KPI Construction

BUILDING A STRATEGY FOCUSED ORGANIZATION
WITH THE BALANCED SCORECARD

§  Introduction to BSC
§  Overview of BSC Architecture & Methodology
§  BSC Internal Process Clusters
§  Customizing BSC to Strategy
Ng Aung San
Vice President & Head (Strategy & Organization)
1
QUOTE…
“Strategy without tactics is the slowest
route to victory. Tactics without
strategy is the noise before defeat.
”
Sun Tzu
The Art of War
2
Strategy
is……About Choices
…What to do, but more importantly, what not to
do
…What will we truly excel in, what will be simply
par
…What is for today, what is for another time
3
Content
1.  Why BSC? 3.  Closer Look at Internal

Process Clusters
2.  Overview of BSC 4.  Customizing BSC to

Architecture & Strategy
Methodology
4
Delivering value requires an strong unbroken continuum…
Mission
Why we exist
Values
What s important to us
Vision
What we want to be
Strategy
Our game plan
Strategy Translation
Communicate, Cascade and Align
Strategy Measurement & Focus

Strategy Scorecard
Targets/ Objectives & Initiatives

What we need to do/ achieve
Personal Objectives
What I need to do
5
…But issues typically arise at critical junctures
Mission
Why we exist
Typical Issues with Vision of most
Values Organizations…
§  Too hazy to provide any real direction or to motivate
action or generate enthusiasm
Vision
What we want to be §  While usually able to recite the vision, Managers
often do not see how to put vision into practice to
direct/ guide strategy
Strategy
Our game plan §  Developed haphazardly, without adequate
consideration of Organization s
§  Internal & external influences/ interests
Strategy Translation §  Hard & Soft dimensions
§  Mistaken as having to be static, like Values and
Mission, rather than dynamic and updated/
Strategy Measurement & Focus refreshed, when appropriate
Strategy Scorecard

Personal Objectives
What I need to do
6
Mission
Why we exist
Typical Issues with Strategy of most
Values Organizations…
§  Little more than a summary statement of the myriad
initiatives, projects and activities going on in the
Vision organization
What we want to be
§  Does not answer the following fundamental
questions:
Strategy §  What differentiates us or makes us special/
Our game plan unique?
§  What is our differentiated Value Proposition to
our customers (internal & external) that we
Strategy Translation can draw and hold them to us?
§  Does not consider all key components of strategy
and interrelationships across the organization
Strategy Measurement & Focus
Strategy Scorecard §  Does not consider how the organization s Business
Model/ Internal Processes and Organizational
Capital would be (re)configured to deliver the Value
Targets/ Objectives & Initiatives Proposition
§  Does not fully consider both the Hard & Soft
determinants of strategy delivery/ change
Personal Objectives management
What I need to do
7
Mission
Why we exist
Typical Issues with Strategy
Values Translation, Focus & Measurement of
What s important to us most Organizations…
§  Gap exists between strategy formulation and
Vision strategy execution/ on-going management
What we want to be
§  Translating strategy top down into demands on
elements of Organization s Business Model/
Strategy Internal Processes is non-uniform and frequently,
Our game plan incomplete
§  No overall one-view of progress of various

Strategy Translation components of strategy across entire Business
Communicate, Cascade and Align Model (cross-functional)
§  No uniform and consistent way to describe the

Strategy Measurement & Focus strategy, so that objectives and measures can be
Strategy Scorecard established and managed
§  No framework to measure progress and learn about

Targets/ Objectives & Initiatives interrelationships/ cause and effect between various
What we need to do/ achieve components of strategy and how each impact
performance and guide resource allocation
Personal Objectives §  Focus on strategy is typically low. Strategy often

What I need to do becomes a bi-annual event at Business Planning
Meetings, rather than an-going process
8
Mission
Why we exist
Typical Issues with Targets/
Values Objectives & Initiatives of most
What s important to us Organizations…
§  No clear linkage, bottom up, between Activities and
Vision Projects with overall strategy
What we want to be
§  Measures only remain at compound Business/
Functional Unit level, rather than at individual key
Strategy initiatives/ project level; Also, measures are typically
Our game plan lag measures, rather than leading indicators of
progress
§  Unit Leaders face difficulty in objectively
Strategy Translation determining on-going progress of respective
Communicate, Cascade and Align initiatives, against set targets/ objectives,
communicated upfront
§  Lesser/ no time to take corrective action and/
Strategy Focus & Measurement or re-allocate resource
Strategy Scorecard §  Lower levels of clarity and accountability at
individual initiatives/ project and/ or personal
level
What we need to do/ achieve §  No framework to conduct a business audit of
direction, scope/ coverage, alignment and
effectiveness and phasing of existing initiatives/
Personal Objectives project/ activities; And guide resource allocation
What I need to do
9
BSC can address issues, if well embraced and executed
Facilitate Vision Setting & Strategy formulation
§  Balance Internal/ External influences and Hard/ Soft
dimensions in Vision setting
§  Framework to address in Strategy Formulation:
§  Differentiation/ unique value proposition
§  Re-configuration of Business Model and
Organizational Capital
Make Strategy a §  Hard & Soft determinants of Change Translate the Vision &
Continual Process Strategy to Operational Terms
§  Management Meetings §  Strategy Maps
§  Feedback system §  Scorecards
§  Learning Process
BALANCED §  Demands on Business Model/
Internal Processes
§  Linked to Budgeting Process
SCORECARD §  Financial & Non-Financial
Objectives & Measures
§  Framework to pull together one-
view of all initiatives and activities
Mobilize Change Align the Organization

through Executive to the Strategy
Leadership §  Cross-Functional Unit
§  Executive Sponsorship, linkages/ coordination
Ownership & Engagement §  Strategy Education
§  Change Mobilization Communication & Awareness
§  Change Governance §  Initiative Prioritization
§  Sustaining Change
10
Content

Process Clusters

Architecture & Strategy
Methodology
11
BSC Perspectives
#1 - Financial
§  Defines the tangible outcome of strategy in
traditional Financial terms
§  How does success look like?
#2 - Customer (External)
§  Defines the Value Proposition for target
existing and potential customers segments
§  How can we become a Magnet company?
#3 - Channel Partners (Int. Customers)

§  Defines the Value Proposition for existing
and potential channel partners/ agents
#4 - Business Model/ Int. Processes

§  Defines the Vehicle for delivering the Value
Proposition
§  How can deliver on our promise?
#5 - Organization Learning & Growth

§  Defines the organization s intangible assets
§  How can we align assets to support Business
Model and Mobilize and sustain change?
12
#1 Financial Perspective
Elaboration on Financial Perspective
§  Summarizes readily measurable economic consequences
of actions already taken.
§  Typically comprise two broad drivers:
§  Productivity driver (Improve cost structure/
Enhance asset yield)
§  Revenue Growth driver (Expand revenue
opportunities / Enhance customer value)
#1 - Financial
§  Defines the tangible outcome of strategy in Financial Measures
traditional Financial terms
Two distinct categories of Measures
§  How does success look like? §  Productivity measures
§  Revenue growth measures
Examples of Productivity measures
§  Total Assets
§  Return on net assets/ total assets
§  Gross margin/ NPAT
§  Profit as % of Sales
§  Profit/ Value added per employee
§  Return on Equity/ Return on investments
§  Market capitalization/ Share price/ Dividends
§  Credit Rating
Examples of Revenue Growth measures

§  Total/ New Business Premiums (existing/ new sources)
§  New Business Embedded Value (existing/ new sources)
13
#2 Customer Perspective
Elaboration on Customer Perspective
§  Identifies the markets and customer segments that
organization will serve and compete
§  Identifies the differentiated Value Propositions that the
organization will offer to target market and customer
segment
#2 - Customer (External)
§  Defines the Value Proposition for target existing Customer Measures
and potential customers segments
§  Measures of performance in markets and target
customers
§  Measures of Value Propositions organization will offer to
target customers
Examples of Customer Performance Measures
§  Share in target Market and Customer segments
§  Market and Customer segment profitability
§  Sales Volume/ Sales Volume per channel
§  No. of Customers
§  Target customer acquisition/ retention rates
§  Percentage of revenue from New Customers
§  Target customer segments complaints/ compliments
§  Brand recognition/ awareness in target customer
segments
Customer Value Proposition Measures

§  Measures of elements of value propositions to be
delivered
14
#3 Channel Partner Perspective
Elaboration on Channel Partner Perspective
§  Identifies the channel partners which organization can
partner and work with
§  Identifies the differentiated Value Propositions that the
organization will offer to channel partners
#3 - Channel Partners (Int. Customers)

§  Defines the Value Proposition for existing Customer Measures
and potential channel partners/ agents
§  How can we become a Magnet company? §  Measures of performance in target channels
§  Measures of Value Propositions organization will offer to
channel partners
Examples of Channel Partner Performance Measures
§  Channel product volume/ product mix
§  Channel productivity/ profitability
§  Channel market share
§  Channel customer acquisition/ retention rates
§  Channel development/ growth
§  Percentage of revenue from new channels
§  Channel complaints/ compliments
§  Channel scorecard/ survey feedback
Channel Partner Value Proposition Measures
§  Measures of elements of value propositions to be
delivered
15
#4 Business Model Perspective
Elaboration on Business Model Perspective
§  Describes how organization will deliver its customer and
channel partner value propositions
§  Identifies related process clusters that make up the
organization. Broadly grouped into three process clusters:
§  Operations Management cluster - Producing and
delivering products to customer
§  Customer Management cluster - Establishing and
#4 - Business Model/ Int. Processes leveraging relationship with customers
§  Innovation processes cluster - Developing new
§  Defines the Vehicle for delivering the Value products, services, processes and relationships
Proposition
Business Model/ Internal Process Measures
Examples of Operations Management measures
§  Cost of key operating processes
§  Marketing, selling, administrate expense as % of total costs
§  No. of processes with substantial improvements
§  Cycle time
Examples of Customer Management measures
§  No. of referrals/ Percentage of leads converted
§  Customer response rate to campaigns
§  No. of products per customer/ Depth of relationship
§  Costs per new customer acquired
Examples of Innovation measures
§  Time to Market/ Percentage of product launches on-time
§  No. of new products first-to-market
§  No. of new applications from platform products
§  No. of joint collaborative new product projects
16
#5 Learning & Growth Perspective
Elaboration on Learning & Growth Perspective
§  Defines organization s intangible asset and their role in
strategy. Intangible assets classified into three categories:
§  Human capital - Skills, talents and know how to
perform activities, required by strategy
§  Information capital - Information systems and
infrastructure required to support the strategy
§  Organization capital - Culture, Leadership,
#5 - Organization Learning & Growth Alignment and Teamwork
§  Defines the organization s intangible assets
§  How can we align assets to support Business
Model and Mobilize and sustain change? Business Model/ Internal Process Measures
Examples of Human Capital readiness measures
§  Training investment per employee/ Training hours
§  Competency coverage ratio
§  % of employees with advanced degrees
§  Number of cross-trained employees
§  Best practice sharing
Examples of Information Capital readiness measures
§  Strategic information ratio
§  Knowledge management index
Examples of Organizational Capital readiness measures
§  Span of control per manager
§  Quality of work environment
§  Motivation index
§  Turnover rate/ Absenteeism
§  Strategic awareness
17
BSC comprise two main related elements – Strategy Map and
Scorecard
Strategy Map Scorecard

§  Visual representation of the cause-and-effect §  Translates objectives in strategy map into
relationships that connects desired Financial, measures of success and targets, across
Customer and Channel Partner outcomes respective financial/ non financial and
with the Business Model drivers that will internal/ external perspectives.
transform intangible assets into these
outcomes §  Organizes in a structured way, bundles of
aligned strategic initiatives – action plans
and scarce resources e.g. people, funding
§  Functions as a checklist for strategy s
and capacity – required to meet targets for
granular components and interrelationships respective measures, and achieve objectives
– Missing components usually indicate
incomplete or flawed strategy §  Functions as a checklist and resource
deployment decision tool for strategic
§  Provides an uniform and consistent way to initiatives – emphasis/ coverage of action
describe strategy, so that objectives across plans and targeted allocation of resources.
all perspectives and measures can be
established and managed – through the §  Provides a cohesive, integrated and
Scorecard systematic way to manage effective
implementation of strategy
18
BSC Strategy Map depicts chain of cause-and-effect
relationships
VISION Guided by and to achieve our Vision…
… To achieve #1 - Financial
Top-down
our financial
success, and
…What is the desired financial Thinking & Logic
§  Defines the tangible outcome of goals we have to achieve…
our Vision strategy in traditional Financial terms
§  How does success look like?
… And, together
with Channel #2 - Customer (External) …What is the unique set of benefits we will
Partners, to our §  Defines the Value Proposition for target offer to customers for their patronage...
Customers… existing and potential customers segments
#3 - Channel Partners (Int. Customers) …And our channel partners for

… Needed to deliver their partnership...
Value Proposition to
§  Defines the Value Proposition for existing
Channel Partner,… and potential channel partners/ agents
#4 - Business Model/ Int. …What do we have to do to

… To build strategic ensure consistent delivery of
capabilities to effectively Processes value propositions…
execute the processes … §  Defines the Vehicle for delivering the
Value Proposition
Bottom-Up #5 - Organization Learning & Growth
Test & Linkage §  Defines the organization s intangible
…And what
assets do we
Align and enhance our
Organizational Assets… assets have to develop
§  How can we align assets to support
Business Model and Mobilize and sustain
change?
19
Financial perspective provides definition of success or value
in tangible financial terms
Financial
Perspective Sustain growth in
Shareholder Value
Productivity Strategy Revenue Growth Strategy
§  NPAT §  ROE/ ROI §  NBEV/ Premiums from new §  NBEV/ Premiums
§  Expenses §  Investment returns products, markets & segment §  NBEV/ Prems. per Customer
Improve Cost Enhance Expand Revenue Enhance

Structure Asset Yield Opportunities Customer Value
Typical Objectives
§  Lower direct and §  Reduce working and fixed §  Tap into new sources of §  Deepen relationship with
indirect expenses capital needed to support revenue (new products, existing customers
business markets, segments)
§  Improve investment yield §  Tap into new channels
20
Customer perspective identifies value proposition to be a
magnet company to External Customers
Sustain growth in
Financial Shareholder Value
Perspective Productivity Strategy Revenue Growth Strategy

Customer (External) §  Customer profitability §  Market Share §  Customer §  Customer
Perspective §  Segment profitability §  Segment Share Acquisition Retention
CUSTOMER VALUE PROPOSITION

Product/ Service Attributes Relationship Image
Price Quality/ Selection Functionality/ Reputation

Returns Availability Features Service
§  Product Price/ §  Bonus Levels §  Distribution §  Range of §  Product §  Quality & §  Brand Strength &
Pricing §  Yields/ Channels/ Product Lines Features/ Coverage of §  Financial Strength
Investment Reach Quality Support/ & Ratings
Returns Service
§  Identifies the customer and market segments in §  Unique configuration of seven pillars of Customer
which organization will serve and compete Value Proposition differentiates organization:
§  Identifies two distinct types of measures: §  What company expects to do for its customers
better or differently than its competitors
§  Measures of value propositions organization
will deliver to target customers §  What draws customers to our company
§  Measures of performance in the target
segments §  Customers perceive where company stands, in
relation to each of seven pillars, and decides on
patronage
21
Channel partner perspective identifies value proposition to
be a magnet company to Channel Partners
Sustain growth in

Customer Customer Value Proposition

(External) Product/ Service Attributes Relationship Image
Perspective Quality/ Functionality/
Price Availability Selection Service Reputation
Returns Features
Channel Partner (Agency) §  Agent Business Volume/ Mix §  Agents Recruited §  No. of Agents on
Perspective §  Agent Productivity §  Agent Attrition Management Path
CHANNEL VALUE PROPOSITION
Sales Production Support Growth & Development Support
Product Range Sales Support Brand Support Career & Agency
Admin Support Comp. Mgmt. Support
§  Identifies the channel partners which §  Unique configuration of six pillars of Channel Value
organization can partner and work with Proposition differentiates organization:
§  Identifies two distinct types of measures: §  What company expects to do for its channel
partner better or differently than its competitors
§  Measures of value propositions
organization will deliver to target §  What draws existing partners/ agents to stay with
channel partners/ agents us and new partners/ agents to join us.
§  Measures of performance in the target
channels §  Channel partners/ agents perceive where company
stands, in relation to each of six pillars, and decides on
partnership
22
Internal Processes/ Business perspective defines vehicle to
deliver on Value Propositions…
Sustain growth in


Returns Features
Channel Partner Channel Value Proposition

Perspective
Internal Process
Perspective
Customer Mgmt. Innovation Processes Operations Mgmt. Regulatory & Social
Processes Processes Processes
Process which expand and Processes which develop new products, Basic, day to day processes by Processes which help organizations
deepen relationships with processes and services, to enable which companies produce their continually earn the right to
targeted customers company to penetrate new markets existing products and deliver operate in communities and
and customer segments them to customers countries in which they operate
§  Identifies Four Process clusters that make §  Business Model enables organization to deliver on
up the organization elements of value propositions.
§  Changes to value propositions requires corresponding

changes to business model
23
… And groups Organization s myriad existing and new
processes into four Clusters
Sustain growth in


Returns Features

Perspective
Internal Process
Perspective
Process which expand and Processes which develop new products, Basic, day to day processes by Processes which help organizations
deepen relationships with processes and services, to enable which companies produce their continually earn the right to
targeted customers company to penetrate new markets existing products and deliver operate in communities and
and customer segments them to customers countries in which they operate
§  Customer Selection §  Opportunity Identification §  Supply §  Environment
§  Customer Acquisition §  R&D Portfolio §  Production §  Safety and Health
§  Customer Retention §  Design/ Develop §  Distribution §  Employment
§  Customers Growth §  Launch §  Risk Management §  Community
24
Learning & Growth perspective defines and aligns
organization s intangible assets, completing Strategy Map
Sustain growth in


Returns Features

Perspective
Internal Process
Perspective
Learning & Growth

Perspective Organization s Intangible Assets
Human Capital Information Capital Organizational Capital
§  Skills/ Talent §  Systems §  Culture

§  Knowledge §  Databases §  Leadership
§  Capabilities §  Networks §  Alignment/ Teamwork
25
Closer look at Human Capital Readiness – Strategic Job
Families, Headcount, Knowledge, Skills & Capabilities
Sustain growth in


Returns Features

Perspective
Internal Process Perspective

Learning & Growth

Perspective (illustrative for Human Capital Readiness – Identify Strategic Job Families)
Operations Marketing BD
Underwriters Executives Underwriters Executives BD Executives
(No.) (No.) Executives (No.) ??? ??? ???
(No.) (No.) (No.)
Competency Profile
§  Knowledge
List the Knowledge & Skills Required by various Strategic Job Families identified above
§  Skills
Readiness Assessment (Assess HC Readiness in terms of adequacy of Headcount, required level of Knowledge & Skills)
XX% XX% XX% XX% XX% XX% XX% XX% XX%

26
Strategy comprise complementary strategic themes that cut
across respective perspectives
Sustain growth in

Strengthen franchise for sustainable growth

Expand Revenue Opportunities

Returns Features

Perspective
Deliver profit
Internal Process
Perspective
Learning & Growth

Perspective § Organization s Intangible Assets
Human Capital Information Capital Organizational Capital
§  Skills/ Talent §  Systems §  Culture

§  Knowledge §  Databases §  Leadership
§  Capabilities §  Networks §  Alignment/ Teamwork
27
Strategy Map Construction – Step1: Vision
Theme: EXPAND REVENUE OPPORTUNITIES
§  STEP 1: Clarify, in detail, respective internal,
Vision
VISION external, hard and soft components of overall

strategic vision
Perspective
Financial
Perspective
Channel Partner Customer
Perspective
Business Model
Perspective
Perspective
L&G
28
Strategy Map Construction – Step 2: Financial
§  STEP 1: Clarify, in detail, respective internal,
Vision
VISION external, hard and soft components of overall

strategic vision
Grow new sources
Perspective
Strategic objective §  STEP 2: Identify a strategic theme for the

Financial
of revenue
identified to grow
new sources of financial perspective, linked to Strategic Vision,
revenue Tap into new that will drive the target financial result
customer segment
§  Revenue Growth Strategy
§  Theme 1: Expand revenue opportunities
Perspective
§  Theme 2: Enhance customer value

§  Productivity improvement strategy

§  Theme 3: Improve cost structure
§  Theme 4: Enhance asset yield
Perspective
Business Model
Perspective
Perspective
L&G
29
Strategy Map Construction – Step 3: Customer
§  STEP 1: Clarify, in detail respective internal,
Vision
VISION external, hard and soft components of, overall

strategic vision
Grow new sources
Perspective
§  STEP 2: Identify a strategic theme for the

Financial
of revenue
financial perspective, linked to Strategic Vision,
Strategic objective Tap into new
identified for Target customer segment
that will drive the target financial result
Market & Customer
Segment
Increase new §  STEP 3: Identify the target market and
customer segments in which organization will
Perspective
customer acquisition
Strategic objectives serve and compete and unique customer value

identified for Offer innovative Offer highest
Customer Value features service level proposition organization will offer
Proposition
§  Components of Customer Value Proposition:
Price, Features, Quality. Availability, Service and
Perspective
Reputation
§  Basic Par Requirements vs. Differentiators
Business Model
Perspective
Perspective
L&G
30
Strategy Map Construction – Step 4: Channel Partner
Vision

strategic vision
Grow new sources
Perspective

Financial
of revenue
Tap into new that will drive the target financial result
customer segment

Perspective
serve and compete and unique customer value

Offer innovative Offer highest
features service level proposition organization will offer
Strategic objective
identified for Target Enhance channel
§  STEP 4: Identify the channel partner
Perspective
Channel Partner capability organization can partner and work with and
Offer strongest
unique channel partner value proposition
Offer highest
product quality admin support organization will offer
Strategic objectives
identified for
Channel Partner
Value Proposition
Business Model
Perspective
Perspective
L&G
31
Strategy Map Construction – Step 5: Business Model
Vision

strategic vision
Grow new sources
Perspective

Financial
of revenue
customer segment

Perspective

Enhance channel
Perspective
capability organization can partner and work with and

Offer strongest
Offer highest
§  STEP 5: Choose, align and resource the

Enhance Enhance organization s business model or internal
Business Model
Product Innovation Operational

Perspective
Strategic objectives Process Process processes to deliver on the channel partner

identified for and customer value proposition
Business Model
Perspective
L&G
32
Strategy Map Construction – Step 6: Learning & Growth
Vision

strategic vision
Grow new sources
Perspective

Financial
of revenue
customer segment

Perspective

Enhance channel
Perspective
capability organization can partner and work with and

Offer strongest
Offer highest
§  STEP 5: Choose, align and resource the

Enhance Enhance organization s business model or internal
Business Model

Perspective
Process Process processes to deliver on the channel partner

and customer value proposition
Strategic objectives identified
for Organization s Assets to
enable Business Model §  STEP 6: Identify capabilities and
organizational climate required to enable the
Perspective
Strengthen Strengthen business model or strategic internal processes

L&G
Product R&D Operational IT

capabilities capabilities identified
33
Scorecard Construction – Step 1: Establish Objectives,
Measures, Targets & Measure Owners
Theme: TRANSFORM PRODUCT MIX Objectives Objective Measure Yr 1 Targets Owner
§  Grow new sources of §  Total revenue from new sources §  $50m §  ABC
Grow new sources revenue §  Market share in targeted new
Perspective
§  15% §  ABC

Financial
of revenue §  Tap into new customer segment

customer segments
Tap into new
customer segment
§  Increase new §  No. of new customers from target §  25,000 §  DEF
Increase new
Perspective
customer acquisition customer acquisition segment §  85% §  DEF

Customer
§  Offer innovative §  Brand awareness (survey) §  10 new §  GHJ
Offer innovative Offer highest features §  No. of new-to-market product features §  KLM
features service level §  Offer highest service features
§  95%
level §  Customer satisfaction (survey)
§  Enhance channel §  Channel productivity §  75% §  NOP
Channel Partner
Enhance channel capability

Perspective
capability §  Channel professionalism (survey) §  85% §  NOP

§  Offer highest product §  Product benchmarking §  Top quartile §  QRS
Offer highest Offer strongest quality
§  Total Cycle/ Process Time §  2 days §  QRS
product quality admin support §  Offer strongest admin turnaround
support
§  Enhance product §  No. of new projects or product §  15 projects/ §  TUV
Business Model
Enhance Enhance innovation process concepts presented for concepts

Perspective
Operational §  WXY

Product Innovation development
Process §  Enhance operational §  5 processes
Process
process §  No. of processes with substantial
improvement
§  Strengthen product §  R&D Process Strategic Job §  80% §  UVW
Perspective
Strengthen Strengthen R&D capabilities Family Human Capital Readiness §  75% §  XYZ
L&G
Product R&D Operational IT §  Strengthen §  Operational Process Strategic Job
capabilities capabilities operational IT family IT Readiness
capabilities
34
Scorecard Construction – Step 2: Identify/ Organize Strategic
Internal Business Process & Organizational L&G Initiatives
Theme: TRANSFORM PRODUCT MIX Objectives Measure Targets Owner Initiatives
§  Grow new sources of §  ___ §  ___ §  ___
Grow new sources revenue §  ___ §  ___ §  ___
Perspective
Financial
of revenue §  Tap into new §  ___ §  ___ §  ___
customer segments
Tap into new
customer segment
§  Increase new §  ___ §  ___ §  ___

Increase new
Perspective
customer acquisition customer acquisition §  ___ §  ___ §  ___
Customer
Outcome of Initiatives & Activities

§  Offer innovative §  ___ §  ___ §  ___
features undertaken at Business Model/
Offer innovative Offer highest Internal Business Process and
features service level §  Offer highest service
level Organizational Asset level
§  Enhance channel §  ___ §  ___ §  ___

Channel Partner
Enhance channel capability §  ___ §  ___ §  ___

Perspective
capability
§  Offer highest product §  ___ §  ___ §  ___
product quality admin support §  Offer strongest admin
support
§  Enhance product §  ___ §  ___ §  ___ §  Pro-active manage and extend
Business Model
Enhance Enhance innovation process §  ___ §  ___ §  ___ Product Portfolio
Perspective

§  Enhance operational §  ___ §  ___ §  ___ §  Extend current product platforms
Process Process
process into new markets
§  Improve process efficiency and
responsiveness
§  Strengthen product §  ___ §  ___ §  ___ §  R&D process training
Perspective
Strengthen Strengthen R&D capabilities §  ___ §  ___ §  ___ §  Operational IT process
L&G
Product R&D Operational IT §  Strengthen §  ___ §  ___ §  ___ management training/ systems
capabilities capabilities operational IT §  Operational IT process
capabilities management staff alignment
35
Scorecard Construction – Step 3: Determine/ Allocate
Resource Requirements
Theme: TRANSFORM PRODUCT MIX Objectives Measure Targets Owner Initiatives Resource
§  Grow new sources of §  ___ §  ___ §  ___
Grow new sources revenue §  ___ §  ___ §  ___
Perspective
Financial
of revenue §  Tap into new §  ___ §  ___ §  ___
customer segments
Tap into new
customer segment
§  Increase new §  ___ §  ___ §  ___

Increase new
Perspective
customer acquisition customer acquisition §  ___ §  ___ §  ___
Customer
§  Offer innovative §  ___ §  ___ §  ___

Offer highest features N.A. N.A.
Offer innovative
features service level §  Offer highest service
level
§  Enhance channel §  ___ §  ___ §  ___

Channel Partner
Enhance channel capability §  ___ §  ___ §  ___

Perspective
capability
§  Offer highest product §  ___ §  ___ §  ___
product quality admin support §  Offer strongest admin
support
§  Enhance product §  ___ §  ___ §  ___ §  ___ §  5 Headcount/
Business Model
Enhance Enhance innovation process §  ___ §  ___ §  ___ §  ___ 50 Man-days
Perspective

§  Enhance operational §  ___ §  ___ §  ___ §  ___ §  $100k
Process Process
process §  8 Headcount/
80 Man-days
§  $200k
§  Strengthen product §  ___ §  ___ §  ___ §  ___ §  Total of $300k
R&D capabilities §  ___ §  ___ §  ___ §  ___ for training
Perspective
Strengthen Strengthen §  ___ §  ___ §  ___ §  ___ §  $500k for IT
§  Strengthen
L&G
Product R&D Operational IT system upgrade

capabilities operational IT
capabilities §  $20k for
capabilities
Workshop
36
Bringing it all together… BSC Strategy Map and Scorecard
Strategy Map Scorecard STEP 1: Clarify Vision
§  Clarify, in detail components of overall strategic vision
Theme: TRANSFORM PRODUCT MIX STEP 2: Define the Shareholder Value Gap
§  Define the financial objectives and measures
Grow new sources
Perspective
Financial
of revenue §  Measures §  Define the targets and value gap
§  Target §  Allocate the value gap to growth and productivity goal
Tap into new
customer segment STEP 3: Reconcile the Customer Value Proposition
§  Owner
§  Define the target customer segments
Increase new §  Initiatives §  Clarify the customer value proposition
Perspective
Customer
§  Resources §  Select the measures

Offer innovative Offer highest §  Reconcile customer objectives with financial growth goals
features service level
STEP 4: Reconcile Channel Partner Value Proposition
§  Define the target channel partners
Channel Partner
Enhance channel §  Clarify the channel partner value proposition

Perspective
capability
§  Select the measures
Offer highest Offer strongest §  Reconcile channel partner objectives with customer goals/
product quality admin support
objectives
STEP 5: Identify Strategic Themes
§  Identify the critical few processes that have the greatest
Business Model
Enhance Enhance
Perspective
Product Innovation Operational impact to deliver value propositions

Process Process §  Establish measures and targets
STEP 6: Create Strategic Asset Readiness
§  Identify human, information and organizational capital
required to support critical processes
Perspective
Strengthen Strengthen §  Assess readiness of assets

L&G
Product R&D Operational IT §  Establish measures and targets

capabilities capabilities
STEP 7: Identify & fund the initiatives
§  Define the specific initiatives required to support the
processes and to develop capital
§  Clarify, secure and allocate funding
37
Content

Process Clusters

Architecture Strategy
38
Closer look at Internal Processes - BSC groups an
Organization s myriad internal processes into four Clusters
Cluster 1 - Customer Management Cluster
Understanding customers and value proposition that attracts them is fundamental to any strategy. Customer Management
Processes help company acquire, sustain, and grow long-term, profitable relationship with targeted customers, viz.:
1.  Customer Selection – Identifying customer segments attractive to the company; Craft the value proposition to appeal to
these segments; Create a brand image that attracts customers in these segment to the company's products and
services
2.  Customer Acquisition – Communicate the message to the market, secure prospects; Covert prospects to customers
3.  Customer Retention – Ensure quality, correct problems; Develop loyalty in customers.
4.  Growing Relationship with Customers – Get to know customers, build relationships with them; Increase the company s
share of targeted customers purchasing activity
Cluster 2 - Innovation Management Cluster

Processes that help companies create competitive advantage by bringing innovative products – well matched to target
customers needs – to the market fast and efficiently. Successful Innovation drive customer acquisition and growth and
margin enhancement and customer loyalty and includes four important processes, viz.
1.  Identify opportunities for new product and services – Anticipating future customer needs; Developing more effective
product and services
2.  Manage the research and development portfolio – Actively manage the product/ offer portfolio for superior innovation
and customer positioning, performance and profitability; Extend current product platforms into new and existing markets;
Extend product portfolio through collaboration
3.  Design and develop new products and services- Concept development; Product planning; Detailed product and process
engineering
4.  Bring the new products and services to market – Rapid launch of new products; Effective production of new products;
Effective marketing, distribution and sales of new products
39
Closer look at Internal Processes - BSC groups an
Organization s myriad internal processes into four Clusters
Cluster 3 – Operations Management Cluster
Operations Management Processes are the basic, day-to-day processes by which companies produce their existing
products and services and deliver them to customers.
Successful management of processes that deliver goods and services to customers vital in helping organizations improve
the cost, quality and responsiveness of critical processes, and includes four processes, viz.:
1.  Develop and sustain supplier relationships

2.  Produce products and services
3.  Distribute and deliver products and services to customers
4.  Manage Risk
Cluster 4 – Regulatory & Social Cluster

Regulatory and social processes help organizations continually earn the right to operate in the communities and countries in
which they produce and sell
40
Customer Management Processes
Sustain growth in
Improve Cost Increase Expand Revenue Enhance Customer

Structure Asset Utilization Opportunities Value

Perspective
Channel Value Proposition

Channel
Partner Sales Production Support Growth & Development Support
(Agency) Product Quality/ Sales Support Brand Support Agency Mgmt.
Range Admin Support Career & Comp. Support
Perspective
Business Model (Int. Process)

Perspective
Learning &Growth Perspective
Human Capital
Information Capital
Organizational Capital - Culture, Leadership, Alignment, Teamwork

41
Closer look at Customer Management Processes
Sustain growth in


Perspective
Channel Channel Value Proposition

(Agency) Product Quality/ Agency Mgmt.
Sales Support Admin Support Brand Support Career & Comp.
Perspective Range Support
Business Model (Int. Process) Perspective

Customer Selection Customer Acquisition Customer Retention Customer Growth
§  Understand segments §  Communicate Value Proposition §  Premium Customer Svc §  Cross-selling
§  Screen unprofitable customers §  Customize mass marketing §  Sole-Source partnerships §  Solution selling
§  Target high value customers §  Acquire/ convert leads §  Service excellence §  Partnering/ Integrated Mgmt.
§  Manage the brand §  Loyal customers §  Customer education
Learning & Growth Perspective
§  Market research §  Telemarketing §  Call centre protocols §  Consultative sales skills
Human
Capital
§  Profitability analysis §  Product line knowledge §  Product line knowledge §  Customer/ Industry knowledge
§  Market communication §  Customer communications §  Problem resolution §  Product line knowledge
§  Partner management §  Customer feedback
§  Customer database §  Database marketing §  Customer interaction centre §  Customer information feedback
Information
Capital
§  Customer analytics §  Lead management §  Problem tracking system §  Portfolio planning models
§  E-polling/ sampling §  Sales force automation §  Order Mgmt. System §  Integrated order management
§  Customer profitability analysis §  Web site design
§  Customer focused culture §  Customer focused culture §  Customer focused culture §  Customer focused culture
Capital
Org
§  Personal goal alignment §  Personal goal alignment §  Personal goal alignment §  Personal goal alignment
§  Best practice sharing §  Best practice sharing §  Best practice sharing §  Best practice sharing 42
Perspective Objective Measure
§  Create new sources of revenue §  Revenue from new customers
§  Increase revenue per customer §  Share of wallet
Financial §  Increase customer profitability §  Profits per customer (ABC)
§  Improve sales productivity §  Cost of sales by channel
§  Increase customer satisfaction with §  % customers highly satisfied (survey)
value proposition §  Customer retention
Customer §  Increase customer loyalty §  Depth of relationship
§  % business from customer referrals
§  Under customer segments §  Contribution by segment/ Market share in target segment
§  Screen unprofitable customers §  Percentage of unprofitable customers
Selection §  Target high value customers §  No. of strategic accounts
§  Manage the brand §  Customer survey on Brand awareness/ preference
§  Communicate value proposition §  Brand awareness (survey)

§  Customer mass marketing §  Campaign response rate
Internal Process
Acquisition §  Acquire new customers §  No. of customer using promotions to sample product
§  Cost per customer acquired/ Life time value (est.) of customer acquired
§  No. of leads/ conversion rate
§  Provide premier customer service §  No. of premier customers/ Time for customer to resolve concerns
§  Create sole source partnerships §  No. of referrals to new customers
Retention §  Provide service excellence §  No. of new customer acquired from referrals by existing customers
§  Create highly loyal customers §  % revenue from sole source
§  Service levels (by channel)
§  Cross selling §  No. of products per customer
§  Solution selling §  Cross market revenues
Growth §  Partnering/ integrated management §  No. jointly developed service agreements
§  Customer education §  No./ $ from gain sharing agreements
§  Hours with customers
43
§  Develop strategic competencies §  Human capital readiness
Learning & Growth
Human §  Attract and retain top talent §  Key employee turnover
Capital
§  Develop strategic CRM portfolio §  Application portfolio readiness

Information
§  Increase knowledge sharing §  No. of Customer Knowledge Mgmt. System employees
Capital
§  Create customer focused culture §  Customer survey
Organization
§  Create personal goal alignment §  Employee objectives linked to BSC
Capital
44
Innovation Management Processes
Sustain growth in


Perspective

Channel
Perspective

Perspective
Learning & Growth

Perspective
Human Capital
Information Capital
45
Closer look at Innovation Management Processes
Sustain growth in
Manage Total Life Revenue from Gross Margins:

Cycle Production Costs New Products New Products

(External)
Perspective High Performance
First to Market Extend into
Products New Markets

Channel
Perspective

Perspective
Identify Opportunity Manage the Portfolio Design & Develop Launch
§  Anticipate customer needs §  Choose and manage mix of §  Supply §  Environment
§  Discover new opportunities projects §  Production §  Safety and Health
§  Extend products to new §  Distribution §  Employment
applications
§  Risk Management §  Community
§  Collaborate
Learning & Growth

Perspective
Human Capital Information Capital Organization Culture
Technology to explore, integrate Culture of Creativity

Multi-disciplinary Skills
and Speed to Market & Innovation
46
§  Revenue growth from existing customers §  Revenues and margins from existing customer from product released
§  Revenue growth from new customers in last 12 months
Financial §  Manage life cycle costs §  Percent growth in sales to existing customers
§  Revenues and margins from new customers with new products
§  Maintenance cost as percent of total manufacturing costs
§  Offer enhanced product/ service §  Specific performance attribute of new product/ service
functionality to customers §  Lead time relative to competitors
§  First to market with new product service §  No. of new products/ service first to market
Customer §  Extend products/ services to new segments
§  Percent of products launches on time
§  No. of new application from platform products
§  Revenue from new markets and segments
§  Anticipate future customer needs §  Time spent with key customers learning about their future
§  Discover and develop new, more effective opportunities and needs
Identify new products and services §  Number/ percent of new projects launched based on client input
opportunities
§  Number of nee projects or concepts presented for development
§  Number of new value-added services identified
Internal Process
§  Actively mange the product portfolio for §  Actual vs. desired mix of projects (advanced development, platform,
superior innovation and customer derivative and outsourced)
positioning, performance and profitability
§  Actual vs. desired spending on projects of each type
§  Extend current product platforms into new
and existing markets §  Technology ranking (independent peer review of current technology
capabilities)
§  Extend product portfolio through
Manage the §  Net present value of products in project pipeline
collaboration
R&D
Portfolio §  No. of project leveraged from existing platforms that are targeted at
new markets
§  No. of life cycle extension projects
§  No. of licensed products
§  No. of joint projects in new or emerging markets
§  No. of technology or product partners 47
§  Manage the project portfolio §  No. of patents; No. of patent citations
§  Reduce development cycle time §  Project yield (Percent of projects advancing from stage to stage)
§  Manage development cycle cost §  No. of project entering each phase of product development process
Design &
Develop New §  No. of projects delivered on time
Products & §  Average time spent by projects at the development, test, and launch
Internal Process
Services stages of the development process

§  Total time (Concept to market)
§  Actual vs. budgeted spending on projects at each development stage
§  Rapid launch of new products §  Time from start of pilot production until full volume achieved
§  Effective production of new products §  No. of re-design cycles
§  Effective marketing, distribution, and sales §  No. of new products launched or commercialized
Bring new of new products §  Manufacturing cost of new products (actual vs. targeted)
Products to
§  Manufacturing process yield for new products (successful vs. killed
Market
projects)
§  Consumer satisfaction or complaints about new products launched
§  Six month revenues from new products (actual vs. budgeted)
§  Achieve deep functional expertise §  Strategic skill coverage in key R&D positions
§  Develop effective interdisciplinary and §  Percent of R&D employees who work effectively in inter-disciplinary
Learning & Growth
Human cross-functional teams and multi-functional project development teams

Capital §  Percent of R&D employees capable of effective project management
leadership
§  Use technology for rapid product launch §  No. of ideas from external sources
Information
§  Capture leading knowledge from global §  Peer review of current scientific and technological capabilities
Capital
industry
Organization §  Foster a culture of innovation §  No. of suggestions for new products and capabilities
Capital §  Employee culture survey for innovation and change
48
Operations Management Processes
Sustain growth in


Perspective

Channel
Perspective

Perspective
Learning & Growth

Perspective
Human Capital
Information Capital
49
Closer look at Operations Management Processes
Sustain growth in
Maximize Use of New Revenue Increase Share

Industry Cost Leader Sources of Customer
Existing Assets

(External) Product/ Service Attributes
Perspective
Competitive Low Perfect Speedy, Timely Excellent
Prices Total Cost Quality Purchase Selection

Channel
(Agency) Product Range Sales Support Brand Support Agency Mgmt.
Admin Support Career & Comp. Support
Perspective

Perspective
Develop Supplier Relations Produce Product & Services Distribute to Customers Manage Risk
§  Lower Cost Of Ownership §  Lower Cost Of Production §  Lower Cost To Serve §  Financial Risk
§  Just In Time Delivery §  Continuous Improvement §  Responsive Delivery Time §  Operating Risk
§  High Quality Supply §  Process Cycle Time §  Enhance Quality §  Technological Risk
§  New Ideas From Suppliers §  Fixed Asset Utilization
§  Supplier Partnerships §  Working Capital Efficiency
§  Outsource Mature Non-
strategic Services
Learning & Growth

Perspective
Human Capital Information Capital Organization Culture
Skills in Quality Management/ Technology that Facilitates Culture of Continuous

Process Improvement Process Improvement Improvement
50
§  Become Industry Cost Leader §  Cost per unit, benchmarked against competitors
§  Maximize Use of Existing §  Percent of annual reductions in cost per unit of output
Assets §  Percent of cost budget variance
Financial §  Increase revenue from §  General selling, and administrative expenses per unit of output
customers
§  Investment efficiency (NPV of new projects to total commitment)
§  Revenue from acquiring new customers
§  Lower customers cost; Increase §  Price, relative to competitors

customers' profit §  Customers cost of ownership
§  Deliver zero defect products §  No. of customer complaints
and services to customers §  No. of incidents of warranty and field service repairs
Customer §  Deliver products on time §  Percent on-time delivery
§  Offer excellent selection §  Customer lead time (from order to delivery)
§  Index of product or service offering measuring percent of customer needs
covered
§  Lower Cost Of Ownership §  Activity based costing of acquiring materials and services
§  Achieve Just In Time supplier §  Cost of purchasing as percentage of total purchase price
capability
Internal Process
§  Supplier ratings: Quality, delivery, cost

§  Develop High Quality Supply §  Lead time from order to receipt
capability
§  On time deliver percentage
Develop & §  Use New Ideas from Suppliers §  Percent of late orders
Sustain Supplier §  Achieve Supplier Partnerships
Relationships §  Percent of orders delivered directly to production process by suppliers
§  Outsource Mature Non- §  PPM of defects/ incoming orders
strategic Products/ Services
§  Number of suppliers providing services directly to customers
§  No. of outsourced relationship
§  Benchmarked performance of outsourcing partnerships
51
§  Lower Cost Of Production §  Activity based cost of key operating processes
§  Continuous Improvement §  Marketing, selling, distribution & administration expense as percent of total costs
§  Process Cycle Time §  No. of processes with substantial improvements
Produce
§  Fixed Asset Utilization §  No. of inefficient or non-value added processes eliminated
Products &
Services §  Working Capital Efficiency §  Cycle time (from start of production until product completed)
§  Percent of capacity utilization
§  Flexibility (range of products/ services that processes can produce and deliver)
Internal Process
§  Lower Cost To Serve §  Activity based costing of storage and delivery to customers
§  Responsive Delivery Time §  Percent of customers reached via. Low cost-to-serve channels, e.g switching
Distribute §  Enhance Quality customers from manual and telephone transactions to electronic ones
Products & §  Lead time, from order to delivery
Services to §  Time from completion of product until ready for use by customers
Customers §  Percent of items delivered with no defects
§  Number and frequency of customer complaints
§  Manage Financial Risk/ §  Bad debt percentage

Maintain high credit quality §  Percent of uncollectible receivables
§  Manage Operating Risk §  Exposure of losses from interest rates, foreign exchange etc.
Risk §  Manage Technological Risk §  Order backlog
Management
§  Percent of capacity from existing and backlogged orders
§  Technology ranking of products and processes compared to competitors
52
§  Develop skills in quality §  Percent of employees trained in quality management techniques
management and process §  No. or percent of employees qualified in six sigma quality programs
Human Capital improvement §  Percent of employees with knowledge and training in activity based management,
just in time etc.
Learning & Growth
§  Technology that facilitates §  Percent of employees who obtain immediate feedback from operations
Information process improvement and §  Percent of customers who can track order status electronically
Capital customer satisfaction
§  Culture for continuous §  Employee survey on culture for continuous improvement and knowledge sharing
improvement §  Number of new process improvement ideas generated
Organization §  Percent of employee process improvements suggestions adopted
Capital §  No. of ideas for quality and process improvement shared across multiple
organizational units
§  Performance improvement from employees suggestions and action
53
Content

Process Clusters

Architecture Strategy
54
Customizing BSC to strategy – Overview
Strategy is about Making Choices and Keeping Focused…
Strategy is Deciding What to Do, And more importantly, What Not to Do
§  No organization can hope to excel at every single objective in the different Internal Process
Clusters and/ or Learning and Growth perspective.
§  The Value Proposition in the customer perspective, the critical internal processes, and intangible
assets in the Learning and Growth perspective of a strategy map will be different for companies
pursuing different strategies.
§  Internal processes differ in priorities depending upon the strategy to be adopted by organization:
§  Company competing on Complete Customer Solution Strategy should highlight Customer
Management as most important
§  Company competing on Product Innovation and Leadership Strategy – Focus on Innovation
§  Company competing on Low Total Cost Strategy – Focus on Operations Management
§  The Art of Strategy is to identify and excel at the critical few processes that are the most important
to the Customer Value Proposition. In line with strategy, all processes selected should be
managed well, but a few strategic processes must receive special attention and focus, since these
processes create the differentiation of the strategy.
§  All selected Internal Processes across four clusters should be aligned and integrated to enable
the organization to deliver a Differentiated Value Proposition – one that is valued by its target
customer segments – from its competitors
55
Closer look at Complete Customer Solutions strategy
Companies pursuing Complete Customer Solutions Strategy:
Value Proposition
§  Emphasize building long lasting relationships with customers – Making customers feel that the company
understands their business or personal issues, and they can trust the company to develop customized
solutions tailored to them
§  Emphasize Customer objectives relating to completeness of solution (selling multiple, bundled products
and services), exception service (before and after sale) and the quality of relationship
§  Often acquire customers through a single, entry level product, before deepening the relationship to
encompass sale of multiple, related products to retain customers and produce high lifetime profitability
Internal Processes
§  Develop deep understanding about what their customer value, build strong, trusted relationships with
customers, bundle existing products and solutions into individually customize solutions - Customer
Management Processes Cluster is most important
§  Do not have lowest Operations Management Processes. Instead they support the customer
management processes by offering customers a broad product and service line, bundling products and
services from suppliers, along with company s own offerings, allow customization of these products and
services, and delivering these to customers through seamless distribution channels
§  Have Innovation Management Processes that focus on finding new ways to create value for customers,
understanding more about customers future needs, rather than fundamental product innovation. Also
directed at finding new ways for customers to access and use company s offerings
§  Have Regulatory and Social Processes that focus on gaining regulatory approval to offer services that
cut across traditional industry barriers, getting regulatory approval to bundle new services to customers
56
Closer look at Complete Customer Solutions strategy
Companies pursuing Complete Customer Solutions Strategy:
Learning & Growth Processes

§  Require Human Capital competencies that focus on skills and knowledge about the diverse products
and services the company offers to its targeted customer segments. Employees must have excellent
knowledge about and be highly sensitive to targeted customers and their preferences.
§  Require Information Capital that focuses on data about customers and analytic capabilities to learn
more about customer preferences and buying patterns.
§  Extensive, preferably proprietary, Customer databases can provide a sustainable source of
competitive advantage for customer focused companies.
§  Robust CRM system enables company to have an integrated and comprehensive view of all
transactions each customer has with the company.
§  Data Mining capabilities enables company to unique insights into constructing customer
segments and buying behavior.
§  Knowledge Management systems enables transferring of knowledge gained from customers to
develop new products and services offerings and to better serve customers
§  Organizational Capital:
§  Foster a customer-centric culture and climate among employees.
§  Employees understand the primacy of customers and the value the company gains from
developing and maintaining long-standing relationships with customers
57
BSC Strategy Map Template for Complete Customer
Solutions Strategy Sustain growth in
Manage Total Life Maximize Use of Revenue from Increase Account

Cycle Product Costs Existing Assets New Customers Share with Customers

Perspective Quality of Solutions Customer Customer Lifetime
No. of Products/ Services
Provided to Customers Per Customer Retention Profitability

Channel
(Agency) Product Range Sales Support Admin Support Brand Support Agency Mgmt.
Career & Comp. Support
Perspective

Perspective
Customer Mgmt. Innovation Mgmt. Operations Mgmt. Regulatory & Social
§  Create customized solutions §  Identify new opportunities to §  Deliver broad product/ service §  Gain regulatory approval for
§  Build strong customer serve customers line new offerings
relationships §  Anticipate future customer §  Customize product/ service §  Contribute to community
§  Develop knowledge about needs offerings
customers §  Create network of suppliers for
extended product/ service
capabilities
Learning & Growth

Perspective Human Capital Information Capital Organization Culture
Diverse Product/ Customer databases Transfer of
Services Skills Knowledge
Customer Mgmt. CRM & Data Mining Customer
Skills Capabilities Focused
58
Closer look at Product Innovation and Leadership strategy
Companies pursuing Product Innovation and Leadership Strategy:
Value Proposition
§  Have Value Propositions that emphasizes particular features and functionality customers value and
are willing to pay more to receive
§  Are First-To-Market with innovative or enhanced features and functionality
§  Strive to extend superior functionality of their products into multiple market segments
Internal Processes
§  Excel at anticipating customers needs and discovering new opportunities for superior products and
services – Innovation Processes Cluster is most important
§  Do not have lowest Operations Management Processes. Instead they emphasize robust and flexible
processes to accommodate continual introduction of new products, changes in product characteristics
based on feedback from marketplace and experimentation
§  Have Customer Management Processes that focus on:
§  Identifying leading-edge customers and learning from them
§  Educating customer about the benefits from improved functionality
§  Are vigilant at managing Regulatory and Social Processes associated with their new products and
have good relationship with regulators so that new products and services receive necessary regulator
approval, and that delays associated with regulatory approval are minimized
59
Closer look at Product Innovation and Leadership Strategy
Companies pursuing Product Innovation and Leadership Strategy:

§  Require High level of Human Capital competency and Effective interaction between Product
Development Teams with employees from marketing, operations and finance etc.
§  Exploit Information Capital/ Technology to Achieve rapid introduction of new products, Enhance
communication of knowledge and project experiences across functions, departments and geography
and Foster sharing of Best Practices
§  Organizational Capital:
§  Emphasize Teamwork amongst internal functions/ team and active involvement with external
technical communities, conferences, leading universities to tune in to advances that can affect
the company's products and services
§  Emphasize/ Foster Culture of innovation, disruption and change; Foster acquisition of knowledge
from outside the company
60
BSC Strategy Map Template for Product Innovation and
Leadership Strategy Sustain growth in
Shareholder Value
Financial
Reduce Cost to Revenue from Gross Margins:

Serve New Products New Products

Perspective
High Performance Products:
First to Market New Customer Segments
Better Quality/ More innovative Features etc.

Channel
(Agency) Product Range Sales Support Brand Support Agency Mgmt.
Admin Support Career & Comp. Support
Perspective

Perspective
§  Educate customers about §  Disciplined high performance §  Flexible robust processes §  Rapid regulatory approvals
complex new products/ product development §  Rapid introduction of new
services §  Produce development time: products
§  Capture customer ideas from idea to market §  Supply capacity for rapid growth
from new products/ §  In-line experimentation and
services improvement
Learning & Growth

Deep functional Creative, Versatile Technology that facilitates Creativity &

Employees/ Cross Functional
expertise Teamwork Rapid Product Introduction Innovation
61
Closer look at Low Total Cost Strategy
Companies pursuing Low Total Cost Strategy:
Value Proposition
§  Offer customers highly competitive prices combined with consistent quality, ease and speed of
purchase, and reduced product selection
§  Reduces customers total cost of acquiring and using company s products through consistent
quality and reducing time required to purchase and receive the product
§  Keeps own costs down by offering customers a selection that is somewhat limited, but that meets
the needs of most of its targeted customers; Reducing range of offerings allows company to keep
production and service delivery costs low, enabling a low total cost value proposition.
Internal Processes
§  Have highly efficient operating processes that are lowest cost in the industry and also be consistent,
high quality and highly responsive, with short cycle times; Distribution processes to customers must also
be low total cost and timely - Operations Management Process Cluster is most important
§  Have Customer Management Processes that focus on providing convenience and ease of access for
customers. Objectives include:
§  Simple, accessible, ordering processes, such as Internet etc
§  Superb post sales service on operational issues
§  Robust Market Research to understand the most preferred limited set/ range of products, services
and options desired by large segments of customers, and producing limited product and service
line to keep operating costs down
§  Are Product Followers (not Product Leaders) and hence do not invest a great deal in product and
service Innovation Management. They require capabilities for replicating innovations done by Product
Leaders. Main focus is on Process Innovation to increase efficiency and reduce cost
62
Closer look at Low Total Cost Strategy
Companies pursuing Low Total Cost Strategy:

§  Require Human Capital competencies that focus on process improvements – Knowledge of six sigma,
just-in-time and activity-based-costing so that employees have the ability and knowledge to continually
lower costs, reduce cycle times, and improve quality.
§  Have Information Capital objectives that relate to:
§  Enhancing the customers buying experience (ease of ordering) and lowering the company s and
its customers costs of ordering and acquiring products and services
§  Providing accurate and timely data to employees about the cost, quality, and cycle times of
processes and the company s customers, to enable continuous improvement
§  Enabling internal and external benchmarking of processes so that best practices can be
identified and shared across organization
§  Have Organizational Capital that emphasize process learning, continuous improvements and sharing
of best practices across the organization.
63
BSC Strategy Map Template for Low Total Cost Strategy
Sustain growth in
Become Industry Maximize Use of Revenue from Increase Account

Cost Leader Existing Assets New Customers Share with Customers

Perspective
Lowest Cost Consistent
Supplier Speedy Purchase Appropriate Selection
Quality

Channel
(Agency) Product Range Sales Support Admin Support Brand Support Agency Mgmt.
Career & Comp. Support
Perspective

Perspective
§  Provide convenient order §  Process innovation §  Outstanding supplier §  Gain regulatory approvals for
handling processes §  Manage capital projects relationships new low cost channels to market
§  Provide desired variety of §  Efficient timely distribution §  Contribute to community
products and services §  Manage risk
§  Produce goods and services;
Cost, Quality and Time
Learning & Growth

Process Improvement Facilitate
Capabilities Better, Faster, Cheaper Knowledge Sharing
Electronic Supplier/ Process Improvements Replicate
Customer Relationships Best Practices
64
End of Pack
65

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BUILDING A STRATEGY FOCUSED ORGANIZATION

WITH THE BALANCED SCORECARD

1. Why BSC? 3. Closer Look at Internal

2. Overview of BSC 4. Customizing BSC to

Strategy Measurement & Focus

Targets/ Objectives & Initiatives

Targets/ Objectives & Initiatives

§ No overall one-view of progress of various

§ No uniform and consistent way to describe the

§ No framework to measure progress and learn about

Personal Objectives § Focus on strategy is typically low. Strategy often

Mobilize Change Align the Organization

1. Why BSC? 3. Closer Look at Internal

2. Overview of BSC 4. Customizing BSC to

#3 - Channel Partners (Int. Customers)

#4 - Business Model/ Int. Processes

#5 - Organization Learning & Growth

Examples of Revenue Growth measures

Customer Value Proposition Measures

#3 - Channel Partners (Int. Customers)

Strategy Map Scorecard

#3 - Channel Partners (Int. Customers) …And our channel partners for

#4 - Business Model/ Int. …What do we have to do to

Productivity Strategy Revenue Growth Strategy

Improve Cost Enhance Expand Revenue Enhance

Improve Cost Enhance Expand Revenue Enhance

CUSTOMER VALUE PROPOSITION

Price Quality/ Selection Functionality/ Reputation

Improve Cost Enhance Expand Revenue Enhance

Customer Customer Value Proposition

Improve Cost Enhance Expand Revenue Enhance

Customer Customer Value Proposition

Channel Partner Channel Value Proposition

§ Changes to value propositions requires corresponding

Improve Cost Enhance Expand Revenue Enhance

Customer Customer Value Proposition

Channel Partner Channel Value Proposition

Improve Cost Enhance Expand Revenue Enhance

Customer Customer Value Proposition

Channel Partner Channel Value Proposition

Learning & Growth

§ Skills/ Talent § Systems § Culture

Improve Cost Enhance Expand Revenue Enhance

Customer Customer Value Proposition

Channel Partner Channel Value Proposition

Internal Process Perspective

Learning & Growth

XX% XX% XX% XX% XX% XX% XX% XX% XX%

Improve Cost Enhance Expand Revenue Enhance

Strengthen franchise for sustainable growth

Expand Revenue Opportunities

Channel Partner Channel Value Proposition

Learning & Growth

§ Skills/ Talent § Systems § Culture

VISION external, hard and soft components of overall

VISION external, hard and soft components of overall

Strategic objective § STEP 2: Identify a strategic theme for the

§ Theme 2: Enhance customer value

§ Productivity improvement strategy

VISION external, hard and soft components of, overall

§ STEP 2: Identify a strategic theme for the

Strategic objectives serve and compete and unique customer value

VISION external, hard and soft components of, overall

§ STEP 2: Identify a strategic theme for the

1.  Why BSC? 3.  Closer Look at Internal

2.  Overview of BSC 4.  Customizing BSC to

§  No overall one-view of progress of various

§  No uniform and consistent way to describe the

§  No framework to measure progress and learn about

Personal Objectives §  Focus on strategy is typically low. Strategy often

1.  Why BSC? 3.  Closer Look at Internal

2.  Overview of BSC 4.  Customizing BSC to

§  Changes to value propositions requires corresponding

§  Skills/ Talent §  Systems §  Culture

§  Skills/ Talent §  Systems §  Culture

Strategic objective §  STEP 2: Identify a strategic theme for the

§  Theme 2: Enhance customer value

§  Productivity improvement strategy

§  STEP 2: Identify a strategic theme for the

§  STEP 2: Identify a strategic theme for the

Increase new §  STEP 3: Identify the target market and

§  STEP 2: Identify a strategic theme for the

Increase new §  STEP 3: Identify the target market and

§  STEP 5: Choose, align and resource the

§  STEP 2: Identify a strategic theme for the

Increase new §  STEP 3: Identify the target market and

§  STEP 5: Choose, align and resource the

§  15% §  ABC

of revenue §  Tap into new customer segment

customer acquisition customer acquisition segment §  85% §  DEF

capability §  Channel professionalism (survey) §  85% §  NOP

Operational §  WXY

§  Increase new §  _ §  _ §  ___

§  Enhance channel §  _ §  _ §  ___

Enhance channel capability §  _ §  _ §  ___

§  Increase new §  _ §  _ §  ___

§  Offer innovative §  _ §  _ §  ___

§  Enhance channel §  _ §  _ §  ___

Enhance channel capability §  _ §  _ §  ___

§  Resources §  Select the measures

Enhance channel §  Clarify the channel partner value proposition

Strengthen Strengthen §  Assess readiness of assets

Product R&D Operational IT §  Establish measures and targets

1.  Why BSC? 3.  Closer Look at Internal

2.  Overview of BSC 4.  Customizing BSC to

1.  Develop and sustain supplier relationships

§  Communicate value proposition §  Brand awareness (survey)

§  Develop strategic CRM portfolio §  Application portfolio readiness