Strategic Control Map

This tool is helpful in analyzing an industry landscape, looking at various companies or firms in this industry, by breaking down overall performance into two key drivers or indicators. It is essentially taking a simple A = B * C formula and translating it into a compelling graphic form.
The graph above uses two key examples: One would be an analysis of the asset management industry in a given country. The formula basically states that market capitalization = book value of assets under management * market-to-book ratio. As you can see, the graphic translates this into a horizontal axis (the underlying business driver or an indicator of size, i.e. assets under management), a vertical axis with the key performance indicator (market-to-book ratio), and the resulting isoquants represent the overall market capitalization. Companies on the same isoquant have achieved the same market capitalization, although it may well be through a different combination of assets and market-to-book ratio.

The fundamental assertion here is that companies with high market capitalization are in a stronger position, have more strategic control, and would more likely be in a position to acquire other companies. Companies with a combination of low assets and low market-to-book ratio are probably quite vulnerable strategically.

The example can also be used in a variety of other settings. The second example listed on the graph is an analysis of law firms, where the key drivers are number of partners, profit per partner, and as a result overall firm profitability. Other combinations exist as well.

Another twist to this framework: Rather than just list the participation along the key axes in any given year, one can also use the strategic control map by plotting different market participant over time. Showing where different firms stood in 2002 and 2008, for example, will show some interesting and revealing trends, with clear winners and losers.