Corporates need to hard sell strategy to their people

I read a good article on balanced scorecard in The Economic Times, with some statements from David Norton about the applications of BSC nowadays. The article, written by Dibeyendu Ganguly, tells when David Norton and Robert Kaplan introduced the Balanced Scorecard (BSC) as a strategy execution tool some 20 years ago, four American companies adopted the idea and implemented it very successfully, and had something else in common at that point — they were all led by CEOs with military backgrounds. David Norton said that it's not coincidence,the BSC fits the military. In a military operation, an officer who goes into the field may not return. But the operation has to go on. So people down the line need to know the strategy being deployed.

In the corporate world, the BSC is meant to turn vision into action and provide daily marching orders to the corporate soldier, and it helps create organisation-wide alignment around strategy. "We were moving from the product economy to the knowledge economy and the BSC proved to be a very effective tool for the new age," says Norton.

"I'd say only 30% of those who use the BSC actually use it as we described," says Norton."Some companies see it purely at a measurement tool, a way to create KPIs (key performance indicators). It gets used by engineers and middle managers, not the CEO. On the other hand, it is now being used by governments in Brazil, Philippines, Abu Dhabi, to execute developmental strategies. The BSC is about strategy execution, about results."

"Strategy is about change, and that's never easy," says Norton, "The leadership has to have a strategy and see to it that it is executed. But CEOs really have a hard time influencing change in their organisations." Strategy is formulated by the Board, executive leadership and senior management, with inputs from shareholders and analysts, but it has to executed by the line management and front line staff. Good organisations also share their strategy with customers, suppliers, regulators and society.

This communication, says Norton, can be viewed as an advertising exercise. You begin by selecting the target audience you want to reach and then let loose a stream of messages through various communication channels, ranging from brochures to videos to mouse pads with strategy maps. It works at a subliminal level." says Norton. "You have to tell them seven times in seven different ways: try my new strategy, you'll like it. Sometimes, front line employees are disengaged and simply not interested in learning about company strategy. Some employees may be totally focused on their jobs and indifferent to the larger picture. It is still in the company's interest to reach out to all employees since alignment amplifies the power of strategy. One way to get employees interested in strategy is to link their incentives to execution . The BSC can have anything from six to 20 target measures on which organisational units are evaluated and individual bonuses can be linked to these targets .

The BSC is a powerful tool, but needs a well-defined execution strategy in order to obtain the expected success. All the employees need to understand the organization's strategy and understand what they can do to contribute to the success of the strategy. Without this, you can define a great strategy, but you will hardly be able to implement it successfully.

Interview with Balanced Scorecard Co-Creator Dr. Robert Kaplan

Bruno Aziza published today a great interview with Dr. Robert Kaplan in the BizIntelligence.TV, with the title: Risk Reduction Advice from a Legend. Robert Kaplan is Baker Foundation Professor at Harvard Business School, and co-creator, together with David P. Norton, of the Balanced Scorecard.

In formulating strategic plans, senior executives tend to overlook two key elements: effectively communicating those plans to the employees who must execute them, and factoring in what might go wrong with the plans, according BizIntelligence.TV's post. Dr.Kaplan says: "You have to communicate the plans to employees seven times in seven ways" for them to understand those plans, he says. "At the end, they need to understand the organization's strategy and understand what they can do to contribute to the success of the strategy."



I was glad because Dr.Kaplan mentioned Volkswagen Brazil (I'm Brazilian) as a successful example of effective employee engagement, motivation, and communication when implementing a turnaround strategy.

Robert Kaplan wrote several books on management and strategy. He and David Norton are the creators of the Balanced Scorecard, and their books about the subject are worth reading (I wrote a book review about the first book: The Balanced Scorecard: Translating Strategy into Action). Their latest book, The Execution Premium, focuses on linking strategy to execution.

The business value of IT

Robert Kaplan gave a good interview to SearchCIO.com, published in two parts, where he talked about strategy execution. In the first part, he explains how CIOs can align IT strategy with corporate objectives and demonstrate the business value of IT.

He gave interesting answers to the questions, like when the interviewer asked: How can CIOs help the business measure the value IT is contributing to the corporate strategy?, he answered: if you want to evaluate the impact of IT on business value, then you have to go to a methodology -- a strategy map -- and balanced scorecard, because often IT doesn't directly produce revenue. What IT does do is support a critical process like innovation or a customer management process, and the output from IT is greater satisfaction or loyalty among customers, such as the FedEx example. And because of greater loyalty, the customers transact more business with the company.

Kaplan also gave a good answer to the question: How can IT play a more active role in driving the business strategy?, he said: Depending on the strategy the business is following, the demands on IT are very different. If you look at Wal-Mart, Toyota or Dell, they are trying to follow a low cost strategy. The role for IT in this case is to lower the cost of working with suppliers, handling the logistics, and the distribution. IT is doing that networking with suppliers and making a platform for which customers find it easier to transact business. Another organization might be following a strategy of building long-lasting relationships with ongoing sales and services. There, IT is very much related to CRM, and perhaps data mining, to be able to understand customers better.

In the second part of the interview, he told about agile business and predictive analysis. His definition of to be agile is the ability to sense changes in the markets and customer preferences faster, as they are evolving, and be able to respond to it. It's not just information, but it's really analysis to see patterns in customers' purchasing decisions and preferences and have that [data] come into the company so they can respond to whatever these evolving needs are.

About predictive analysis, he said: Predictive analysis comes from analytics that are being applied to historical data. In the old days, you were using historical data to evaluate performance and reward people. Now you're trying to use data to help understand the future. Wal-Mart, for example, does a very good job of understanding the types of bundles consumers are likely to purchase. They're trying to predict the patterns of consumer purchasing and then arrange the offerings to encourage the buying of multiple products and services. We have crystal balls, but they're not very accurate. What we do have is data, and by having access to large quantities of data on consumer purchasing, then yes, that does help you predict the future.

The question is, are companies investing sufficiently in analytic methods to make sense out of the data? Raw data is useless, but if you can study the past and use various statistical methods to process the data, then you really can provide information and knowledge that's actionable and that will be predictable in the future, as long as historical patterns are persistent.

About risk management, he commented: Risk management was siloed and considered more of a compliance issue and not a strategic function. Now we see that identification, mitigation and management of risk has to be on an equal level with the strategic process.

Robert Kaplan wrote several books on management and strategy. He and David Norton are the creators of the Balanced Scorecard, and their books about the subject are worth reading (I wrote a book review about the first book: The Balanced Scorecard: Translating Strategy into Action). Their latest book, The Execution Premium, focuses on linking strategy to execution.

In recession, think risk management

SearchCIO.com published an article entitled Balanced Scorecard founder: In recession, think risk management, by Christina Torode, commenting about some considerations of Robert Kaplan on the recession.

Robert Kaplan co-developed with David Norton, the Balanced Scorecard methodology nearly two decades ago to introduce a corporate strategy methodology that measures more than financial results and aligns business units with corporate objectives.

Kaplan considers that organizations need to include risk management among the key performance indicators that they measure.

Robert Kaplan's comments:
- If you can't measure, you can't manage and you can't improve upon your corporate success.
- Financial performance is a lag indicator. … Now we're seeing the consequences of not making risk management a strategic part of strategy.
- The principles of the Balanced Scorecard can be applied to any business unit, including IT, but it is critical that a department's internal scorecard link to the corporate strategy.
- In a recession you need to focus on short-term goals and the three Cs: reduce costs, rebuild capital and watch your credit.

For long-term corporate strategy success, Balanced Scorecard focuses on several key areas:
- Aligning the organization with strategy and objectives
Create balance and a sense of common purpose.
- Mobilizing change through executive leadership
Everyone in the organization needs to understand why a corporate strategy is changing, and only the leaders can drive that change.
- Linking strategy to business users
Make everyone accountable for individual excellence. But for this to work, every individual needs to be able to visualize the role he plays in making corporate objectives and overall strategy a success. Kaplan advises giving everyone in the organization a strategy map.
- Making strategy a continual process
Develop strategy maps and even dashboards for employees so they can drill down and see the links between objectives, how individuals and teams play a role in that end goal, and how the success of that objective is measured. Visual strategy maps allow employees to see links between objectives and how they are measured.

Management Excellence

In July of this year, Frank Buytendijk introduced the concept of Management Excellence in his Oracle's blog and launched The Journal of Management Excellence.

He wrote: "Organizations should recognize that the competitive differentiation of operational excellence is diminishing, and that a new competitive wave has started. Organizations should extend their focus on cost, quality and speed, to including being smart, agile and aligned.

Creating management excellence is the goal of performance management.

Management Excellence is going to be a very important theme for Oracle EPM the coming year."

In October, he launched the issue #2 of The Journal of Management Excellence, with a very nice article about the Office of Strategy Management by Robert Kaplan and David Norton.

Today he posted a link to download four white papers about Management Excellence:
• “Management Excellence: How Tomorrow’s Leaders Will Get Ahead” introduces what management excellence means, and describes the Oracle management process framework called Strategy to Success (S2S)
• “Management Excellence: The Metrics Reloaded” discusses the performance indicators that organizations should focus on when they adopt Strategy to Success
• “Management Excellence: From Strategy to Success” details the S2S processes and introduces a blueprint to map your own management processes
• “Management Excellence: Techniques and Technologies” highlights important techniques that an EPM System must offer in order to support Strategy to Success.

Oracle is doing a great work and those are excellent materials about Management Excellence.

The Balanced Scorecard - Translating Strategy Into Action (Classic Book)

The Balanced Scorecard - Translating Strategy Into Action - Robert S. Kaplan, David P. Norton

This book arose from a research that culminated with an article entitled "The Balanced Scorecard - Measures That Drive Performance", published in the Harvard Business Review, in early 1992.

The book has a preface and two chapters with an introduction to the concepts of Balanced Scorecard. In the preface, they explain the path to publish the book, since the research, publication of articles, to the application of the concepts of balanced scorecard in several companies.

After the introduction, the book is organized within two Parts, Part One is about measuring business strategy and Part Two deals with managing business strategy.

In the Part One, entitled Measuring Business Strategy, they define the four perspectives: financial, customer, internal business process, and learning and growth, one chapter for each perspective. This part has more two chapters, one about linking balanced scorecard measures to your strategy, and the last chapter about structure and strategy.

The Balanced Scorecard Provides a Framework to Translate a Strategy into Operational Terms:


(Source: www.balancedscorecard.org, based on the book)

In the Part Two: Managing Business Strategy, they describe in four chapters how several companies are using the balanced scorecard as the foundation of the strategic management system.

This is a great book, where Kaplan and Norton explain how to use this excellent tool. The Balance Scorecard is considered nowadays one of management practices most important and revolutionary.

Of course, Kaplan and Norton, using their experience, based on extensive applications in organizations worldwide, updated and evolved the concepts in their next books: The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment, Strategy Maps: Converting Intangible Assets into Tangible Outcomes, Alignment: Using the Balanced Scorecard to Create Corporate Synergies

Books about BI and PM that I am waiting to be published

There are two books about Business Intelligence and Performance Management that I am waiting to come out:

- Execution Premium - Robert Kaplan and David Norton

Planned Launch: July/2008

I like so much the books from Kaplan and Norton, and their approach about business strategy.

- IBM Cognos 8 Business Intelligence: The Official Guide - Dan Volitich

Planned Launch: May/2008

I have been working with Cognos Tools since early 2000 and with Cognos 8 since it was launched. This book was written by an expert in Cognos and I hope it is interesting.

Do you noticed the IBM together with Cognos in the book title ?