I want to introduce the idea of the strategy map. And this is a potentially important and useful tool in your toolkit. What's the purpose of a strategy map? Well, really, the key idea here is that a strategy map can help you understand the competitive positioning of different firms within an industry or market segment. So, it really allows you to kind of combine a couple of different sets of ideas. First of all, it builds on the idea of understanding who the different competitors are in an industry. So that might build directly off of, for example, a competitor analysis that you might have done previously. But it combines that idea with the way these different competitors differ. And they might differ, perhaps, based upon different sets of capabilities. So that might build directly on a capabilities analysis you've conducted on one or more of the firms in this particular industry. So, a strategy map can't tell you everything you need to know in a strategic analysis. Just like all of the tools, we need to learn to use them together. For instance, a strategy map won't tell you a lot about the sort of makeup or structure of an overall industry, or market segment, or the trends in that industry. For that, you might need to go to your five forces analysis, or your environmental analysis. But a strategy map is a potentially very useful tool. It's a generic tool. It's in wide use in consulting, for example, because it allows you to take two or three factors, or criteria, and then visually map the different competitors in an industry according to how they differ, based on those two or three factors or criteria. So, for example, like I'm demonstrating here, on the horizontal axis you might have the first factor. On the vertical axis, you might have a second factor. And here, we represent the third factor by the size of the circle. So, it might be useful to illustrate this with a specific example. So, let's take the example of the automobile industry in the early 2000s. So, without getting into all the details, what we can do here is we can take the specific firms in the industry, and we can start to visualize how they differ depending on the different positions they occupy within that industry. So, I picked three criteria here. For example, on the horizontal axis, we've got, essentially, the average vehicle cost. That'll tell you something about the cost structure of the firms, and also it'll correspond to the price point that the consumer has to pay for those automobiles. On the vertical axis, we've got what I'm describing as sportiness. And that might be a little bit of a fuzzy criteria, but there's ways to sort of, especially in a comparative sense, think about how that might differ. And here we're talking about sportiness, or distinctiveness, things that might make the different models distinctive. Right? And then, for the different firms, the size of the circles, in this case, represent the number of different models that that firm makes. So, a smaller circle means they've got a narrower competitive scope and they offer fewer models. A larger circle means they offer all kinds of models. Right? So again, a strategy map can kind of help you see, visually, the differences between these firms and how, essentially, they occupy different competitive positions within a particular industry. Now, a key question here might be, well, what are the most important criteria or factors to use when you're putting a strategy map together? And the answer is, it depends. Here I've just picked three, but we could have picked a number of other criteria. We could look at market share, or R and D spending, or quality in terms of defect rate or something. There's a number of things you could look at, and what I encourage you to do is just try some things. It's a process of trial and error to kind of map up some different criteria and see if that helps you start to differentiate, and understand better, the firms in that particular industry. And as you try different things you'll arrive on different configurations of criteria that will give you a strategy map that can be really useful at pointing out different ways that the firms differ within an industry. So the strategy map can be useful tool in your toolkit to understand competitive positions in an industry.
