"A strategy is an integrated set of choices that position a firm, in an industry, to earn superior returns over the long run."
A good BSC strategy will exhibit the following verifiable characteristics.
There are various approaches that represent a professional school of thought. What is a 'School of Thought'? A School of Thought is a group of people who share common characteristics of a philosophy, discipline or belief.
Given the preceding, we can see that a Business Performance Management School of Thought is distinguishable from other schools of thought by its economic framework and its philosophy.
Finally, what are the required components of a Performance Management School of Thought?
Most organizations who wish to implement a Balanced Scorecard will need to establish a new organizational unit called The Office of Strategy Management.
When it comes to using the BSC in strategic management, you need to have the following key roles defined and staffed if you want assure on-going success:
Now that you have a working definition of Strategy, you can begin to answer the question, "Do you have a well formulated Business Strategy?" Leading companies use a variety of approaches to Strategy, the Balanced Scorecard being among the most widely known and deployed.
While the SAP Strategy Management (SAP SSM) tool (you may also hear it referred to as SAP BSC) fully supports the Balanced Scorecard approach to strategy and is one of the few tools certified by Kaplan-Norton, the inventors of the Balanced Scorecard, as well as numerous others, the real effort remains the definition and acceptance of the BSC framework among the organizational units before, during, and after the implementation of the BSC.
Getting Strategy Right Requires a Balance
To help you align your Strategy, Objectives and Initiatives, please download the balanced scorecard template using the form located further down the page.
This template provides a robust method to tie complex objectives and initiatives together which can be used in your enterprise Strategy Management deployment. We can help you develop a complete enterprise wide Strategy Management approach.
The Balanced Scorecard is a strategic management tool which allows you to tie your quantified vision back to your Perspectives, Objectives and Initiatives as well as associated Key Performance Indicators (KPIs). It is then deployed across organizational units so that each organizational unit has both a clear mission that it has bought into, as well as a global vision of what the Company's strategy is.
This approach allows each organizational unit to make the required trade-offs among the various activities that they might make, all of which are typically constrained by both budget and manpower resources.
There are numerous approaches to competitive analysis, each of which has it own pluses and minuses. Porter's Five Forces, for example, is a very popular, well regarded approach. However, it does take considerable time and effort to get useful information from it, and usually will require some investment in 3rd party information sources, of which there are many of varying qualities available in the market.
As the BSC approach to Strategy Management is well established, there are already a large number of Industry Specific and Strategy specific templates available. This is not to say you should just rely on them to build out your BSC. If you do, though you may save some time and effort, you will give up the learning and development the organization will gain from developing their own BSC.
It is therefore a smarter approach to start with a template but not to rely on it totally. Once you have your top-level strategy and scorecards built, you'll want to cascade them down to the individual level and build out personal scorecards using a Personal Scorecard Template, such as the one you can download by clicking this button.
Your BSC, once developed, can provide a roadmap which you can follow in your day-to-day operations. However, you will need to ensure you have a Strategic Management steering committee that is consistently monitoring your progress against the plan.
This is why it is imperative to have the right Strategy Management Software along with a robust datawarehouse to ensure your operation is able to actually execute against the plan while making adjustments based on feedback.
In order to change your business processes, you will need to understand them and be able to measure them using a performance scorecard. That is why you will need to perform Value Stream Analysis to develop a comprehensive picture of how your processes are supposed to work as well as how you should measure them.
Without a doubt, the biggest challenge any BSC effort will face is achieving organizational alignment. For very large, multi-national organizations, who may have 100s to 1000s of business entities, in entirely unrelated lines of business, it will simply take a lot of coordination effort to achieve this alignment.
Along with the challenge of organizational alignment, will be the challenge of getting agreement on the quantified vision. What is a quantified vision? At its core, it is usually something along the lines of we want to increase annual revenue from X to Y, or 1 billion to 1.3 billion. It is the 300,000,000 increase in revenue that is the part of the vision that has to be broken out in detail and which each business unit has to 'buy in to'.
The Execution Premium@, a term that comes to us from Professor's Robert S. Kaplan and David P. Norton, who founded Kaplan-Norton, is an acknowledgement that developing a BSC is of little value unless businesses are able and willing to execute against the plan.
It's all about getting stuff done.
Companies that master balanced scorecard design can not only design an effective, competitively differentiating strategy as well as execute it flawlessly, while adjusting to the market in real time, can dominate their market and obtain an outsize profit premium and ensure their long term survivability.
Thus, a BSC project has to be performed by strategy experts, who help ensure the company stays the course for the long term, while providing Strategic Management consulting.
One of the most common myths about the BSC is that it is still developing, which could not be further from the truth. There are a large number of firms operating around the globe in virtually every industry who have successfully implemented the Balanced Scorecard.
Sources: 1) Mckinsey Quarterly Web Survey (2006) Bain Management Tools (2009)
This is at least partially the reason there are already balanced scorecard templates you can use to get started with your BSC project. It also means there is an established methodology for the design, implementation and on-going management of a BSC.
One of the key steps in the process of developing your Balanced Scorecard Enterprise Strategy is the definition of Objectives that support your quantified strategy.
Once those are established, you will then need to develop initiatives that support each of your objectives. In order to keep these two critical elements of your strategy in aligned, you will need our Objectives and Initiatives Alignment Template. You can get your free copy by clicking the button.
While the Balanced Scorecard concept is currently considered one of the most successful approaches to strategy, it is useful to acknowledge some of the other 'Schools of Strategy' as outlined the book "Strategy Safari A Guided Tour Through the Wilds of Strategic Management" by Henry Mintzberg, Bruce Ahlstrand and Joseph Lampel.
There are, in fact, many more Schools of Strategy than this. That's why 'Strategy' continues to be a an area subject to much debate.