A challenge to management is creating superior values for its customers and improving financial performances. This paper expresses the customer-oriented perspective of a company in terms of its competitive priorities. It builds on the House of Quality (a customer requirements planning matrix) by developing a House of Strategy for translating the improvement needs of a company's business objectives into relative importance of its competitive priorities. A mean square error (MSE) criterion, supporting the selection of vital competitive priorities to be improved, is suggested. This divides a group of items (here a set of competitive priorities) into two groups: vital few and trivial many. The partition minimizes the overall MSE and by so doing delineates two homogeneous groups. The method is implemented in companies from three industry types. It reveals their different HOS structures and thus provides useful information on the vital competitive priorities to be improved as dictated by their respective business objectives and internal capabilities.
To locate and prioritize the improvement needs of an enterprise, a strategy map merging managerial principles of the BSC with quality principles stemming from the Malcolm Baldridge National Quality Award and the European Foundation for Quality Management is proposed. It comprises four hierarchical levels: business objectives, competitive priorities, core processes and components of the organizational profile. The implementation methodology for supporting its application in an individual enterprise makes use of quality function deployment (QFD), a quality design tool. A strategy map here represents a bottom up cause and effect potential improvement path of an investigated enterprise, starting from an improvement of its organizational profile towards an improved realization of its business objectives, thus providing a global perspective on the important linkages between its weakest components at different hierarchical levels. Analysis of two test cases for implementing strategy maps revealed strategy maps that differed from one company to another and discontinuities in some of the maps. We found processes, considered as core processes by interviewees that did not support any competitive priority and a competitive priority, strongly recommended by interviewees, that was not supported by any core process. Such findings call attention to the complex cause-and-effect relationships influencing the enterprise system behaviour, to the lack of management understanding of this behaviour and eventually they add motivation and support to the continuation of our work here.
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