Scenario-based strategy maps

Frank Buytendijk a, Toby Hatch b, Pietro Micheli c,*

aVice President and Fellow, Oracle Corporation, Rijnzathe 6, 3454 PV De Meern, The Netherlandsb Senior Strategist, Oracle Corporation, 16720 McCowan Road, Cedar Valley, Ontario, Canada L0G1E0cCentre for Business Performance, Cranfield School of Management, Building 38, Cranfield University,Cranfield, Bedfordshire MK43 0AL, UK

Business Horizons (2010) 53, 335—347

www.elsevier.com/locate/bushor

KEYWORDSPerformancemanagement;Strategy maps;Scenario analysis;Performancemeasurement

Abstract Strategy maps are designed to help execute strategy and bring predictivequalities to key performance indicators by linking them according to perceived cause-and-effect relationships. However, in our experience strategy maps are often extra-polations of past performance and are seldom sufficiently linked to possible futurestates. In this article, we argue that scenario analysis could play an important role inthe design of strategy maps, as it is an effective method to look at the future. Throughthe development of scenarios, organizations can think creatively about possiblediscontinuous future states and can prepare themselves for multiple plausiblefutures, not only the one they expect to happen. Therefore, scenario-based strategymaps could enable organizations to face strategic uncertainty in a more effective wayand make them more sustainable in the longer term. This article highlights thestrengths and weaknesses of strategy maps and scenario analysis, and outlines amethod to develop scenario-based strategy maps both in theory and by presenting asignificant example.# 2010 Kelley School of Business, Indiana University. All rights reserved.

1. Linking present and future

Despite considerable research in the areas of strat-egy and performance management, there is stillneed for ‘‘an explicit, process-based descriptionof how managers at all levels can contribute tomanaging strategic uncertainty in ways that miti-gate risk and position a firm to capture emergingopportunities’’ (Raynor, 2007, p. 10). This is certain-

* Corresponding author.E-mail addresses: frank.buytendijk@oracle.com

(F. Buytendijk), toby.hatch@oracle.com (T. Hatch),p.micheli@Cranfield.ac.uk (P. Micheli).

0007-6813/$ — see front matter # 2010 Kelley School of Business, Idoi:10.1016/j.bushor.2010.02.002

ly not easy, as it is challenging to predict futuretrends and developments, particularly in the cur-rent turbulent business climate (Fink, Marr, Siebe, &Kuhle, 2005). In this context, although strategicplanning has been used by a wide proportion oforganizations, ‘‘it has not proven its ability to informorganization leaders about massive emerging politi-cal, environmental, economic, and/or societalchanges’’ (Chermack, 2004, p. 301). To serve asimilar purpose, several forecasting techniqueshave been adopted–—but they have not proven ef-fective, either (Raynor, 2007).

At the same time, increasing emphasis has beenplaced on strategy execution, namely the mobiliza-

ndiana University. All rights reserved.

336 F. Buytendijk et al.

tion of resources necessary to deliver on the orga-nization’s strategy (Kaplan & Norton, 2008; Rose-nzweig, 2007). The need for tools that could enableorganizations to communicate both their strategyand the processes and systems that will enable themto execute that strategy, has been recognized(Kaplan & Norton, 2000). However, in a number oforganizations, it is still unclear what the strategymeans in operational terms, and there is stilllittle explicit sense of priority among the varietyof performance targets and indicators existingat different hierarchical levels (Neely, Adams, &Kennerley, 2002).

Herein we will bring together two approachesthat could enable organizations to effectively im-plement their strategy, while considering alterna-tive options of how different factors may affect theorganization’s future environment and perfor-mance. Strategy maps are a visual representationof the relationships among the key components of anorganization’s strategy (Eccles & Pyburn, 1992).They are developed to provide ‘‘the missing linkbetween strategy formulation and strategy execu-tion’’ (Kaplan & Norton, 2004, p. 10). Scenarioanalysis encourages managers and organizationalplanners to examine situations and factors thatchallenge their current way of thinking, and toconsider what could be presently unthinkable(Wack, 1985). In opposition to forecasting tech-niques, which aim to provide answers about futurestates, the purpose of scenario analysis is to encour-age people to pose questions (van der Heijden,2005). By developing scenarios, organizations op-pose the idea that a single predictable future exists(Fink et al., 2005).

To develop this idea further, we will: criticallyreview the strengths and weaknesses of strategymaps; examine the main characteristics and useof scenario analysis; compare and contrast thetwo tools, outlining the benefits of their conjointuse; and exemplify the suggested approach to de-signing scenario-based strategy maps through thehypothetical case of a large recruitment firm forpeople with technology skills, such as softwaredevelopers, support specialists, and database ad-ministrators. Finally, we will draw conclusions withrespect to the benefits of developing scenario-basedstrategy maps.

2. Strategy maps

A strategy map is an illustration of an organization’sstrategy. Its main purposes are to facilitate thetranslation of strategy into operational terms andto communicate to employees how their jobs relate

to the organization’s overall objectives (Lawson,Hatch, & Desroches, 2007). Strategy maps are in-tended to help organizations focus on their strate-gies in a comprehensive yet concise and systematicway (Kaplan & Norton, 2000).

If a strategy map is created via collaborativeprocess, buy-in and commitment toward the strate-gy could be enhanced. Through strategy maps, it ispossible to visualize how different parts of theorganization contribute–—directly or indirectly–—tothe organization’s overall performance. If we con-sider the Balanced Scorecard framework, a strategymap is used to describe the logic of strategy, con-necting organizational assets to internal businessprocesses which, in turn, enable the organizationto succeed from both customers’ and shareholders’points of view. Moreover, objectives drawn from thefour Balanced Scorecard perspectives are linkedtogether in a chain of cause-and-effect relationships(Kaplan & Norton, 2004). An optional attribute oftenused with Balanced Scorecard (BSC) framework isthe Strategic Theme. Organizations typically choosethree to five strategic themes which are used tohighlight the value proposition of the entire organi-zation, and to communicate shared priorities need-ed to achieve the value proposition. As noted byKaplan and Norton (2004, p. 104):

Each theme consists of a vertical chain of cause-and-effect relationships linking objectives,measures, and initiatives that span the fourBSC perspectives. The collection of strategicthemes articulates how business and supportunits can work together to create the synergiesnecessary to realize the enterprise’s valueproposition.

Strategy maps can be used to help identify appro-priate performance indicators (PIs) associated withthe objectives. On the other hand, it could beargued that PIs that do not fit in a cause-and-effectrelationship may not be important, and if cause-and-effect relationships require a ‘leap of imagina-tion,’ then this may indicate that relevant PIs mightbe missing. Finally, strategy maps can facilitate theselection of leading indicators. When PIs are linkedtogether in a cause-and-effect relationship, somenecessarily would be leading and some lagging.Those PIs that are leadingmay be used for predictivepurposes.

While there may be benefits related to the designand use of strategy maps, a number of authors havehighlighted possible shortcomings (e.g., Ahn, 2001;Buytendijk, 2008; Norreklit, 2000). From a stake-holder management point of view, the developmentof strategy maps could be criticized as too much ofan inward-looking exercise. Also, the cause-and-

Scenario-based strategy maps 337

effect relationships depict a one-way, linear ap-proach often starting with the ‘learning and growth’perspective and culminating in financial results in-stead of depicting non-linear, two-way linkages.Since the Balanced Scorecard perspectives are notindependent, feedback loops should be included inthe maps (Franco & Bourne, 2005).

From a statistical standpoint, testing the validityof the relationships between elements of a strategymap could enhance its quality. Ittner and Larcker(2003) suggest that less than 30% of the companiesthey surveyed actually create causal models to testthe relationships. However, the very idea of calcu-lating cause-and-effect relationships may be mis-leading, as performance indicator or strategicobjective data may result in a positive or negativecorrelation without necessarily being causal. AsNorreklit (2003) pointed out, strategy maps donot discriminate among logical and causal links.Even if we focused only on statistical analysis,insufficient historic data may be available to deter-mine a reliable coefficient. Typically, in many or-ganizations, there are inconsistencies in thefrequency of gathered values and the range in whichthe values vary over a period of time.

Even though statistical concerns with strategymaps are certainly relevant, in our experience,the design of strategy maps is rarely scientific. Mostoften, strategymaps are the outcome of a collectiveview of the involved managers on which objectivesthe business should focus, and how the businessshould operate to attain them. This is not necessar-ily wrong; however, if communicated poorly, a sta-tistically proven and robust strategy map may beseen as a ‘black box’ with cause-and-effect relation-ships that are poorly understood. If managers werenot part of the development process, they could tryto distance themselves from the use and results ofthe strategy map, especially if the implications arenot to their liking. Indeed, buy-in and a sense ofownership are needed, and the design of a strategymap should be a collaborative process.

A final but very important concern is that relianceon the causal model represented in the strategymapmay not be sufficient to reflect the evolution ofstrategy over time (Othman, 2007). Relying on astatic strategy map over the mid and long term isequivalent to assuming not only that the organiza-tion and its strategy will stay the same, but also thatcompetitors will continue to behave in the sameway. Furthermore, if strategy maps are supposed tohave predictive abilities, one could question thevalidity of analyzing past data to predict futurestates. Strategy maps do not include a possible timelag among PIs, and future situations may be differ-ent as relationships which were valid in the past may

not hold up in future circumstances. Therefore,organizations incur the risk that once a map iscreated, they concentrate solely on the develop-ment of a linear set of performance indicators,oblivious to possible changes in the future (Othman,2007). Given that all we can truly predict about thefuture is that most likely it will be different fromtoday, one could even argue that validating a strat-egy map based on past data may, per definition,invalidate it. This implies that although the devel-opment of a strategymap could help an organizationimplement its strategy, it could not enable theorganization to face the changes that can impactits strategy and–—ultimately–—its performance.

Building on the previous analysis, it is possible toconclude that strategy maps should not be closed,static representations of strategy. Both organiza-tions and PESTEL–—Political, Economical, Social,Technological, Environmental, and Legal–—factors(see Gillespie, 2007) change continuously, andover-reliance on past performance can be very risky.Linking the design of strategy maps to future sce-narios could help mitigate this risk, as maps couldbecome future-related, rather than mere represen-tations of the present state. Therefore, we suggestthat the use of a method for imagining possiblefutures, such as scenario analysis, could addressthese concerns and improve both current relevanceand predictive abilities of strategy maps.

3. Scenario analysis

A scenario was defined by Porter (1985, p. 63) as ‘‘aninternally consistent view of what the future mightturn out to be - not a forecast, but onepossible futureoutcome.’’ According to Schwartz (1991, p. 4), ‘‘sce-nario analysis is a tool for ordering one’s perceptionabout alternative future environments inwhich one’sdecisions might be played.’’ As such, scenario analy-sis is not meant to be right about the future. Instead,it helps managers think of future performance not asa single plan to stick to, but as a number of optionsthat–—once played out–—simply need to be recog-nized. In other words, scenarios could be used toprepare an organization for what might happen inthe future. Scenario analysis is a qualitative anddisciplined way to depict possible future states(Schoemaker, 1995). According to Miller and Waller(2003, p. 93), ‘‘scenario planning’’ is used to ‘‘envi-sion plausible future states of the world and toconsider how to take advantage of opportunitiesand avoid potential threats.’’ In the literature, theterms scenario analysis, scenario planning, and sce-nario development are often used interchangeably(Bishop, Hines, & Collins, 2007). In this article, we

338 F. Buytendijk et al.

will employ the termscenario analysis, aswebaseourapproach mostly on Schwartz (1991).

Despite being ‘‘essentially a study of our collec-tive ignorance’’ (Schoemaker, 1995, p. 38), scenarioanalysis aims to tackle two common concerns indecision making: predicting too much change ornot enough change. To do so, participants involvedin the development of scenarios are encouraged todifferentiate between factors they believe they areknowledgeable about and elements they consideruncertain or unknowable. Building on Schoemaker(1995, pp. 26—27), scenario analysis differs fromother planning methods in a number of ways:

� Scenarios explore the joint impact of variousuncertainties, which stand side by side as equals.

� Scenarios change several variables at a time,without necessarily keeping others constant.

� Scenarios go beyond objective analyses to includesubjective interpretations.

Scenario analysis is a relevant method to look at thefuture for two principal reasons. First of all, it isfundamental for organizations to think creativelyabout the future in order to avoid the risk of beingsurprised and unprepared, once discontinuous fu-ture states manifest themselves. Second, since thefuture is inherently uncertain, organizations need toprepare for multiple plausible futures, not only theone they expect to happen (Bishop et al., 2007).

Scenario analysis can lead managers to gain adeeper appreciation for the innumerable factorsthat shape the future, thus challenging tunnel visionand insufficient consideration for possible futurestates (Schoemaker, 1995). In doing so, organiza-tions are encouraged to build flexibility in the waysthey operate (Miller & Waller, 2003). Moreover,scenarios can be used for a number of purposes(Schoemaker, 1995, p. 34):

� Identify early warning signals

� Assess the robustness of the organization’s corecompetencies

� Generate better strategic options

� Evaluate the risk/return of each option in view ofthe uncertainties

According to Schwartz (1991), usually two or threescenarios are created. One scenario can be an ex-trapolation of the present. A second may describe abright future, such as a discontinuity that would be

dealt with well because the organization was pre-pared. The third scenario could describe a moregloomy perspective; for instance, a discontinuitythat would not be dealt with successfully becausethe organization was not ready. Others–—such asanalyst firm Gartner (2008)–—use a grid of two di-mensions, each describing opposite sides of a trend,leading to four scenarios; for a review of the differ-ent approaches to scenario analysis, see Bishopet al. (2007).

The development of scenarios also has the benefitof continually pushing the envelope of possibilities,since it regards strategic planning as collectivelearning (Schoemaker, 1995). Once scenarios arecreated, managers can devise strategic initiatives,which could reduce the risk posed by the mainuncertainties, exploit the opportunities identified,and keep risk within an acceptable limit (Miller &Waller, 2003). Although there may be benefits re-lated to the use of scenario analysis, some authorshave highlighted possible shortcomings. More pre-cisely, Miller and Waller (2003) suggest four mainweaknesses:

1. Scenarios may consist of nothing more than imag-inative guesswork unless there is logical consis-tency and thorough examination of the logic usedand outcome.

2. Some of the inputs to scenario analysis are non-quantifiable in nature. In this case, the output ofthe scenario may not be quantifiable.

3. The scenarios created may reflect current con-ditions and biases rather than future possibili-ties, and the personalities of those developingthe scenarios would likely limit the possibilitiesconsidered.

4. During analysis, many perspectives may be con-sidered. It is possible that there will be a lack ofconsensus and therefore, in the end, participantsmay not reach a shared or common strategy.

Following the reflections presented in the previoussection, it is possible to argue that organizationscould benefit from bringing together scenario anal-ysis with a formalized approach in creating strate-gy maps. Strategy maps aim to be predictive, asthey aspire to show how decisions made in thepresent could impact future results. Scenario anal-ysis could expand the effectiveness of strategymaps. The joint use of the two methods couldbe a substantial step forward, compared witheither the uncoordinated multiple versions of thetruth that all too often characterize the state of

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management information in many organizations(Buytendijk, 2008), or with a single version ofthe truth, often crystallized through the design ofa single strategy map. The use of scenario analysis inthe creation of strategy maps could add a probabilis-tic and anticipatory view,which the standard processof strategy map design lacks. Despite the benefits ofjointly developing scenarios and strategy maps, thecombination of these two techniques is not common.Let’s now investigate, in more detail, how such acombination could work.

4. Scenario-based strategy maps

Both scenario analysis and strategy maps requiremanagers to exercise their judgment to distilcountless possible future states to the most plau-sible few, and identify the key organizational ob-jectives. The development of scenario-basedstrategy maps implies that, once scenarios havebeen created, the main task for managers is todevise a strategy that is robust under the condi-tions identified under the final scenarios consid-ered (Othman, 2007). Building on Miller and Waller(2003) and Kaplan and Norton (2004), the combi-nation of strategy maps and scenario analysis has anumber of advantages:

� Strategy maps and scenarios are effective meansto communicate the present and future strategyof an organization.

� Both tools are built on a holistic view of theorganization and its environment, and on howkey activities and processes are interrelated.

� The internal focus of strategy maps is comple-mented by the focus of scenario analysis on envi-ronmental factors.

� Through strategy maps and scenarios, both quali-tative and quantitative aspects can be taken intoaccount.

� Both tools require the participation of severalstakeholder groups; this could increase thevalidity and robustness of the organization’sstrategy.

� The development of strategy maps and scenariosalso implies the comparison of mental models(Senge, 1990) and the achievement of intersub-jective agreement between participants.

� Finally, contingencies, uncertainties, trends, andopportunities–—which are seldom anticipated–—

could be identified and evaluated through scenar-io analysis, incorporated in the strategy maps,and thus acted upon.

Although the joint development of scenarios andstrategy maps could result in major benefits, we arenot suggesting that the complete process of devel-oping a strategy map should be driven solely byexternal influences as identified in various scenari-os. Competitive advantage also comes from strate-gic choices based on the organization’s owncapabilities and strengths. As a market player, thosestrategic choices impact the market as well; there-fore, they should be taken into account along withexternal factors. However, even though the litera-ture on strategy mapping is fairly vast, few authorshave suggested the combination of strategy mapsand scenario analysis (Fink et al., 2005; Othman,2007) and none have described the actual designprocess.

To address this issue, we propose the followingfour steps to create a scenario-based strategy map.Given the popularity of balanced scorecards andstrategy maps (Lawson et al., 2007), we will beginby assuming that the organization already has astrategy map:

1. Consider the strategy map and identify the stra-tegic objectives that describe the assumptionsfor the business model. For instance, ‘cost lead-ership’ for a budget airline, or ‘ultimate safety’for a car manufacturer, or ‘superior service’ for ahotel chain.

2. Create different scenarios; for example, usingPESTEL analysis. Identify the new or unchangedcritical success factors in each of those sce-narios.

3. Create a strategymap with objectives for each ofthose scenarios based on the specifics of thatscenario.

4. Establish the commonality of objectives acrossthe various scenarios. The more an objective ispresent across scenarios, the more relevantand ‘trustworthy’ such an objective will be,and the higher the probability that these goalscould be reached in a changing environment. Inorder for this commonality analysis to work,objectives will have to be specific; this impliesthat predominantly high-level objectives suchas ‘maintain profitability’ and ‘seek growth’ donot provide practical guidance and will mostlikely only change in the gravest of disconti-nuities.

340 F. Buytendijk et al.

In order to clarify and illustrate the proposed ap-proach, an example is presented in the next section.

5. Example: Tier One Talent

Tier One Talent (a hypothetical entity) is a largerecruitment firm for people with technology skills,such as software developers, support specialists,and database administrators. In a market full ofjobmobility andmany people building ITskills, thereis an ample supply of talent. The competitive differ-entiators of Tier One Talent (TOT) are its superiormatching process and customer relationships. Thecompany has developed global contracts with itslarge multinational customers, yet retains localmanagement for personalized service. Accountmanagers know their customers inside and out,and know what skills to look for. For example,instead of asking customers to fill in forms, TOToffers ‘live services’ creating job profiles basedon interviews and mutual understanding. In otherwords, TOT focuses on the customer intimacy valuediscipline (Treacy & Wiersema, 1995). TOTcreated astrategy map (Figure 1) to articulate how it intends

Figure 1. Tier One Talent’s current strategy map

to meet its goals in upcoming years. The strategymap uses the Norton and Kaplan (1996) BalancedScorecard framework, and employs strategy themesto demonstrate how the key areas of RevenueGrowth, Efficiency, Customer Experience, and Cus-tomer Retention are central to TOT’s ability toachieve its strategy.

Tier One Talent is known for its advanced match-ing system consisting of very specific technologythat provides better results than off-the-shelf pack-ages. This translates well into the company’s cus-tomer value proposition, as TOT can offer bettercandidates in a shorter period of time–—an impor-tant driver of revenue growth. TOT is also workingon expanding the footprint of the technology. Thismeans adding candidates and adding matching cri-teria to further improve the system, and opening upthe system for candidates and customers to searchthemselves, providing an innovative service. TOT’sfocus is to increase the number of full-time place-ments and maintain part-time placements in orderto meet its revenue growth objectives. Customerintimacy implies not only knowing the customervery well and having local account management

Scenario-based strategy maps 341

(increasingly internationally), but also having a staffthat understands IT. This discipline also adds toqualifying candidates effectively, a positive custom-er experience, customer retention, and–—ultimate-ly–—revenue growth.

To further differentiate from the competition,Tier One Talent has a small unit of employed ITconsultants that take on projects, mainly focusedon project management. This is an hourly-rate con-sulting business designed to create a ‘TOT’ way ofdoing ITand adding to the customer experience. Thisservice was created chiefly for smaller customers,who do not have their own professional IT depart-ment.

Following the arrows between the objectives (seeFigure 1), it is possible to understand the cause andeffect links. For example, if Tier One Talent choosesto expand the matching footprint, this will aid inimproving the advanced matching system. A bettermatching system will produce a faster matchingprocess. A faster matching process contributes tothe theme of a better Customer Experience, whichin turn will help with Revenue Growth. Along thesame lines, if TOT chooses to recruit internationaltalent, this will aid in local account management,which will help provide live personal service. Livepersonal service contributes to a good CustomerExperience, which in turn helps with the RevenueGrowth Strategy.

5.1. Scenarios

When deciding on the number of scenarios to createand test for future stability, the pros and cons ofcreating not enough or too many must be consid-ered. Bishop et al. (2007) advise against producing abest case, worst case, and a middle version, as thiswould lead organizations to choose the middleground. They also point out there are many othertechniques. For our Tier One Talent example, wehave chosen a variation on this approach as thefocus of this article is not the description of ap-proaches to scenario analysis, but rather the idea ofusing scenarios when creating strategy maps.Therefore, in order to test the validity of the stra-tegic objectives, and make the strategy map reli-able in the future, TOT has prepared threescenarios:

1. Steady-As-She-Goes: The economic market staysthe same and the company continues to groworganically.

2. It’s A NetworkedWorld: The labor economy startsto boom and TOT needs to focus on hyper-growth.

3. Costs, Costs, Costs: The economy takes a severedownturn, ITstrategies change, and TOT needs tochange the business model to survive.

Scenario 1 (Steady-As-She-Goes) can be completedusing the same strategy map. Tier One Talent simplyramps up efforts to hire and retain employees, andfind and contract new candidates for matching. Thecurrent objectives in the learning and growth per-spective would be sufficient.

Scenario 2–—It’s A Networked World–—sketches adifferent situation. (We used the six factors ofPESTEL-analysis to create this sample scenario–—Political/Legal influence: tax rebates. Economical/Social factors: Generation Y self-employed profes-sionals who use Internet markets to find work.Technological: rise of the 2.0 world. Ecological:focus on sustainability.) With Generation Y enteringthe workforce, there is an increase in the number ofindependent professionals. Whereas lifelong em-ployment had already transitioned to job-hopping,now professionals hop from project to project.Governments support entrepreneurship by offeringvarious tax rebates, thus lowering the risk for peoplewho become self-employed. Open source workingstyles dominate the IT world. The 2.0 wave rulesthe business and commerce shifts even more fromtraditional channels to social websites. ‘Green’ is thekey, causing many professionals to work at homeserving multiple customers, and find new projectsusing Internet markets.

This scenario has a clear impact on Tier OneTalent’s strategic objectives (Figure 2). The dynam-ics of the market will change, too. Currently arecruitment firm, TOT may have to shift its focusto become more of a temp agency, matching cus-tomers and candidates on a project-by-project ba-sis. Given the huge growth of the market, TOT mayhave to acquire a temp agency in order to keep upwith the competition and the market growth. An-other opportunity might be to acquire a trainingfirm, to educate new graduates and provide themwith a few months of basic experience.

With a huge demand for flexible employment,Tier One Talent’s customer intimacy would have toshift focus to the supply side: understanding thenetworks of self-employed professionals and buildingclose relationships with colleges and universities.In this scenario, it is no longer necessary to havestaff with in-depth domain expertise about IT. TOT’s‘live services’ would not scale, and matching wouldhave to become a self-service process betweencustomers and candidates. This, then, becomesthe innovative service of choice. In addition, TOTwould have to take a hard look at its lines of businessto ensure revenue maximization. For this reason,

342 F. Buytendijk et al.

Figure 2. Strategy map, Scenario 2

TOTwould no longer have the luxury of maintainingits own staff to provide hourly consulting for smallerclients.

In this scenario, Tier One Talent’s customer inti-macy strategy turns out not to be very reliable.However, given the enormous market growth, thematching system and the planned expansion stillhold effective.

The previous scenario depicts only one of severalpotential realities. Scenario 3–—Cost, Cost, Cost–—draws a different picture. (The PESTEL analysisused for this scenario is–—Political/Legal influence:increased compliance regulations. Economical/So-cial factors: job security in a declining economy.Technological: Internet largely used to globalizeand source operations; IT becomes a utility. Eco-logical: focus on sustainability.) In this scenario, theeconomy declines and the cost of living increases.People are looking for secure jobs. Companies arenot willing to invest in IT innovation, but insteadoutsource IT activities to offshore companies thatoffer economies of scale. IT professionals focuson managing sourcing relationships, instead ofdeveloping or maintaining systems themselves.

Consequently, IT becomes a utility, governmentregulations intensify, and more IT budget is spenton compliance.

Also in Scenario 3, Tier One Talent’s strategy isheavily impacted (Figure 3); new sources of businessare needed. The traditional recruiting business willtake a hit, so TOT will have to differentiate evenmore. The company will need to emphasize its liveservices, and prove even more the superior capabil-ities of the matching system. The IT people custom-ers hire will be of a more senior level, and ITmanagers will manage the outsourcing relationshipsinstead of IT development and operations. TOTwillneed to position the matching system as a mecha-nism between the customer and the outsourcingparty, and how resources can be matched betweenthose parties. TOT then will mediate between out-sourcers and customers, based on an annual con-tract. Given the additional complexity of this work,TOT will need to ramp up its consulting business,advising large customers on outsourcing strategies,and managing outsourcing relationships for smallercustomers as a trusted advisor. TOT will need tohire more IT professionals themselves. Instead of

Scenario-based strategy maps 343

Figure 3. Strategy map, Scenario 3

expanding inNorthAmericaandEurope, thecompanywould need to invest in India and other offshorecompanies where outsourcers run their operations.Like in Scenario 2, the company needs to intensifyrelationships with the supply side. There are morethan enough candidates, but TOT needs to find theright ones with a multitude of skills. Customer inti-macy is nowmore important than ever; however, thecompany must specialize, and therefore no longerhas the luxury of offering one-stop-shopping.

Key objectives in this scenario are expanding thematching footprint and expanding the consultingbusiness. Setting up college relationships alsoemerges as an important objective in two of thethree scenarios.

5.2. Synthesized strategy map

After considering all the scenarios, a new, synthe-sized strategy map can be created (Figure 4). Thismap is Tier One Talent’s new, more reliable strategymap for the future based on the common strategicobjectives throughout the various scenarios, andother objectives which were evaluated and consid-

ered important to TOT’s future. The objectives arecategorized into two types: strategic imperativesand strategic choices.

� The strategic imperatives (SI) include all objec-tives that remained stable throughout the scenar-ios. Strategic imperatives also include theobjectives that appear in all the new scenarios(other than Steady-As-She-Goes), that don’t harmthe original scenario and fit the new strategicdirection. The objectives that were formulatedon a level which is too abstract (too high) did notchange, but are likely not useful. These should bediscussed to see if they can be made more rele-vant, or be removed.

� Strategic choices (SC) include all objectives thatdid not appear in all scenarios but do fit the futurestrategic direction.

The objectives in scenarios that are neither imper-ative nor a strategic choice (not chosen) are re-moved from the strategy map. We suggest that it isconsidered safe to make long-term investments in

344 F. Buytendijk et al.

Figure 4. Synthesized strategy map

strategic imperatives. It is less safe to invest heavilyin strategic choices, unless the investment can bemade in such away that it is possible to reconsider oralter the investment, if required by a future reality.Table 1 compares the objectives for the threescenarios being considered. The evaluation columndescribes whether or not the objective was consid-ered a strategic imperative, a strategic choice(in some cases modified based on the insights gainedby the scenario analysis process), or not consideredat all for the synthesized map.

A few strategic objectives of Tier One Talentremain solid throughout all scenarios, and weretherefore labeled imperatives (Table 1). TOT’s keycompetitive differentiator, the matching system, isfortunately reliable now and in the future. Expand-ing its technology footprint works in all exploredscenarios, and using it in various ways remains animportant part of the customer value proposition.Monitoring operating expenses–—and reducing themwhere possible–—is also important, as is the mainstrategic objective: increasing profitability. It is alsological that attracting candidates remains a strate-

gic imperative throughout all scenarios, as it is TOT’score business.

Scenarios 2 and 3 both suggest it is wise to investin college relationships, and since this objectivedoes not negatively affect the Steady-As-She-Goesscenario, it can be considered a strategic imperativeas well. Exceeding customer expectations enduredthroughout the three scenarios; therefore, it is alsopresent on the new strategy map. This objective ismeaningful in all scenarios; however, it is not clear ifthis is truly a strategic imperative or if it did notchange from scenario to scenario because it hasbeen defined at too high a level to be of significance.

Based on the scenario analysis, Tier One Talentchooses to change its strategy. As TOTalready has areasonable share of the market, the strategicchoices it makes will not only affect the company,but will also have an impact on the market. TOTdecides to move away from a high-touch businessmodel for all customers. Consequently, it will supplylocal account management and live personal servicefor key accounts only. For other customer segments,the company will move to a self-service model

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Table 1. Finding commonality across all scenarios

Strategic Objective Current& Steady-

As-She-Goes

It’s ANetworked

World

Costs,Costs, Costs

Evaluation

Financial

Increase profitability U U U SI

Increase full-time hire matching U U SC Modified

Maintain part-time hire matching U U SC Modified

Maintain/Expand hourly consulting U U SC

International revenue expansion U U SC Modified

Minimize loss recruitment revenue U Not Chosen

Reduce operating expenses U U U SI

Acquire temp & training agency U Not Chosen

Customer

Fast matching process U U U SI Modified

One-stop shopping U U SC

Live personal service U U SC

Self-service matching U SC

Provide innovative services U Not chosen

Exceed customer expectations U U U SI

Be trusted advisor U Not Chosen

Internal Process

Improve matching system U U U SI

Attract and contract high quality matchingcandidates

U U U SI

Create courses to develop new candidates U Not Chosen

Maintain/Expand stable of IT consultants U U SC

Local account management U U SC

Develop college relationships U U SI

Learning & Growth

Expand matching footprint U U U SI

Develop staff with domain expertise U U SC

Recruit international talent U U SC Modified

Expand in outsourcing countries U SC Modified

Offer 6 months of experience for candidates U Not Chosen

whereby customers and candidates get access to thematching system themselves. For non-key custom-ers, TOTwill still offer a wide range of services for allareas of the business, thus retaining its businessmodel of one-stop-shopping for IT recruitment.

As long as the consulting activities are profitable,and there are no drastic changes in volume, thisobjective should remain on the map. The revenuestream from maintaining an in-house group of con-sultants should be retained. Given the lower servicecosts of the self-service model, it makes sense tocontinue providing and even expanding full-timeand part-time contracts. Currently, Tier One Talentdoes not need to actively pursue acquiring a temp

agency, another recruitment agency, or a trainingcompany. However, it is prudent to continue tomonitor the mergers and acquisitions market in casegood opportunities arise, or the market conditionschange again.

In the learning and growth area, Tier One Talentwill continue to invest in developing IT domainexpertise in its own staff. This expertise is neededto carry on improving the intelligence of the self-service matching system, from which customers andcandidates will benefit. On a more strategic level,international investments will be rerouted to coun-tries that may hold large outsourcing businesses.Attracting staff in these local communities can not

346 F. Buytendijk et al.

only help grow business and revenue in the emergingeconomies, but also add to the intelligence of theself-service system.

The objective, ‘to provide 6 months of experi-ence,’ was not inserted in the synthesized strategymap, as currently it is not needed and the programcan always be started later. Although it makes sensein a number of scenarios (Scenario 3 and, in hind-sight, Scenario 1) to focus on being a trusted advisor,this path of thinking is not followed. It does not fitthe self-service model, and local account manage-ment should already have that role in key accounts.Providing innovative services is also not on thestrategy map anymore, because the self-servicemodel has become the innovative model of choice.

Figure 4 shows the effects of the new approach onthe development of the strategy map. If we com-pare this new strategy map with the original(Figure 1), a number of differences are evident.Based on the scenario-based strategy mapping ex-ercise, Tier One Talent has effectively decided tochange its strategy. Strategic uncertainty will al-ways be present, and although TOT’s new strategy ismore reliable in a number of possible future situa-tions, it may not necessarily be right. However, thenew strategy map has supported TOT’s decision onwhich strategic areas the company could invest insafely for the long term, and which options shouldbe kept open.

6. Conclusions

Strategy maps are useful tools for strategy execu-tion, but they are often built on unclear cause-and-effect relationships derived from the extrapolationof past performance data and insufficiently linked topossible future states. If too static, strategy mapscould actually lead organizations on a risky pathwhich assumes that present conditions will simplyperpetuate. Therefore, the development of staticstrategy maps might make organizations even moreill-prepared to face radical changes than if they didnot have a strategy map at all.

In order to address these concerns, we proposethe joint use of scenario analysis and strategymaps. Scenario analysis has been used in a varietyof contexts over the past decades, and it hasproven valuable in considering new and possiblydiscontinuous futures. Building strategy mapsthat are linked to scenarios could help organiza-tions link their strategy to future conditions, andprepare them to face currently unexpected sit-uations.

Through the hypothetical case of Tier One Talent,a large recruitment firm for people with technology

skills, we have exemplified the development ofscenario-based strategy maps. In this instance, itis clear how TOT could–—and should–—consider asuite of factors that may have a significant impacton the way the organization and its market operate.By considering three scenarios, TOTcould modify itscurrent strategy and prepare itself for possiblefuture conditions. Differentiating among strategicimperatives, strategic choices, and marginally rele-vant objectives (particularly in the light of futurestates), the organization could design a more reli-able strategy map for the future. This could enableit to face strategic uncertainty in a more effectiveway and, eventually, make it more sustainable in thelonger term.

In this article, we have presented one way tocombine strategy maps and scenario analysis to helporganizations face strategic uncertainty in a moreeffective way. Moreover, we have discussed a hypo-thetical example to clarify the effectiveness of thiscombination. We have found no other article thathas done so before. Future research could explorethe joint use of strategy maps and scenario analysisin real-life cases. In particular, issues which could bediscussed in more depth include: the cause andeffect links between measures and objectives; themost appropriate number of scenarios to obtainfuture-reliable strategy maps; and, the outcomesof using such a method.

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