The best evidence, or at least the best thinking, behind this is probably Kaplan and Norton’s strategy map, based on their business scorecard. This suggests businesses benefit from setting objectives within their planning that relate to each of four perspectives – learning and growth, business processes, customer and financial.
Each of the four sections of Kaplan and Norton’s business strategy map is actually a value chain in its own right:
- The primary activities in Porter’s value chain provide the objectives in the financial perspective of K&N’s strategy map
- There is then a customer value chain which is all about creating loyalty and retention of customers (but not sales, which would go in the financial perspective)
- Which is followed by an operations or processes value chain which is all about creating business excellence
- Finally, there is the learning and growth value chain.
Learning and growth is all about HR. In fact it’s interesting to look at Kaplan and Norton’s original Harvard Business Review article on the balanced business scorecard in which they mentioned people within learning and growth but all of their examples were about technology. These days, even though technology is even more important now than it was then, most organisations using the business strategy map and / or scorecard simply title learning and growth as people. It’s yet another indication of the move to a new S curve, or from competitive positioning to organisational capabilities, which I’ll be coming back to again shortly.
Each of these value chains focuses on undertaking activities to create outcomes. For example Porter’s financial value chain focuses on making and selling products or services to create financial outcomes ie revenues and profits. We’ll have a look at the other value chains over the next few articles.