The first and most important component of a BSC is a so-called ‘Strategy Map’ that visually maps the key strategic objectives of a company on a single page (a bit like the sailing route in my shipping example). A Strategy Map shows the overall destination as well as the key objectives and priorities a company must deliver along the way. The strategic objectives are usually mapped along four perspectives, which support each other (see below):

• Financial Perspective – outlining the financial objectives
• Customer Perspective – outlining the objectives related to customers and the market
• Internal Process Perspective – outlining the internal business process objectives
• Learning and Growth Perspective – outlining the objectives related to employees, culture and information system

Mapping out how the objectives in each perspective support each other is one of the big benefits of a Strategy Map. Instead of listing strategic objectives in a seemingly unrelated manner, the Strategy Map depicts how each objective supports others and how they all help to reach the ultimate destination.

The second component of a BSC are Key Performance Indicators that allow companies to measure and monitor progress against their most important strategic objectives (outlined in their Strategy Map). Key Performance Indicators, or KPIs for short, are the vital navigation instruments for managers. Each KPI needs to be defined well and include targets or benchmarks.

The third component of a BSC is an Action Plan that ensures the right projects, programmes or initiatives are in place to deliver each of the strategic objectives on the Strategy Map.

If all three of these components (Strategy Map, KPIs and Action Plan) are in place then a BSC can transform an organisation. It is such a popular and powerful strategy execution tool because it allows organisations to depict and communicate their strategic plan in a very simple and graphical way as well as monitor and manage the delivery of the plan.