MGN600

Corporate Strategy
&
Decision Simulation

RAJESH VERMA

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LEARNING OBJECTIVES

1 Understand the interdependence between

strategy formulation and implementation

2 Understand how to prepare a BSC and use it

for strategy Implementation

3 How to implement Strategy Mapping

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Imagine entering the cockpit of a jet plane and observing that there is only
one single instrument. How would you feel about flying on that plane after the
following discussion with the pilot:
Q. I am surprised to see you operating the plane with only a single instrument .
What does it measure?
A. Airspeed.

Q. That’s good. Airspeed certainly seem important. But what about altitutde.
Would,nt an altimeter be helpful?
A. I worked on altitude for last few flights and I’ve gotten pretty good on altitude.
Now I have to concentrate on proper air speed.

Q. But I notice you don’t even have a fuel gauge . Wouldn’t that be useful?
A. Fuel is important, but I cant concentrate on doing too many things well at the
same time. So this flight I want all my attention focused on air speed. Once I
get to be excellent at air speed, as well as altitude, I intend to concentrate on
fuel consumption on the next set of flights.
 The

BALANCED
SCORECARD
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FOUR BARRIERS TO STRATEGIC IMPLEMENTATION

The Vision Barrier

Only 5% of the work force

understands the strategy

The People Barrier The Management Barrier

9 of 10
companies fail to 85% of executive teams spend
Only 25% of managers have
less than one hour per month
incentives linked to strategy execute strategy discussing strategy

60% of organizations don’t link

budgets to strategy

The Resource Barrier

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SOUTHWEST AIRLINES

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STRATEGY MAPS HELP LINK ALL PERFORMANCE METRICS TO STRATEGY

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 EXTEND THE MAP INTO MEASUREMENTS, TARGETS AND INITIATIVES

Strategy Map
Customers

Detailed statement How success in The level of Key action

Faster Service Access of what is critical to achieving the performance or programs
successfully strategy will be rate of required to
achieving the measured and improvement achieve
strategy tracked needed objectives
Self Service
Internal Process

Applications

Objective
Measure Target Initiative
Lean Processes Description
Eliminate waste, Number of Reworks 2 per setup per Lean / Six Sigma
reworks, and other month each
Process and Value errors in our Outlet Office
Map Analysis processes
L&G

Web Enable
Technologies
Financials

Invest in IT
ALIGNMENT OF SCORECARD COMPONENTS

Make sure the components of scorecard fit together. Create a tight model for
driving execution of strategy.

Goal Objective Measurement Target Initiative

Achieve Reduce Cost per Outlet 5% - Year 1 Activity Based
Agency Operational Office, Cost per 10% - Year 2 Costing /
operational Service Costs by Region Management
15% - Year 3
efficiencies 50% over the next
with best 5 years
practices in
the private Reduce identified Waste Volume Waste stream Lean / Six
sector re-activities within Charts, Rework reductions of 5% Sigma
primary processes Tracking, Cycle each year,
by 80% over the Time End to Start Reworks cut in
next 3 years half for next 3
years, cycle time
cut by 75%
THE STORY OF A SCORECARD

To be successful for shareholders, co. must be (position in market),

which means that we must return superior financial results in .......

Customers are the people who will secure these results for co. so co must
offer customers superior value by .........

To deliver this superior value co. must excel in the way people manage the
processes for .......

These processes are operated by our people. Co. must provide our people
with ....... to achieve excellent performance.

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HOW IT STARTED

• Introduced in 1992, by Robert Kaplan and David Norton

• The Balanced Scorecard is the most commonly used

framework for ensuring that agencies execute their
strategies. Today, about 70% of the Fortune 1,000
companies utilize the Balanced Scorecard to help
manage performance.

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BALANCED SCORECARD HISTORY

Measurement Enterprise-wide
Alignment and
and Reporting Strategic
Communication
Management

1992 1996 2000

Articles in Harvard Business Review: Acceptance and Acclaim:

 “The Balanced Scorecard —  “The Balanced
Measures that Drive Performance” Scorecard” is translated
January - February 1992 into 18 languages
 “Putting the Balanced Scorecard to  Selected by Harvard
Work” September - October 1993 Business Review as
one of the “most
 “Using the Balanced Scorecard as important management
a Strategic Management System” practices of the past 75
January - February 1996 years.“
1996 2000

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BALANCED SCORECARD

At the highest level, the Balanced Scorecard is a

framework that helps organizations put strategy at the
center of the organization by Translating strategy into
operational objectives that drive both behavior and
performance.

The Balanced Scorecard is a tool that translates an

organization's mission and strategy into a comprehensive
set of performance measures that provides the framework
for a strategic measurement and management system.

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BSC-CREATES BALANCE

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ORGANIZATIONS OFTEN HAVE A GAP BETWEEN STRATEGY AND ACTION

Strategy Is a Step In a Continuum

MISSION
Why we exist
VALUES
What’s important to us
VISION
What we want to be
STRATEGY
Our game plan

STRATEGIC OUTCOMES

Satisfied Delighted Efficient and Effective Motivated & Prepared

SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE
THE BALANCED SCORECARD IS A BRIDGE TO CLOSE THAT GAP

Strategy Is a Step In a Continuum

MISSION
Why we exist
VALUES
What’s important to us
VISION
What we want to be
STRATEGY
Our game plan
BALANCED SCORECARD
Implementation & Focus
STRATEGIC INITIATIVES
What we need to do
PERSONAL OBJECTIVES
What I need to do

STRATEGIC OUTCOMES

Satisfied Delighted Efficient and Effective Motivated & Prepared

SHAREHOLDERS CUSTOMERS PROCESSES WORKFORCE
INTRODUCTION

When you can measure what you are speaking

about, and express it in numbers, you know
something about it; but when you cannot measure
it, when you cannot express it in numbers, your
knowledge is of a meager and unsatisfactory kind.

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MEASUREMENT SYSTEM

Translates mission, vision and strategy through objectives

and measures

Provides a framework to describe the key elements in the

achievement of the strategy

Measures four perspectives

- Customer Relations
- Financial
- Internal Service Process
- Learning, Innovation and Growth

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MODEL BALANCED SCORECARD

Each Balanced Scorecard should be customized to match organizational

structure, strategy, and situation.

Still, all Balanced Scorecards should contain these components:

Perspectives – Groupings of organization's high-level focus areas (should take

all key "stakeholders" into account).

Objectives – Critical top-level goals derived from current strategic plan (phrased
in short, verb-noun statements, e.g. "improve customer satisfaction.")

Measures – The best indication(s) that co is on track to achieve each objective

(should have no more than 1-3 per objective).

Initiatives – Time-specific projects (e.g. with defined start- and end-dates) that
are separate from, but aligned to, strategic objectives and measures.

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FINANCIAL PERSPECTIVE

1. What financial steps are necessary to ensure the execution of our

strategy/goals?
2. Are the program’s/ department’s goals, implementation, and
execution contributing to the bottom line?
3. Are we meeting operational and financial targets?
4. Dimensions of Quality: Efficiency

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INTERNAL SERVICE PROCESS PERSPECTIVE

1. What critical processes must we excel at to satisfy our

customers/stakeholders?
2. What must be done internally to meet patient/customer
expectations?
3. Dimension of Quality:
Effectiveness
Appropriateness
Safety

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CUSTOMER PERSPECTIVE

1. Who are our target customers?

2. How do our patients/customers see us?
3. How do patients/customers rate our performance?
4. Dimension of Quality:
Accessibility
Acceptability
Continuity

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LEARNING INNOVATION AND GROWTH PERSPECTIVE

1. How can we continue to improve?

2. What capabilities and tools do our employees need to execute our
strategy/goals?
3. Dimension of Quality:
Competence
Participation

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EXAMPLES OF MEASUREMENTS BY PERSPECTIVE

Stakeholder / Customer Internal Processes

• Current customer satisfaction level • Number of unscheduled maintenance calls
• Improvement in customer satisfaction • Production time lost because of maintenance
• Customer retention rate problems
• Frequency of customer contact by • Percentage of equipment maintained on
customer service schedule
• Average time to resolve a customer • Average number of monthly unscheduled
inquiry outages
• Number of customer complaints • Mean time between failures

Learning and Growth Investments

• Percentage employee absenteeism • % of facility assets fully funded for
• Hours of absenteeism upgrading
• Job posting response rate • % of IT infrastructure investments
• approved
Personnel turnover rate
• # of new hire positions authorized for
• Ratio of acceptances to offers
filling
• Time to fill vacancy
• % of required contracts awarded and in
place

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ELECTRIC UTILITY - Example

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HOW SOUTHWEST AIRLINES DEVELOPED ITS BALANCED SCORECARD ANALYSIS

Strategic Theme: ‘operating efficiency’

The four perspectives

Financial: What will drive operating efficiency?
Answer: More customers on fewer planes.
Customer: How will we get more customers on fewer planes?
Answer: Attract targeted segments of customers who value price and on-time arrivals.
Internal: What must our internal focus be?
Answer: Fast aircraft turnaround time.
Learning: How will our people accomplish fast turnaround?
Answer: Educate and compensate the ground crew regarding how they contribute to the
firm’s success.

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CREDIT CARD COMPANY EXAMPLE

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HOW WOULD I DO THAT? – BALANCED SCORECARD AT US NAVAL UNDERSEA WARFARE CENTER

NUWC Vision: Be our nation’s provider of choice

for undersea superiority – satisfying today’s needs
and meeting tomorrow’s challenges

NUWC Mission: We provide the technical

foundation which enables the conceptualization,
research, development, fielding, modernization, and
maintenance of systems that ensure our navy’s
undersea superiority. Financial: To succeed, how must we
look to our constituents in terms of
External: To achieve our vision and balanced budgets, revenue sources,
mission, how must we look to our and value?
customers on the dimensions of
purpose, service, and quality?

Internal: To satisfy our customers, at

what business processes must we excel
in order to decrease lag time, raise
productivity, and lower costs?

Employee learning and growth: To

accomplish our vision and mission and
support internal processes, what kind
of staff and information systems do we
need to foster innovation, continuous
learning, and value in intellectual
assets?

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THANK YOU

RAJESH VERMA

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THANK YOU

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