Communication

Communication is the headline that gathers the theoretical findings regarding how communication can support the contribution of each level in the strategy process. The result of this review is a theoretical hypothesis regarding the forth research question. In order to provide an answer to this question the tools such as strategy plan, balanced scorecard, strategy map are studied as well as the concept of strategic planning as a communicative process. According to Kaplan and Norton (2000) the success of strategy execution depends on how well the people in the organization understand it. Therefore organizations need tools for communicating the strategy. According to Spee and Jarzabkowski (2011) text within the planning process can take form as PowerPoint presentations, planning documents and targets that are part of a strategic plan. In this section we will present three written documents that can be used as such tools; strategy plans, balanced scorecards and strategy maps.

2.4.1 STRATEGY PLAN

A strategy plan typically concentrates on a medium to long term time frame and includes a performance plan, an operating budget, a capital expenditure budget, strategic targets for market share, employment level, output, and specific strategic milestones (Grant, 2006). According to Grant (2006) the performance plans are often developed annually and are then monitored on monthly and quarterly basis to detect deviations from targets and finally to be

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reviewed at the end of each year. The performance targets emphasize financial indicators such as for example return on invested capital and growth of sales revenue but also strategic goals such as market share and quality and operational performance such as productivity and output (Grant, 2006).

2.4.2 BALANCED SCORECARD

The balanced scorecard was introduced by Kaplan and Norton (1992). Fifteen years later Kaplan and Norton (2007) describes the balanced scorecard as “a sophisticated instrument panel for coordinating and fine-tuning a company’s operations and businesses so that all activities are aligned with its strategy”. Often it is used to build the content of companies’ strategy plans. The balanced scorecard does not only focus on the financial result of a company but also the intangible assets that companies need for future growth (Kaplan & Norton, 2007). It includes financial, customer, internal business processes and learning and growth. The areas should provide answers to the following questions: how should we appear to our shareholders; how should we appear to our customers; to satisfy our customers and shareholders which business process must we excel in; and finally how will we sustain our ability to change and improve in order to achieve our vision (Kaplan & Norton, 2007). The basic design of the balanced scorecard is illustrated in Table 2. The balanced scorecard hence links objectives with measures and according to Kaplan and Norton (1992) it also forces managers to only focus on the few measures that are critical.

Table 2 The structure of a balanced scorecard (Kaplan & Norton, 2007) Financial / Customer / Internal Business Processes/ Learning and Growth

Objectives Measures Targets Initiatives

2.4.3 STRATEGY MAP

Through extensive research, gathered through working with the balanced scorecard at hundreds of companies, Kaplan and Norton (2000) brought the patterns and different items from the organizations’ balanced scorecard together into a common visual framework, a strategy map. Kaplan and Norton (2008) describe the strategy map as a tool for visualizing the cause and effect relation between the organization’s overall goal and the individual employees’ job, hence the performed activities. Another way of expressing it is that a strategy map shows how initiatives and resources including corporate culture and knowledge are converted into tangible outcomes (Kaplan & Norton, 2000).

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The strategy map framework that Kaplan and Norton (2000) present is illustrated in Figure 7. At the top is the financial strategy, increasing shareholder value, which can be done either through increasing revenue or productivity. Increasing revenue in turn can be pursued either through building the franchise with new markets, new products or new customer and through increasing value for existing customers. Productivity can be increased through improved cost structure with either lower fixed or variable costs and finally more efficient use of assets.

Figure 7 Strategy map framework (Kaplan & Norton, 2000)

Then in the customer perspective it is described how the company will differentiate including the set of product, the characteristics of its services, the customer relations, and the corporate image that the company offers. According to Kaplan and Norton (2000) there are typically three differentiators to choose among: Operational Excellence, Customer Intimacy and Product Leadership.

The internal process perspective is used to determine the activities by which the company will obtain the value proposition. According to Kaplan and Norton (2000) a complete strategy should involve specifying activities from several internal processes. The activities can be divided into four processes, as seen in Figure 7; first, franchising through innovating new products and services and by penetrating new markets and customer segments; second, increasing customer value through closer relationship with existing customers; third,

Improve Shareholder Value • Share price • Return on Capital Employed Revenue Growth Strategy Increase Value to Customers Improve Cost Structure Improve Use of Assets Build the Franchise

• Revenue from new sources • Asset utilization • Customer profitability • Operating cost/ unit produced Productivity Strategy Operational Excellence Operational Excellence Operational Excellence • Customer acquisition, retention and satisfaction

Financial Perspective

Customer Perspective

Build the franchise through innovations Increase customer value through customer management processes Achieve operational excellence through operations and logistics processes Become a good corporate citizen through regulatory and environmental processes Internal Processes Perspective

Learning and Growth

Perspective Employee

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achieving operational excellence though improvement of supply chain management, internal operational processes such as utilization and capacity management; and finally, becoming a good corporate citizen through developing effective relationships with external stakeholders. Providing a bottom up explanation of the strategy map, it tells the company the knowledge (learning and growth), skills and systems (internal processes) that its employees require to innovate and build the right capabilities and efficiencies to deliver value to the market (the customer) which will lead to increased shareholder value (the financials) (Kaplan & Norton, 2000). The major benefit with the strategy map is that it enables the employees to organize their work in a coordinated manner toward the overall company goal (Kaplan & Norton, 2000).

2.4.4 STRATEGIC PLANNING AS A COMMUNICATIVE PROCESS

An alternative view on strategic planning was provided by Spee and Jarzabkowski (2011). The authors argue that strategic planning can be seen as a communicative process with increasing interpretation of talk and text. Even though their recommendations are based on studies conducted in a university context the authors expected their recommendations to be relevant in organizational contexts with diffuse power structures and democratic decision making.

Through their studies Spee and Jarzabkowski (2011) showed that communication is not a process that starts after the strategy plan has been developed but rather integrated in the planning process itself. Even though the final plan is only constructed by a few individuals, the content may have been influenced by many who participated in the communicative process (Spee & Jarzabkowski, 2011). There is increasing interpretation of talk and text in the strategy document, as during the construction of the plan participants reveal their interpretations which result in amendments that have to lead to agreed formulations in the final strategic plan. This interplay process, through which agreement has to be reached, minimizes competing interpretations and legitimizes the strategy plan though the organization. Spee and Jarzabkowski (2011) conclude that it is this recursive communication process rather than the strategy document in itself that is of significance.