BSC - Introduction, Architecture, Strategy Formulation Guide & Templates

1

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)

2

UOTE… Q“

”Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.

Sun Tzu The Art of War

3

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

4

Content

1.  Why BSC? 3.  Closer Look at Internal Process Clusters

2.  Overview of BSC Architecture & Methodology

4.  Customizing BSC to Strategy

5

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

6

…But issues typically arise at critical junctures Mission

Why we exist








Typical Issues with Vision of most Organizations… §  Too hazy to provide any real direction or to motivate

action or generate enthusiasm

§  While usually able to recite the vision, Managers often do not see how to put vision into practice to direct/ guide strategy

§  Developed haphazardly, without adequate consideration of Organization’s

§  Internal & external influences/ interests §  Hard & Soft dimensions

§  Mistaken as having to be static, like Values and Mission, rather than dynamic and updated/ refreshed, when appropriate

7


Why we exist








Typical Issues with Strategy of most Organizations… §  Little more than a summary statement of the myriad

initiatives, projects and activities going on in the organization

§  Does not answer the following fundamental questions:

§  What differentiates us or makes us special/ unique?

§  What is our differentiated Value Proposition to our customers (internal & external) that we can draw and hold them to us?

§  Does not consider all key components of strategy and interrelationships across the organization

§  Does not consider how the organization’s Business Model/ Internal Processes and Organizational Capital would be (re)configured to deliver the Value Proposition

§  Does not fully consider both the “Hard” & “Soft” determinants of strategy delivery/ change management

8


Why we exist








Typical Issues with Strategy Translation, Focus & Measurement of most Organizations… §  Gap exists between strategy formulation and

strategy execution/ on-going management

§  Translating strategy top down into demands on elements of Organization’s Business Model/ Internal Processes is non-uniform and frequently, incomplete

§  No overall one-view of progress of various components of strategy across entire Business Model (cross-functional)

§  No uniform and consistent way to describe the strategy, so that objectives and measures can be established and managed

§  No framework to measure progress and learn about interrelationships/ cause and effect between various components of strategy and how each impact performance and guide resource allocation

§  Focus on strategy is typically low. Strategy often becomes a bi-annual event at Business Planning Meetings, rather than an-going process

9


Why we exist






Typical Issues with Targets/ Objectives & Initiatives of most Organizations… §  No clear linkage, bottom up, between Activities and

Projects with overall strategy

§  Measures only remain at compound Business/ Functional Unit level, rather than at individual key initiatives/ project level; Also, measures are typically lag measures, rather than leading indicators of progress

§  Unit Leaders face difficulty in objectively determining on-going progress of respective initiatives, against set targets/ objectives, communicated upfront

§  Lesser/ no time to take corrective action and/or re-allocate resource

§  Lower levels of clarity and accountability at individual initiatives/ project and/ or personal level

§  No framework to conduct a business “audit” of direction, scope/ coverage, alignment and effectiveness and phasing of existing initiatives/ project/ activities; And guide resource allocation


Strategy Focus & Measurement Strategy Scorecard

10

BSC can address issues, if well embraced and executed

BALANCED SCORECARD

Make Strategy a Continual Process

§  Management Meetings §  Feedback system §  Learning Process §  Linked to Budgeting Process

Translate the Vision & Strategy to Operational Terms §  Strategy Maps §  Scorecards §  Demands on Business Model/

Internal Processes §  Financial & Non-Financial

Objectives & Measures §  Framework to pull together one-

view of all initiatives and activities

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 §  Hard & Soft determinants of Change

Mobilize Change through Executive

Leadership §  Executive Sponsorship,

Ownership & Engagement §  Change Mobilization §  Change Governance §  Sustaining Change

Align the Organization to the Strategy

§  Cross-Functional Unit linkages/ coordination

§  Strategy Education Communication & Awareness

§  Initiative Prioritization

11

Content


2.  Overview of BSC Architecture & Methodology


12

BSC Perspectives

#2 - Customer (External) §  Defines the Value Proposition for target

existing and potential customers segments §  “How can we become a “Magnet” company?”

#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?”

#1 - Financial §  Defines the tangible outcome of strategy in

traditional Financial terms §  “How does success look like?”

#3 - Channel Partners (Int. Customers) §  Defines the Value Proposition for existing

and potential channel partners/ agents §  “How can we become a “Magnet” company?”

13

#1 Financial Perspective

#1 - Financial §  Defines the tangible outcome of strategy in

traditional Financial terms §  “How does success look like?”

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)

Financial Measures Two distinct categories of Measures §  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)

14

#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

Customer Measures Two distinct categories of Measures §  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

#2 - Customer (External) §  Defines the Value Proposition for target existing

and potential customers segments §  “How can we become a “Magnet” company?”

15

#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

Customer Measures Two distinct categories of Measures §  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



16

#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

leveraging relationship with customers §  Innovation processes cluster - Developing new

products, services, processes and relationships

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

#4 - Business Model/ Int. Processes §  Defines the Vehicle for delivering the Value

Proposition §  “How can deliver on our promise?”

17

#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,

Alignment and Teamwork

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

#5 - Organization Learning & Growth §  Defines the organization’s intangible assets §  “How can we align assets to support Business

Model and Mobilize and sustain change?”

18

BSC comprise two main related elements – Strategy Map and Scorecard

Strategy Map §  Visual representation of the cause-and-effect

relationships that connects desired Financial, Customer and Channel Partner outcomes with the Business Model drivers that will transform intangible assets into these outcomes

§  Functions as a “checklist” for strategy’s granular components and interrelationships – Missing components usually indicate incomplete or flawed strategy

§  Provides an uniform and consistent way to describe strategy, so that objectives across all perspectives and measures can be established and managed – through the Scorecard

Scorecard §  Translates objectives in strategy map into

measures of success and targets, across respective financial/ non financial and internal/ external perspectives.

§  Organizes in a structured way, “bundles” of aligned strategic initiatives – action plans and scarce resources e.g. people, funding and capacity – required to meet targets for respective measures, and achieve objectives

§  Functions as a “checklist” and resource deployment decision tool for strategic initiatives – emphasis/ coverage of action plans and targeted allocation of resources.

§  Provides a cohesive, integrated and systematic way to manage effective implementation of strategy

19

BSC Strategy Map depicts chain of cause-and-effect relationships

#5 - Organization Learning & Growth §  Defines the organization’s intangible

assets §  “How can we align assets to support

Business Model and Mobilize and sustain change?”

#1 - Financial §  Defines the tangible outcome of

strategy in traditional Financial terms §  “How does success look like?”



Align and enhance our Organizational Assets…

Guided by and to achieve our Vision…

…What is the desired financial goals we have to achieve…

… To build strategic capabilities to effectively execute the processes …

… And, together with Channel Partners, to our Customers…

… To achieve our financial success, and our Vision

…What is the unique set of benefits we will offer to customers for their patronage...

…And our channel partners for their partnership...

#2 - Customer (External) §  Defines the Value Proposition for target

existing and potential customers segments §  “How can we become a “Magnet” company?”

Top-down Thinking & Logic

Bottom-Up Test & Linkage

#4 - Business Model/ Int. Processes

§  Defines the Vehicle for delivering the Value Proposition

§  “How can deliver on our promise?”

…What do we have to do to ensure consistent delivery of value propositions…

… Needed to deliver Value Proposition to Channel Partner,…

…And what assets do we have to develop

VISION

20

Financial perspective provides definition of success or value in tangible financial terms

Sustain growth in Shareholder Value

Productivity Strategy Revenue Growth Strategy

§ Lower direct and indirect expenses

§ Reduce working and fixed capital needed to support business

§  Improve investment yield

§ Tap into new sources of revenue (new products, markets, segments)

§ Tap into new channels

§ Deepen relationship with existing customers

Financial Perspective

§ NPAT § Expenses

§ ROE/ ROI §  Investment returns

§ NBEV/ Premiums from new products, markets & segment

§ NBEV/ Premiums § NBEV/ Prems. per Customer

Typical Objectives

Expand Revenue Opportunities

Improve Cost Structure

Enhance Asset Yield

Enhance Customer Value

21

Customer perspective identifies value proposition to be a “magnet” company to External Customers Financial Perspective





Enhance Asset Yield


Customer (External) Perspective

§ Customer profitability § Segment profitability

§ Market Share § Segment Share

§ Customer Acquisition

§ Customer Retention

§  Identifies the customer and market segments in which organization will serve and compete

§  Identifies two distinct types of measures: §  Measures of value propositions organization

will deliver to target customers §  Measures of performance in the target

segments

§  Unique configuration of seven pillars of Customer Value Proposition differentiates organization:

§  What company expects to do for its customers better or differently than its competitors

§  What draws customers to our company

§  Customers perceive where company stands, in relation to each of seven pillars, and decides on patronage

CUSTOMER VALUE PROPOSITION

Product/ Service Attributes Relationship Image

Price Quality/ Returns Availability Selection Service Reputation Functionality/

Features §  Product Price/

Pricing §  Brand Strength & §  Financial Strength

& Ratings

§  Distribution Channels/ Reach

§  Range of Product Lines

§  Bonus Levels §  Yields/

Investment Returns

§  Quality & Coverage of Support/ Service

§  Product Features/ Quality

22

Channel partner perspective identifies value proposition to be a “magnet” company to Channel Partners Financial Perspective





Enhance Asset Yield




Channel Partner (Agency) Perspective

Customer Value Proposition

§  Agent Business Volume/ Mix §  Agent Productivity

§  Agents Recruited §  Agent Attrition

§  No. of Agents on Management Path

§  Identifies the channel partners which organization can partner and work with

§  Identifies two distinct types of measures: §  Measures of value propositions

organization will deliver to target channel partners/ agents

§  Measures of performance in the target channels

§  Unique configuration of six pillars of Channel Value Proposition differentiates organization:

§  What company expects to do for its channel partner better or differently than its competitors

§  What draws existing partners/ agents to stay with us and new partners/ agents to join us.

§  Channel partners/ agents perceive where company stands, in relation to each of six pillars, and decides on partnership


Features

CHANNEL VALUE PROPOSITION

Sales Production Support Growth & Development Support

Product Range Sales Support Admin Support Brand Support Career & Comp.

Agency Mgmt. Support

23

Internal Processes/ Business perspective defines “vehicle” to deliver on Value Propositions… Financial Perspective





Enhance Asset Yield




Channel Partner Perspective



Features

Channel Value Proposition Sales Production Support Growth & Development Support



§  Identifies Four Process clusters that make up the organization

§  Business Model enables organization to deliver on elements of value propositions.

§  Changes to value propositions requires corresponding changes to business model

Customer Mgmt. Processes

Innovation Processes Operations Mgmt. Processes

Regulatory & Social Processes

Process which expand and deepen relationships with

targeted customers

Processes which develop new products, processes and services, to enable company to penetrate new markets

and customer segments

Basic, day to day processes by which companies produce their existing products and deliver

them to customers

Processes which help organizations continually earn the right to operate in communities and

countries in which they operate

Internal Process Perspective

24

… And groups Organization’s myriad existing and new processes into four Clusters Financial Perspective





Enhance Asset Yield







Features








Process which expand and deepen relationships with

targeted customers

Processes which develop new products, processes and services, to enable company to penetrate new markets

and customer segments

Basic, day to day processes by which companies produce their existing products and deliver

them to customers

Processes which help organizations continually earn the right to operate in communities and

countries in which they operate

§  Customer Selection §  Customer Acquisition §  Customer Retention §  Customers Growth

§  Opportunity Identification §  R&D Portfolio §  Design/ Develop §  Launch

§  Supply §  Production §  Distribution §  Risk Management

§  Environment §  Safety and Health §  Employment §  Community

25

Learning & Growth perspective defines and aligns organization’s intangible assets, completing Strategy Map Financial Perspective





Enhance Asset Yield







Features





Learning & Growth Perspective








Organization’s Intangible Assets Human Capital Information Capital Organizational Capital

§  Skills/ Talent §  Knowledge §  Capabilities

§  Systems §  Databases §  Networks

§  Culture §  Leadership §  Alignment/ Teamwork

26

Closer look at Human Capital Readiness – Strategic Job Families, Headcount, Knowledge, Skills & Capabilities Financial Perspective





Enhance Asset Yield







Features





Learning & Growth Perspective (illustrative for Human Capital Readiness – Identify Strategic Job Families)

Underwriters (No.)

Operations Executives

(No.) Underwriters

(No.) Marketing Executives

(No.) BD Executives

(No.) ??? ??? BD

Executives (No.)

???

Competency Profile §  Knowledge §  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%

List the Knowledge & Skills Required by various Strategic Job Families identified above

27

Strategy comprise complementary strategic themes that cut across respective perspectives Financial Perspective





Enhance Asset Yield







Features













§ Organization’s Intangible Assets Human Capital Information Capital Organizational Capital

§  Skills/ Talent §  Knowledge §  Capabilities

§  Systems §  Databases §  Networks

§  Culture §  Leadership §  Alignment/ Teamwork

Deliver profit

Strengthen franchise for sustainable growth

Expand Revenue O

pportunities

28

Strategy Map Construction – Step1: Vision §  STEP 1: Clarify, in detail, respective internal,

external, hard and soft components of overall strategic vision

Theme: EXPAND REVENUE OPPORTUNITIES

Fina

ncia

l P

ersp

ectiv

e C

hann

el P

artn

er

Per

spec

tive

Bus

ines

s M

odel

P

ersp

ectiv

e L&

G

Per

spec

tive

Cus

tom

er

Per

spec

tive

Visi

on

VISION

29

Strategy Map Construction – Step 2: Financial §  STEP 1: Clarify, in detail, respective internal,

external, hard and soft components of overall strategic vision

§  STEP 2: Identify a strategic theme for the financial perspective, linked to Strategic Vision, that will drive the target financial result

§  Revenue Growth Strategy §  Theme 1: Expand revenue opportunities §  Theme 2: Enhance customer value

§  Productivity improvement strategy §  Theme 3: Improve cost structure §  Theme 4: Enhance asset yield


Fina

ncia

l P

ersp

ectiv

e C

hann

el P

artn

er

Per

spec

tive

Bus

ines

s M

odel

P

ersp

ectiv

e L&

G

Per

spec

tive

Cus

tom

er

Per

spec

tive

Visi

on

VISION

Tap into new customer segment

Grow new sources of revenue Strategic objective

identified to grow new sources of

revenue

30

Strategy Map Construction – Step 3: Customer §  STEP 1: Clarify, in detail respective internal,

external, hard and soft components of, overall strategic vision


§  STEP 3: Identify the target market and customer segments in which organization will serve and compete and unique customer value proposition organization will offer

§  Components of Customer Value Proposition: Price, Features, Quality. Availability, Service and Reputation

§  Basic Par Requirements vs. Differentiators


Fina

ncia

l P

ersp

ectiv

e C

hann

el P

artn

er

Per

spec

tive

Bus

ines

s M

odel

P

ersp

ectiv

e L&

G

Per

spec

tive

Cus

tom

er

Per

spec

tive

Visi

on

VISION


Grow new sources of revenue

Increase new customer acquisition

Offer highest service level

Offer innovative features

Strategic objective identified for Target Market & Customer

Segment

Strategic objectives identified for


31

Strategy Map Construction – Step 4: Channel Partner §  STEP 1: Clarify, in detail respective internal,




§  STEP 4: Identify the channel partner organization can partner and work with and unique channel partner value proposition organization will offer


Fina

ncia

l P

ersp

ectiv

e C

hann

el P

artn

er

Per

spec

tive

Bus

ines

s M

odel

P

ersp

ectiv

e L&

G

Per

spec

tive

Cus

tom

er

Per

spec

tive

Visi

on

VISION




Enhance channel capability

Offer strongest admin support

Offer highest product quality



Strategic objective identified for Target

Channel Partner

Strategic objectives identified for

Channel Partner Value Proposition

32

Strategy Map Construction – Step 5: Business Model §  STEP 1: Clarify, in detail respective internal,





§  STEP 5: Choose, align and resource the organization’s business model or internal processes to deliver on the channel partner and customer value proposition


Fina

ncia

l P

ersp

ectiv

e C

hann

el P

artn

er

Per

spec

tive

Bus

ines

s M

odel

P

ersp

ectiv

e L&

G

Per

spec

tive

Cus

tom

er

Per

spec

tive

Visi

on

VISION









Enhance Operational

Process

Enhance Product Innovation

Process Strategic objectives identified for

Business Model

33

Strategy Map Construction – Step 6: Learning & Growth Theme: EXPAND REVENUE OPPORTUNITIES

Fina

ncia

l P

ersp

ectiv

e C

hann

el P

artn

er

Per

spec

tive

Bus

ines

s M

odel

P

ersp

ectiv

e L&

G

Per

spec

tive

Cus

tom

er

Per

spec

tive

§  STEP 1: Clarify, in detail respective internal, external, hard and soft components of, overall strategic vision




§  STEP 5: Choose, align and resource the organization’s business model or internal processes to deliver on the channel partner and customer value proposition

§  STEP 6: Identify capabilities and organizational climate required to enable the business model or strategic internal processes identified

Visi

on

VISION









Enhance Operational

Process


Process

Strengthen Operational IT

capabilities

Strengthen Product R&D capabilities

Strategic objectives identified for Organization’s Assets to

enable Business Model

34

Scorecard Construction – Step 1: Establish Objectives, Measures, Targets & Measure Owners

Fina

ncia

l P

ersp

ectiv

e C

hann

el P

artn

er

Per

spec

tive

Bus

ines

s M

odel

P

ersp

ectiv

e L&

G

Per

spec

tive

Cus

tom

er

Per

spec

tive









Enhance Operational

Process


Process


capabilities


Strategy Map Scorecard

Theme: TRANSFORM PRODUCT MIX Objectives Objective Measure Yr 1 Targets Owner

§  Grow new sources of revenue

§  Tap into new customer segments

§  Total revenue from new sources §  Market share in targeted new

customer segment

§  $50m §  15%

§  ABC §  ABC

§  Increase new customer acquisition

§  Offer innovative features

§  Offer highest service level

§  No. of new customers from target segment

§  Brand awareness (survey) §  No. of new-to-market product

features §  Customer satisfaction (survey)

§  25,000 §  85% §  10 new

features §  95%

§  DEF §  DEF §  GHJ §  KLM

§  Enhance channel capability

§  Offer highest product quality

§  Offer strongest admin support

§  Channel productivity §  Channel professionalism (survey) §  Product benchmarking §  Total Cycle/ Process Time

§  75% §  85% §  Top quartile §  2 days

turnaround

§  NOP §  NOP §  QRS §  QRS

§  Enhance product innovation process

§  Enhance operational process

§  No. of new projects or product concepts presented for development

§  No. of processes with substantial improvement

§  15 projects/ concepts

§  5 processes

§  TUV §  WXY

§  Strengthen product R&D capabilities

§  Strengthen operational IT capabilities

§  R&D Process Strategic Job Family Human Capital Readiness

§  Operational Process Strategic Job family IT Readiness

§  80% §  75%

§  UVW §  XYZ

35

Scorecard Construction – Step 2: Identify/ Organize Strategic Internal Business Process & Organizational L&G Initiatives

Fina

ncia

l P

ersp

ectiv

e C

hann

el P

artn

er

Per

spec

tive

Bus

ines

s M

odel

P

ersp

ectiv

e L&

G

Per

spec

tive

Cus

tom

er

Per

spec

tive









Enhance Operational

Process


Process


capabilities



Theme: TRANSFORM PRODUCT MIX Objectives Measure Targets Owner Initiatives



§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

Outcome of Initiatives & Activities undertaken at Business Model/ Internal Business Process and

Organizational Asset level




§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  ___ §  ___ §  ___




§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  ___ §  ___ §  ___



§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  Pro-active manage and extend Product Portfolio

§  Extend current product platforms into new markets

§  Improve process efficiency and responsiveness



§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  R&D process training §  Operational IT process

management training/ systems §  Operational IT process

management staff alignment

36

Scorecard Construction – Step 3: Determine/ Allocate Resource Requirements

Fina

ncia

l P

ersp

ectiv

e C

hann

el P

artn

er

Per

spec

tive

Bus

ines

s M

odel

P

ersp

ectiv

e L&

G

Per

spec

tive

Cus

tom

er

Per

spec

tive









Enhance Operational

Process


Process


capabilities



Theme: TRANSFORM PRODUCT MIX Objectives Measure Targets Owner Initiatives Resource



§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

N.A. N.A.




§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  ___ §  ___ §  ___




§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  ___ §  ___ §  ___



§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  5 Headcount/ 50 Man-days

§  $100k §  8 Headcount/

80 Man-days §  $200k



§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  ___ §  ___ §  ___

§  Total of $300k for training

§  $500k for IT system upgrade

§  $20k for Workshop

37

Bringing it all together… BSC Strategy Map and Scorecard Fi

nanc

ial

Per

spec

tive

Cha

nnel

Par

tner

P

ersp

ectiv

e B

usin

ess

Mod

el

Per

spec

tive

L&G

P

ersp

ectiv

e C

usto

mer

P

ersp

ectiv

e









Enhance Operational

Process


Process


capabilities



Theme: TRANSFORM PRODUCT MIX

§  Measures §  Target §  Owner §  Initiatives §  Resources

STEP 1: Clarify Vision §  Clarify, in detail components of overall strategic vision

STEP 2: Define the Shareholder Value Gap §  Define the financial objectives and measures §  Define the targets and value gap §  Allocate the value gap to growth and productivity goal STEP 3: Reconcile the Customer Value Proposition §  Define the target customer segments §  Clarify the customer value proposition §  Select the measures §  Reconcile customer objectives with financial growth goals

STEP 4: Reconcile Channel Partner Value Proposition §  Define the target channel partners §  Clarify the channel partner value proposition §  Select the measures §  Reconcile channel partner objectives with customer goals/

objectives

STEP 5: Identify Strategic Themes §  Identify the critical few processes that have the greatest

impact to deliver value propositions §  Establish measures and targets

STEP 6: Create Strategic Asset Readiness §  Identify human, information and organizational capital

required to support critical processes §  Assess readiness of assets §  Establish measures and targets STEP 7: Identify & fund the initiatives §  Define the specific initiatives required to support the

processes and to develop capital §  Clarify, secure and allocate funding

38

Content


2.  Overview of BSC Architecture


39

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

40

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

41

Customer Management Processes Financial Perspective






Business Model (Int. Process) Perspective

Learning &Growth Perspective

Human Capital

Information Capital

Organizational Capital - Culture, Leadership, Alignment, Teamwork

Sales Production Support Growth & Development Support Product Quality/

Range Sales Support Admin Support Brand Support Career & Comp. Agency Mgmt. Support




Increase Asset Utilization



Features

Channel Value Proposition








42

Closer look at Customer Management Processes Financial Perspective














Customer Selection Customer Acquisition Customer Retention Customer Growth

§  Understand segments §  Screen unprofitable customers §  Target high value customers §  Manage the brand

§  Communicate Value Proposition §  Customize mass marketing §  Acquire/ convert leads

§  Premium Customer Svc §  Sole-Source partnerships §  Service excellence §  Loyal customers

§  Cross-selling §  Solution selling §  Partnering/ Integrated Mgmt. §  Customer education

Hum

an C

apital

§  Market research §  Profitability analysis §  Market communication

§  Telemarketing §  Product line knowledge §  Customer communications §  Partner management

§  Call centre protocols §  Product line knowledge §  Problem resolution §  Customer feedback

§  Consultative sales skills §  Customer/ Industry knowledge §  Product line knowledge

Information

Capital

§  Customer database §  Customer analytics §  E-polling/ sampling §  Customer profitability analysis

§  Database marketing §  Lead management §  Sales force automation §  Web site design

§  Customer interaction centre §  Problem tracking system §  Order Mgmt. System

§  Customer information feedback §  Portfolio planning models §  Integrated order management

Org

Capital

§  Customer focused culture §  Personal goal alignment §  Best practice sharing







Features

43

Closer look at Customer Management Processes Perspective Objective Measure

Financial

§  Create new sources of revenue §  Increase revenue per customer §  Increase customer profitability §  Improve sales productivity

§  Revenue from new customers §  Share of wallet §  Profits per customer (ABC) §  Cost of sales by channel

Customer §  Increase customer satisfaction with

value proposition §  Increase customer loyalty

§  % customers highly satisfied (survey) §  Customer retention §  Depth of relationship §  % business from customer referrals

Internal Process

Selection

§  Under customer segments §  Screen unprofitable customers §  Target high value customers §  Manage the brand

§  Contribution by segment/ Market share in target segment §  Percentage of unprofitable customers §  No. of strategic accounts §  Customer survey on Brand awareness/ preference

Acquisition

§  Communicate value proposition §  Customer mass marketing §  Acquire new customers

§  Brand awareness (survey) §  Campaign response rate §  No. of customer using promotions to sample product §  Cost per customer acquired/ Life time value (est.) of customer acquired §  No. of leads/ conversion rate

Retention

§  Provide premier customer service §  Create sole source partnerships §  Provide service excellence §  Create highly loyal customers

§  No. of premier customers/ Time for customer to resolve concerns §  No. of referrals to new customers §  No. of new customer acquired from referrals by existing customers §  % revenue from sole source §  Service levels (by channel)

Growth

§  Cross selling §  Solution selling §  Partnering/ integrated management §  Customer education

§  No. of products per customer §  Cross market revenues §  No. jointly developed service agreements §  No./ $ from gain sharing agreements §  Hours with customers

44

Closer look at Customer Management Processes Perspective Objective Measure

Learning & G

rowth

Human Capital

§  Develop strategic competencies §  Attract and retain top talent

§  Human capital readiness §  Key employee turnover

Information Capital

§  Develop strategic CRM portfolio §  Increase knowledge sharing

§  Application portfolio readiness §  No. of Customer Knowledge Mgmt. System employees

Organization Capital

§  Create customer focused culture §  Create personal goal alignment

§  Customer survey §  Employee objectives linked to BSC

45

Innovation Management Processes Financial Perspective















Human Capital

Information Capital




Features








46

Closer look at Innovation Management Processes Financial Perspective











Identify Opportunity Manage the Portfolio Design & Develop Launch §  Anticipate customer needs §  Discover new opportunities

§  Choose and manage mix of projects

§  Extend products to new applications

§  Collaborate



High Performance Products First to Market

Revenue from New Products

Manage Total Life Cycle Production Costs

Gross Margins: New Products

Extend into New Markets

Human Capital Information Capital Organization Culture

Multi-disciplinary Skills Technology to explore, integrate and Speed to Market

Culture of Creativity & Innovation

47

Closer look at Innovation Management Processes Perspective Objective Measure

Financial

§  Revenue growth from existing customers §  Revenue growth from new customers §  Manage life cycle costs

§  Revenues and margins from existing customer from product released in last 12 months

§  Percent growth in sales to existing customers §  Revenues and margins from new customers with new products §  Maintenance cost as percent of total manufacturing costs

Customer

§  Offer enhanced product/ service functionality to customers

§  First to market with new product service §  Extend products/ services to new segments

§  Specific performance attribute of new product/ service §  Lead time relative to competitors §  No. of new products/ service first to market §  Percent of products launches on time §  No. of new application from platform products §  Revenue from new markets and segments

Internal Process

Identify new opportunities

§  Anticipate future customer needs §  Discover and develop new, more effective

products and services

§  Time spent with key customers learning about their future opportunities and needs

§  Number/ percent of new projects launched based on client input §  Number of nee projects or concepts presented for development §  Number of new value-added services identified

Manage the R&D

Portfolio

§  Actively mange the product portfolio for superior innovation and customer positioning, performance and profitability

§  Extend current product platforms into new and existing markets

§  Extend product portfolio through collaboration

§  Actual vs. desired mix of projects (advanced development, platform, derivative and outsourced)

§  Actual vs. desired spending on projects of each type §  Technology ranking (independent peer review of current technology

capabilities) §  Net present value of products in project pipeline §  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

48

Closer look at Innovation Management Processes Perspective Objective Measure

Internal Process

Design & Develop New Products & Services

§  Manage the project portfolio §  Reduce development cycle time §  Manage development cycle cost

§  No. of patents; No. of patent citations §  Project yield (Percent of projects advancing from stage to stage) §  No. of project entering each phase of product development process §  No. of projects delivered on time §  Average time spent by projects at the development, test, and launch

stages of the development process §  Total time (Concept to market) §  Actual vs. budgeted spending on projects at each development stage

Bring new Products to

Market

§  Rapid launch of new products §  Effective production of new products §  Effective marketing, distribution, and sales

of new products

§  Time from start of pilot production until full volume achieved §  No. of re-design cycles §  No. of new products launched or commercialized §  Manufacturing cost of new products (actual vs. targeted) §  Manufacturing process yield for new products (successful vs. killed

projects) §  Consumer satisfaction or complaints about new products launched §  Six month revenues from new products (actual vs. budgeted)

Learning & G

rowth

Human Capital

§  Achieve deep functional expertise §  Develop effective interdisciplinary and

cross-functional teams

§  Strategic skill coverage in key R&D positions §  Percent of R&D employees who work effectively in inter-disciplinary

and multi-functional project development teams §  Percent of R&D employees capable of effective project management

leadership

Information Capital

§  Use technology for rapid product launch §  Capture leading knowledge from global

industry

§  No. of ideas from external sources §  Peer review of current scientific and technological capabilities


§  Foster a culture of innovation §  No. of suggestions for new products and capabilities §  Employee culture survey for innovation and change

49

Operations Management Processes Financial Perspective















Human Capital

Information Capital




Features








50

Closer look at Operations Management Processes Financial Perspective Productivity Strategy Revenue Growth Strategy





Sales Production Support Growth & Development Support Product Range Sales Support Admin Support Brand Support Career & Comp. Agency Mgmt.

Support

New Revenue Sources Industry Cost Leader Increase Share

of Customer



Develop Supplier Relations Produce Product & Services Distribute to Customers Manage Risk

§  Lower Cost Of Ownership §  Just In Time Delivery §  High Quality Supply §  New Ideas From Suppliers §  Supplier Partnerships §  Outsource Mature Non-

strategic Services

§  Lower Cost Of Production §  Continuous Improvement §  Process Cycle Time §  Fixed Asset Utilization §  Working Capital Efficiency

§  Lower Cost To Serve §  Responsive Delivery Time §  Enhance Quality

§  Financial Risk §  Operating Risk §  Technological Risk


Product/ Service Attributes

Maximize Use of Existing Assets

Competitive Prices

Low Total Cost

Perfect Quality

Speedy, Timely Purchase

Excellent Selection


Skills in Quality Management/ Process Improvement

Technology that Facilitates Process Improvement

Culture of Continuous Improvement

51

Closer look at Operations Management Processes Perspective Objective Measure

Financial

§  Become Industry Cost Leader §  Maximize Use of Existing

Assets §  Increase revenue from

customers

§  Cost per unit, benchmarked against competitors §  Percent of annual reductions in cost per unit of output §  Percent of cost budget variance §  General selling, and administrative expenses per unit of output §  Investment efficiency (NPV of new projects to total commitment) §  Revenue from acquiring new customers

Customer

§  Lower customers cost; Increase customers' profit

§  Deliver zero defect products and services to customers

§  Deliver products on time §  Offer excellent selection

§  Price, relative to competitors §  Customers’ cost of ownership §  No. of customer complaints §  No. of incidents of warranty and field service repairs §  Percent on-time delivery §  Customer lead time (from order to delivery) §  Index of product or service offering measuring percent of customer needs

covered

Internal Process

Develop & Sustain Supplier

Relationships

§  Lower Cost Of Ownership §  Achieve Just In Time supplier

capability §  Develop High Quality Supply

capability §  Use New Ideas from Suppliers §  Achieve Supplier Partnerships §  Outsource Mature Non-

strategic Products/ Services

§  Activity based costing of acquiring materials and services §  Cost of purchasing as percentage of total purchase price §  Supplier ratings: Quality, delivery, cost §  Lead time from order to receipt §  On time deliver percentage §  Percent of late orders §  Percent of orders delivered directly to production process by suppliers §  PPM of defects/ incoming orders §  Number of suppliers providing services directly to customers §  No. of outsourced relationship §  Benchmarked performance of outsourcing partnerships

52


Internal Process

Produce Products & Services

§  Lower Cost Of Production §  Continuous Improvement §  Process Cycle Time §  Fixed Asset Utilization §  Working Capital Efficiency

§  Activity based cost of key operating processes §  Marketing, selling, distribution & administration expense as percent of total costs §  No. of processes with substantial improvements §  No. of inefficient or non-value added processes eliminated §  Cycle time (from start of production until product completed) §  Percent of capacity utilization §  Flexibility (range of products/ services that processes can produce and deliver)

Distribute Products & Services to Customers

§  Lower Cost To Serve §  Responsive Delivery Time §  Enhance Quality

§  Activity based costing of storage and delivery to customers §  Percent of customers reached via. Low cost-to-serve channels, e.g switching

customers from manual and telephone transactions to electronic ones §  Lead time, from order to delivery §  Time from completion of product until ready for use by customers §  Percent of items delivered with no defects §  Number and frequency of customer complaints

Risk Management

§  Manage Financial Risk/ Maintain high credit quality

§  Manage Operating Risk §  Manage Technological Risk

§  Bad debt percentage §  Percent of uncollectible receivables §  Exposure of losses from interest rates, foreign exchange etc. §  Order backlog §  Percent of capacity from existing and backlogged orders §  Technology ranking of products and processes compared to competitors

53


Learning & G

rowth

Human Capital

§  Develop skills in quality management and process improvement

§  Percent of employees trained in quality management techniques §  No. or percent of employees qualified in six sigma quality programs §  Percent of employees with knowledge and training in activity based management,

just in time etc.

Information Capital

§  Technology that facilitates process improvement and customer satisfaction

§  Percent of employees who obtain immediate feedback from operations §  Percent of customers who can track order status electronically


§  Culture for continuous improvement

§  Employee survey on culture for continuous improvement and knowledge sharing §  Number of new process improvement ideas generated §  Percent of employee process improvements suggestions adopted §  No. of ideas for quality and process improvement shared across multiple

organizational units §  Performance improvement from employees suggestions and action

54

Content


2.  Overview of BSC Architecture


55

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

56

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

57

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

58

BSC Strategy Map Template for Complete Customer Solutions Strategy Financial Perspective Productivity Strategy Revenue Growth Strategy





Sales Production Support Growth & Development Support Product Range Career & Comp. Agency Mgmt.

Support

Revenue from New Customers

Manage Total Life Cycle Product Costs

Increase Account Share with Customers



Customer Mgmt. Innovation Mgmt. Operations Mgmt. Regulatory & Social

§  Create customized solutions §  Build strong customer

relationships §  Develop knowledge about

customers

§  Identify new opportunities to serve customers

§  Anticipate future customer needs

§  Deliver broad product/ service line

§  Customize product/ service offerings

§  Create network of suppliers for extended product/ service capabilities

§  Gain regulatory approval for new offerings

§  Contribute to community


Sales Support


Product/ Service Attributes Customer Retention

Quality of Solutions Provided to Customers

Customer Lifetime Profitability

No. of Products/ Services Per Customer

Admin Support Brand Support


Customer databases CRM & Data Mining

Capabilities

Transfer of Knowledge

Customer Focused

Diverse Product/ Services Skills

Customer Mgmt. Skills

59

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

60

Closer look at Product Innovation and Leadership Strategy

Companies pursuing Product Innovation and Leadership Strategy:

Learning & Growth Processes §  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

61

BSC Strategy Map Template for Product Innovation and Leadership Strategy Financial Perspective Productivity Strategy Revenue Growth Strategy





Sales Production Support Growth & Development Support Product Range Admin Support Brand Support Career & Comp. Agency Mgmt.

Support

Revenue from New Products

Reduce Cost to Serve

Gross Margins: New Products




§  Educate customers about complex new products/ services

§  Capture customer ideas from new products/ services

§  Disciplined high performance product development

§  Produce development time: from idea to market

§  Flexible robust processes §  Rapid introduction of new

products §  Supply capacity for rapid growth §  In-line experimentation and

improvement

§  Rapid regulatory approvals



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

Sales Support


Deep functional expertise

Technology that facilitates Rapid Product Introduction

Creativity & Innovation

Creative, Versatile Employees/ Cross Functional

Teamwork

62

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

63

Closer look at Low Total Cost Strategy

Companies pursuing Low Total Cost Strategy:

Learning & Growth Processes §  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.

64

BSC Strategy Map Template for Low Total Cost Strategy

Financial Perspective Productivity Strategy Revenue Growth Strategy





Sales Production Support Growth & Development Support Product Range Career & Comp. Agency Mgmt.

Support

Revenue from New Customers

Become Industry Cost Leader

Increase Account Share with Customers




§  Provide convenient order handling processes

§  Provide desired variety of products and services

§  Process innovation §  Manage capital projects

§  Outstanding supplier relationships

§  Efficient timely distribution §  Manage risk §  Produce goods and services;

Cost, Quality and Time

§  Gain regulatory approvals for new low cost channels to market

§  Contribute to community


Sales Support



Speedy Purchase Lowest Cost Supplier Appropriate Selection Consistent

Quality

Admin Support Brand Support


Better, Faster, Cheaper Process Improvements

Facilitate Knowledge Sharing

Replicate Best Practices

Process Improvement Capabilities

Electronic Supplier/ Customer Relationships

65

End of Pack

BSC - Introduction, Architecture, Strategy Formulation Guide & Templates

Documents

Transcript of BSC - Introduction, Architecture, Strategy Formulation Guide & Templates