Mastering the Management System
Successful strategy execution has two basic rules: understand the management cycle that
links strategy and operations, and know what tools to apply at each stage of the cycle.
by Robert S. Kaplan and David P. Norton
Companies have always found it hard to balance pressing operational concerns with
long-term strategic priorities. The tension is critical: World-class processes wont lead to
success without the right strategic direction, and the best strategy in the world will get
nowhere without strong operations to execute it. In this article, Kaplan, of Harvard
Business School, and Norton, founder and director of the Palladium Group, explain how to
effectively manage both strategy and operations by linking them tightly in a closed-loop
management system.
The system comprises five stages, beginning with strategy development, which springs
from a company mission, vision, and value statements, and from an analysis of its
strengths, weaknesses, and competitive environment. In the next stage, managers translate
the strategy into objectives and initiatives with strategy maps, which organize objectives
by themes, and balanced scorecards, which link objectives to performance metrics. Stage
three involves creating an operational plan to accomplish the objectives and initiatives; it
includes targeting process improvements and preparing sales, resource, and capacity plans
and dynamic budgets. Managers then put plans into action, monitoring their effectiveness
in stage four. They review operational, environmental, and competitive data; assess