.SoEP“encouraged”itslocalmanagerstohaltanyprojectthatwasnotcontributingtooneormoreofthefivethemes.Bycuttingdowntheclutterofdailyoperations,EPfreedupspacefornew(butstilllocal)initiativesthatwouldsupportthedivisionalstrategicthemesandembedtheminemployees’routines. ThenewattitudesoonmanifesteditselfinEP’sinteractionswithoneofitslargestcustomers,amanufacturerofplasticmoldings.ThefourththemerequiredEP’sproductmanagerstobetteralignthemselveswiththeircustomerssotheycouldtransformapreviouslytransactionalrelationship,inwhichpricewastheprincipaltopicofdialogue,intoastrategicpartnership.Accordingly,EP’sproductmanagersfromseveralunitsparticipatedinaworkshopwiththelargecustomertobuildabalancedscorecardthatdescribedthebenefitsthatcouldaccruefromanimprovedrelationshipbetweenthetwocompanies. Inthecourseoftheworkshop,theplasticsmanufacturerexpressedfrustrationwithitsownproductdesignprocesses,particularlythelongtimerequiredtofixproblemsdetectedinearlyprototypes.TheworkshopconcludedwithadecisionthatDuPontshouldtakeovertheprocessofdevelopingnewplasticpartsinsidesomeofthecustomer’sfacilities.ThemanufacturerfeltthatEPwoulddoabetterjobbecauseDuPonthadamoreholisticunderstandingofplasticmaterialsandtheirmanufacture.Thisinitiativewasaclearsuccessforthethemeofbuildingcompletesolutionsforcustomers. Anoftenfatalweaknessofamatrixorganizationistheendlessdebatesamongbusinessunits,functionaldepartments,andgeographicalregionsaboutresourceallocation.EPreportedthattheclarityofthefivestrategicthemes,cuttingastheydidacrossunits,regions,andfunctions,highlightedcorporateprioritieseffectivelyandmadeiteasiertounderstandwhyresourceswereallocatedthewaytheywere.Thisledtomoreproductivediscussionanddialoguebasedonasharedunderstandingofthefundamentaldriversofoverallbusinessperformance.Individualsusedthescorecardarchitectureandmeasurestogainsupportforagendasandprojects.Enthusiasmandconstructivediscussionspervadedtheorganizationbecauseofthatsharedunderstandingofstrategy. CoordinatingDiversityintheRoyalCanadianMountedPolice Publicsectorenterprisesalsofindstrategicthemespowerfulforgettingtheirdiverseunitstocooperatesothattheycanachieveoutcomescollectivelybeyondwhattheunitswouldaccomplishindependently.Theapproachisparticularlywellsuitedtothissector,whereorganizationsareoftenhugelydiverseandatthesametimearelimitedpoliticallyintheirfreedomtoexperimentwithstructuralchange. Mappingstrategicthemesisparticularlywellsuitedtothepublicsector,whereorganizationshavelimitedpoliticalfreedomtoexperimentwithstructuralchange. ConsidertheRoyalCanadianMountedPolice,withits23,000employeesandaC$3.3billionannualbudget.TheRCMPoperatesatfourlevels—international;national;provincial/territorial;andlocal(over200municipalities,hundredsofruralcommunities,including566aboriginalcommunities).In2000,theRCMPfacedseveralchallenges.Therewerebudgetaryconstraints,anditsresourceswerestillnotadequateforthepolicingenvironmentofthetwenty-firstcentury.AnewRCMPcommissioner,Giuliano(Zack)Zaccardelli,feltpassionatelyaboutimprovingmanagement;hehadavisionthattheRCMPcouldbecomeastrategicallyfocusedorganizationofexcellence.Evenwithhisstrongcentralizedleadershipandvision,however,ZaccardellifacedthechallengeofgettingallRCMPunits,scatteredacrossanenormouslandmass,toalignwith,andcontributeto,corporate-levelpriorities. Asenior-levelprojectteamattheRCMPlaunchedaprocesstotranslatethemission(“safehomes,safecommunities”)intosomethingoperationalthatcouldbeunderstoodbythehighlymotivatedbutalsoverytacticalpoliceofficersthroughoutCanada.Theheartofthestrategyfordeliveringonthemissionwascontainedwithinasetoffiveoverarchingcorporate-levelstrategicthemesthatformedpartoftheprocessperspectiveandwentbeyondeverydaypolicingactivities: Reducethethreatandimpactoforganizedcrime. ReducethethreatofterroristactivityinCanadaandabroad. Reduceandpreventyouthinvolvementincrime,bothasoffendersandasvictims. Effectivelysupportinternationaloperations. Contributetosafer,healthieraboriginalcommunities. Thefivethemesrequirednational-levelstrategiccoordination.Accordingly,theRCMPdevelopedaseparatestrategymapforeach,withitsowninitiatives,targets,andmeasures.EachthemewasassignedaseniorRCMPexecutiveowner,whoorganizedperiodicmeetingsoflocalandnationalmanagerstoreviewprogressagainstthetheme’stargets.Oncethestrategymapsandscorecardsforthecorporate-levelstrategyandthefivestrategicthemeswerecompleted,thecascadingprocesstolocalunitscouldcommence.Eachlocaldivisionalunitselecteduptotenobjectivesforitsownstrategythatcustomizedthehigh-levelthemestothespecificrealitiesofitsoperations.Inaddition,thelocalstrategymapsincorporatedthedivision’snormalpolicingresponsibilities. Becausenosingleorganizationalunithadcompleteownership,responsibility,oraccountabilityforanyofthethemes,theprocesspromotedcooperationandintegrationamongpreviouslyindependentlocal,provincial,andnationalpolicingunits,allowingthemtosharelessonslearnedandbestpractices.Inonecase,forexample,acentralfunctionalgroup—theCriminalIntelligenceDirectorate—contributedtoathemeinawayitwouldneverhavedonebeforetoreducedrugtrafficinseveralaboriginalcommunities.Initially,thestrategicthemeformakingaboriginalcommunitiessaferfocusedonbuildingbetterrelationswiththeminordertomeettheirspecificneeds.ButwhentheCriminalIntelligenceDirectoratewasbroughtintothestrategy,itidentifiedaneedtofocusaswellonidentifyingcriminalthreatsthatwerepreyingonthecommunities.Accordingly,in2005,theRCMPundertookamajorinvestigationthatdisruptedthedeliveryofdrugstoseveralisolatednorthernaboriginalcommunities.Priortoidentifying“safer,healthieraboriginalcommunities”asastrategictheme,thecentralgroupwouldprobablynothaveconcentratedeffortstowardwhatotherwisemighthavebeenconsideredalower-levelstreetdrug–traffickingproblem. Noteveryunitcontributestoallthemesequally,ofcourse.IntheNorthwestTerritories,forinstance,thethreatofterroristactivitywouldbelow,soitsstrategymapdoesnotcontainobjectivessupportingthisstrategictheme.Buttheunitcouldcertainlyplayavitalroleinreducingyouthinvolvementincrimeandcreatinghealthieraboriginalcommunities.Conversely,anRCMPunitbasedinTorontomaynotbeabletomakeagreatcontributiontoaboriginalcommunitiesbutwouldbeacentralplayerinreducingthreatsfromorganizedcrimeandterroristactivity.Inthisway,allunitsplayedaroleindeliveringonRCMPstrategicprioritiesbeyondtheirday(andnight)joboflocalpolicing.Collectively,theresultsofinitiativesoutlinedinthestrategymapswereimpressive,astheexhibit“MeasuringSatisfactionwiththeMounties”demonstrates. MeasuringSatisfactionwiththeMounties SincetheRoyalCanadianMountedPoliceinstituteditsbalancedscorecardapproachtorealizingitsbroadvisionof“safehomes,safecommunities,”thepublic’slevelofsatisfactionwiththeforcehasrisen. ••• BothDuPontEPandtheRCMPwereabletousecorporatescorecardsandstrategymapsorganizedaroundstrategicthemestorealizetheenormousvaluethattheirportfolioofassets,people,andskillsrepresented.Asaresult,theydidnothavetoenduretherigorsofapainfulseriesofchangesthatsimplyreplacedonerigidstructurewithanother.Theyrealizedthatamoreflexibleandlessdisruptiveapproachwastocreateamanagementsystemtoserveastheinterfacebetweenstrategyandstructure.Ofcourse,motivatingbusinessunitsaroundstrategicthemesisnottheonlywayofdoingthis—norforsomecorporationswillitbethemostappropriateway.Butthere’snodoubtthatastrategictheme’sverticallinksacrossbalancedscorecardobjectives,measures,andinitiativescreatesanextraordinarilypowerfulsystemforuncoveringopportunitiesforvaluecreation,forcommunicatingcorporateprioritiestolocalunits,andforfacilitatingreviewsofresourceallocation,strategy,andmanagementeffectiveness.Ascompanieslookforwaystoimplementcorporate-levelstrategies,theynowhaveanewtooltoconsider. AversionofthisarticleappearedintheMarch2006issueofHarvardBusinessReview. HBRLearning ChangeManagementCourse AccelerateyourcareerwithHarvardManageMentor®.HBRLearning’sonlineleadershiptraininghelpsyouhoneyourskillswithcourseslikeChangeManagement.EarnbadgestoshareonLinkedInandyourresume.Accessmorethan40coursestrustedbyFortune500companies.Freeforalimitedtime! Changemaybetheonlyconstantintoday'sorganizations.Here'showtoleadthroughit. StartCourse LearnMore&SeeAllCourses ReadmoreonChangemanagement orrelatedtopics Balancedscorecard, Strategyexecution, Businessadministrationandsupportservices, Fabricationandmanufacturing andNorthAmerica RobertS.KaplanisaseniorfellowandtheMarvinBowerProfessorofLeadershipDevelopment,Emeritus,atHarvardBusinessSchool.HismostrecentHBRarticlesinclude:“InclusiveGrowth:ProfitableStrategiesforTacklingPovertyandInequality”(withGeorgeSerafeimandEduardoTugendhat),“HowtoPayforHealthCare:TheCaseforBundledPayments”(withMichaelE.Porter),and“HowtoSolvetheCostCrisisinHealthCare”(withMichaelE.Porter). DN DavidP.NortonisafounderanddirectorofthePalladiumGroupandisco-authorofTheBalancedScorecard. 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