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Balanced Scorecard: An Introduction To The
Balanced Scorecard: An Introduction To The
BALANCED SCORECARD
In the majority of cases the real problem isnt bad strategyits bad execution Less than 10% of strategies effectively formulated are effectively executed
Fortune Magazine
Objectives
Understanding the basic concepts of the Balanced Scorecard Using the BSC to transform the strategic plan into a strategic map that tells the story of the strategy Providing an opportunity for top executives to compare notes with colleagues on the issues of getting started and implementing a BSC system.
The balanced scorecard is a management system to help a business unit focus on achieving current financial results and on creating future value through strategic activities
Financial: How do we look to our shareholders? Customer: How do we become our customers most valued supplier?
Internal Process: What processes must we excel at to achieve our financial and customer objectives? Innovation and Growth: How can we continue to improve and create value with employee capabilities, systems, and structure?
Financial results report past performance but do not adequately drive future performance No single measure is appropriate Strategic objectives must be translated into linked sets of measures so they can be communicated and implemented
Customer Value Proposition Best in Product/Ser vice Best Total Solution Best Total Cost The BSC links the financial measures with the drivers of future performance
Product Innovation
Customer Intimacy
Operational Excellence
Skills
Technology
Environmen t
To tell the story of the strategy we begin with the process of Strategy Mapping
Customer Perspecti ve
Develop New Products Modify Existing Products Feedback From Customers Market Research
Financial
Customer
Internal Processes
Financial
Revenue Growth
WHAT?
Loyal Customers
WHAT? HOW?
Customer
Quality Product
WHAT? HOW?
Internal
Quality Production
Quality Materials
HOW? WHAT?
HOW?
Financial
Revenue Growth
EFFECT
Loyal Customers
CAUSE EFFECT
Customer
Quality Product
CAUSE EFFECT
A chain of cause and effect relationships can be established as a vertical dimension through the four BSC perspectives. The BSC tells the story of the strategy
Internal
Quality Production
Quality Materials
CAUSE EFFECT
CAUSE
Financial
Revenue Growth
EFFECT
Loyal Customers
CAUSE EFFECT
Customer
Quality Product
Value Proposition
Internal
Quality Production
Quality Materials
EFFECT CAUSE
CAUSE
Financial
Revenue Growth
EFFECT
Loyal Customers
CAUSE EFFECT
Customer
Quality Product
cause driver
Internal
Quality Production
Quality Materials
EFFECT CAUSE
if how
CAUSE
FINANCIAL Measures NON-FINANCIAL Measure EXTERNAL Perspective Constituents INTERNAL Constituent Financial Customer Perspective TANGIBLE Assets INTANGIBLE Assets Financial Perspective Internal Perspective Internal Perspective LAG Indicators LEAD Indicators Customer Perspective Learning and Growth Learning and Growth of Performance of Performance Perspective Perspective
Loyal Customers
Customer
Quality Product
Internal
Quality Production
Quality Materials
tangible assets
intangible assets
In order to extract value from the intangible assets, these must be transformed.
Financial
Financial
Loyal Customers
Customer
Quality Product
Internal
Quality Production
Quality Materials
Non-Financial
Loyal Customers
Customer
Quality Product
Internal
Quality Production
Quality Materials
Financial
Customer
Quality Product
Internal
Quality Production
Quality Materials
measures the results of an the lag measures, can measure action after a time period intermediate processes & sales historical after the fact number of sales calls hours spent with customers predictive
Financial Results
Financial Perspective
Value Proposition
Custom er Value
Customer Perspective
Process Capabilities
Capabilities
Enablers