The Relationship Between Kaplan and Norton’s Notion of a Strategic Management System for an Organization’s Internal Environment with Porter’s Approach to Assessing the “Five Forces” of a Firm’s External Environment

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A successful Strategic Management System (SMS) not only has to focus on an organization’s external environment, it also has to take care of the organization’s internal environment as well. In 1979, Mr. Michael Porter, a young Harvard associate professor, published “How Competitive Forces Shape Strategy”. It became an instant success. Corporations, large and small, started to use his “Five Forces” analysis to form their strategic plan. The “Five Forces” are external forces that a corporation needs to consider for its business strategy to compete with other in the real world. The “Five Forces” that shape the competition according to Mr. Porter are: 1) Threat of New Entrants, 2) Bargaining Power of Suppliers, 3) Bargaining Power of Buyers, 4) Threat of Substitute Products or Services, and 5) Rivalry Among Existing Competitors. In 2004, Robert Kaplan and David Norton published “Strategy Maps: Converting Intangible Assets into Tangible Outcomes”. Their strategy map provides a systematic way to analyze if the intangible assets are aligned with the critical internal processes. Intangible assets according to Kaplan et al. are: 1) Human Capital, 2) Information Capital, and 3) Organization Capital. In 2010, Mary Adams and Michael Oleksak used Porter’s Value Chain diagram to explain the linear creation process of organizations is no longer valid nowadays (Adams and Oleksak, 2010, page 20)1. Instead, organizations must focus on human capital, information capital and organization capital management. This is exactly what Kaplan et al. argued in 2004. When I read the introduction of Intangible Capital (Adams et al., 2010), for a moment I thought they were talking about Hypertherm. Hypertherm started as a research project in the 1968 by Mr. Dick Couch and his colleague, Mr. Bob Dean, in a small garage in Hanover, NH. In 1968, Mr. Couch and Mr. Dean invented the patented

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