Fachhochschule für Ökonomie und Management

University of Applied Science

Berlin

Master of Business Administration (MBA)

1st Academic Semester

Strategic Management

Assignment I

The Strategy Map for

General Electric Medical Systems, 2002

Handed in by:

Anna Massot

Nadine Pahl

Berlin, May, 02nd 2008

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The Strategy Map for General Electric Medical Systems, 2002

I

Table of Contents

Table of Contents I

List of Abbreviations II

List of Figures III

1

Introduction 1

2

Strategy Maps ­ Theoretical Framework 2

2.1

The Idea Behind Strategy Maps 2

2.2

Principles of Strategy Maps 3

2.3

Creating a Strategy Map 5

2.3.1

Financial Perspective 7

2.3.2

Customer Perspective 7

2.3.3

Internal Process Perspective 8

2.3.4

Learning and Growth Perspective 9

3

Strategy Map for General Electric Medical Systems
(GEMS), 2002 11

3.1

Background ­ The GEMS Business Concept 11

3.2

The Situation ­ Market Developments 14

3.3

Current Strategy Map 16

3.3.1

Financial Perspective 16

3.3.2

Customer Perspective 17

3.3.3

Internal Process Perspective 18

3.3.4

Learning & Growth Perspective 20

4

Conclusion 23

Appendix 1 Integral Total Management (ITM) Checklist V

Bibliography VI

Declaration In Lieu of Oath VII

Table of Contents

Anna Massot, Nadine Pahl

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The Strategy Map for General Electric Medical Systems, 2002

II

List of Abbreviations

1Q First

Quarter

%

Symbol

, per cent

$

Currency symbol

, United Stated Dollar

&

Symbol

, and

BSC Balanced

Scorecard

CEO

Chief Executive Officer

cf. confer

COE

Center of Excellence

CT Computed

Tomography

e.g.

Latin

, exempli gratia (for example)

et al.

Latin,

et alii (and others)

GDP

Gross Domestic Product

GE General

Electrics

GEMS

General Electric Medical Systems

GPC

Global Product Company

ID Identity

ibid.

Latin,

ibidem (at the same place)

i.e.

Latin,

it est (that is)

IT Information

Technology

MR Magnetic

Resonance

NBC National

Broadcasting

Company

p. Page

PET

Positron Emission Tomography

R&D

Research and Development

s.l.

Latin,

sine loco (without place)

s.p.

Latin,

sine pagina (without page)

TQM

Total Quality Management

US United

States

List of Abbreviations

Anna Massot, Nadine Pahl

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The Strategy Map for General Electric Medical Systems, 2002

III

List of Figures

Figure 1: The Balanced Scorecard Metrics 3

Figure 2: Steps to Devise and Execute Strategy 4

Figure 3: Strategy Maps: Simple Model of Value Creation 5

Figure 4: The Strategy Map Template 6

Figure 5: Financial Perspective 7

Figure 7: Internal Process Perspective 9

Figure 8: Learning & Growth Perspective 10

Figure 9: Global Market Share Leaders by Modality 12

Figure 10: Center of Excellence Strategy 13

Figure 11: Financial Perspective of GEMS Strategy Map 17

Figure 12: Customer Perspective of GEMS Strategy Map 18

Figure 13: Internal Perspective of GEMS Strategy Map 20

Figure 14: Learning & Growth Perspective of GEMS Strategy Map 22

Figure 15: Balance - Strategy Formulation and Strategy Execution 24

List of Figures

Anna Massot, Nadine Pahl

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The Strategy Map for General Electric Medical Systems, 2002

1

1 Introduction

If you take the words of a former General Electrics (GE) employee to define

strategy,

William E. Rothschild

1 said, "What do you want to achieve or avoid?

The answers to this question are objectives. How will you go about achieving

your desired results? The answer to this you can call strategy."2 This

statement not only highlights the need for strategy but also the need to bring

strategy to fruition. Companies should not only devise strategy but also

successfully clarify and execute their strategies. This means that a company

has to be able to measure its strategic success.

Unfortunately, company strategy is not always transparent or understood in

the same way by a company′s key players.

Sun Tzu

, a Chinese military

strategist who wrote the military treatise

The Art of War

, praised this aspect

for strategies in war as follows: "All men can see these tactics whereby I

conquer, but what none can see is the strategy out of which victory is

evolved"3

The Strategy Map created by

Kaplan

and

Norton

is to facilitate corporate

strategy development and execution providing a missing link between

strategy formulation and strategy implementation by identifying the key

internal processes that drive strategic success and by aligning investment in

people, technology and organizational capital for the greatest impact.4

The first part of the assignment describes in detail the theoretical framework

of Strategy Maps. The second part uses the theory to describe and visualize

the Strategy Map of General Electric Medical Systems (GEMS) ­ the world′s

leading manufacturer of diagnostic imaging equipment.5 This practical

approach is based on the publication of

Tarun Khanna

about GEMS in the

Harvard Business School Press in February 2003. In conclusion, there is a

brief up-to-date situation on GEMS after 2002 and some statements to the

authors′ experience in creating the GEMS Strategy Map.

1 Corporate Strategist at GE from 1981-1983.

2 www.sme-growth.co.uk, 23.04.2008.

3 www.hbsp.harvard.edu, 30.04.2008.

4 See Kaplan, Norton (2004), s.p.

5 See Khanna (2003), p. 1.

Introduction

Anna Massot, Nadine Pahl

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The Strategy Map for General Electric Medical Systems, 2002

2

2

Strategy Maps ­ Theoretical Framework

2.1

The Idea Behind Strategy Maps

According to

Kaplan

and

Norton

"an organization′s strategy describes how it

intends to create value for its shareholders, customers and citizens".6 To

create sustained value, organizations must leverage their tangible physical

and financial assets (e.g. machinery, buildings, bank balance) and their

intangible assets (e.g. people, information, culture). More than 75 % of the

average organization′s market value is derived from intangible assets that

traditional financial metrics do not capture.7 Therefore, improvements in

intangible assets affect financial outcomes not direct, but through cause-and-

effect relationships. These relationships define the chain of logic by which

intangible assets will be transformed to tangible value.8

In 1992,

Robert S. Kaplan

and David P. Norton

introduced the concept of the

Balanced Scorecard, based on the principle

"You can′t manage what you can′t measure".9

The Balanced Scorecard (BSC) is a performance measurement system that

enables companies to quantify critical intangible assets.10 The BSC groups

four general categories (perspectives):

·

Financial perspective

: describes the tangible outcomes of the

strategy in traditional financial terms (e. g. revenue growth, profitability)

·

Customer perspective

: defines the value proposition for targeted

customers

·

Internal process perspective

: defines the processes that will

transform intangible assets into customer and financial outcomes

·

Learning & growth perspective

: defines the intangible assets that

must be aligned and integrated to create the value.

6 Kaplan, Norton (2004), p. 4.

7 See Kaplan, Norton (2004), s.p.

8 Ibid, p. 31.

9 Ibid, s.p.

10 Ibid, p. x.

Strategy Maps ­ Theoretical Framework

Anna Massot, Nadine Pahl

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