Fachhochschule für Ökonomie und Management
University of Applied Science
Berlin
Master of Business Administration (MBA)
1
st
Academic Semester
Strategic Management
Assignment I
The Strategy Map for
General Electric Medical Systems, 2002
Handed in by:
Anna Massot
Nadine Pahl
Berlin, May, 02
nd
2008
The Strategy Map for General Electric Medical Systems, 2002
Table of Contents
Anna Massot, Nadine Pahl
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
The Strategy Map for General Electric Medical Systems, 2002
List of Abbreviations
Anna Massot, Nadine Pahl
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
The Strategy Map for General Electric Medical Systems, 2002
List of Figures
Anna Massot, Nadine Pahl
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
The Strategy Map for General Electric Medical Systems, 2002
Introduction
Anna Massot, Nadine Pahl
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.
The Strategy Map for General Electric Medical Systems, 2002
Strategy Maps Theoretical Framework
Anna Massot, Nadine Pahl
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):
N Financial perspective: describes the tangible outcomes of the
strategy in traditional financial terms (e. g. revenue growth, profitability)
N Customer perspective: defines the value proposition for targeted
customers
N Internal process perspective: defines the processes that will
transform intangible assets into customer and financial outcomes
N 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.
The Strategy Map for General Electric Medical Systems, 2002
Strategy Maps Theoretical Framework
Anna Massot, Nadine Pahl
3
Intangible assets are therefore highlighted in the last two perspectives:
Figure 1: The Balanced Scorecard Metrics
Source: http://images.google.de, 24.04.2008.
The architecture of cause-and-effect, linking the four perspectives, is
the structure around which a strategy map is developed.
11
2.2
Principles of Strategy Maps
As stated in chapter 2.1, the strategy map has evolved from the four-
perspective model of the BSC. Kaplan and Norton realized that there were
two important factors that make organizations implementing the BSC
successfully:
N Alignment of the organizational resources
N Focus intensively in implementing the strategies
12
11
See Kaplan, Norton (2004), p. 32.
12
Ibid, p. xi.
The Strategy Map for General Electric Medical Systems, 2002
Strategy Maps Theoretical Framework
Anna Massot, Nadine Pahl
4
While drawing up the BSC for themselves, organizations were forced to
rethink their strategic priorities and describe their strategies. This led
Kaplan and Norton to develop a new tool the strategy map based
on the principle
"You can't measure what you can't describe".
According to Kaplan and Norton, the following formula exists:
Breakthrough results =
(Describe the strategy) + (Measure the strategy) + (Manage the strategy
)
13
This formula combines the two underlying principles of Kaplan and Norton:
You can't manage (3
rd
component) what you can't measure (2
nd
component)
and you can't measure what you can't describe (1
st
component).
Therefore, strategy maps are on step in a logical continuum that describes
what value is and how it is created (figure 2):
Figure 2: Steps to Devise and Execute Strategy
Source: Kaplan, Norton (2004), p. 33.
13
Kaplan, Norton (2004), p. xii.i
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