How to build a BSC strategy map for Enterprise architecture

Kaplan and Norton have identified the following the 5 principles of that guide the development of the strategy map. The principles have been modified to fit the Enterprise Architecture context.

1. Strategy balances contradictory forces: EA’s short term resource expense should balance the benefits realized mainly on a long term return time horizon
2. Strategy is based on a differentiated customer value proposition. Satisfying customers needs the vital source of sustainable value creation. The targeted customer segments of the EA initiative need to be identified and a value proposition need to be formulated.
3. Value is created through internal processes. Effective and aligned internal processes of the enterprise modeling initiative, determine how value gets created and sustained for customers. Focus is on critical few internal processes that deliver the differentiating value proposition
4. Strategy consists of simultaneous, complementary themes. The formulated key internal process, occur parallel and in many situations complement each other. However, they do not always deliver benefits at the same time. Hence care is to be taken so that, they are formulated, evolve and measured at appropriate intervals to create a sustaining growth.
5. Strategic alignment determines the value of intangible assets. The future learning and growth perspective, describes the EA initiative’s intangible assets and their role in the strategy.

I find work done by an EA guru, Jaap Schekkerman in Extended Enterprise Architecture Maturity Model Support Guide SM Version 2.0, an exceptional starting point to use maturity based KPIs to measure the objectives indicated in the strategy map.

http://www.enterprise-architecture.info/Images/E2AF/Extended%20Enterprise%20Architecture%20Maturity%20Model%20Guide%20v2.pdf

Balance scorecard simplified

Kaplan and Norton presented the Balance Scorecard (BSC) concept in articles published in the Harvard Business Review. The original BSC was created to overcome the traditional financial accounting measures such as ROI and payback period, which offer a very narrow and incomplete picture of business performance. It was clear that dependency on such data inhibits future actions to create value. The competitive strategy of a firm should not be solely driven by the core competencies and internal process but also by its environment, Prahalad and Hamel (Competing for the Future).

Hence there is a need create a strategy which is environment inclusive and a performance measurement to measure the same. As a result, Kaplan and Norton suggest that financial measures should be supplemented with further measures that reflect customer satisfaction (delivering value to the customer), internal business processes (building the right strategic capabilities and efficiencies) and the ability to learn and grow (skills and systems that will be needed) . Furthermore, the name “balance” stems from the concept to keep score between

· short- and long-term objectives

· financial and non-financial

· between lagging and leading indicators

· internal and external performance perspectives

In short the balance scorecard identifies the knowledge, skills and systems that
employees will need (learning and growth) to develop and build the right strategic capabilities (internal processes) to deliver value to the market (customer) which leads to higher shareholder value (financial).