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Strategic Action PlanStrategic Action PlanProcess and WorkshopProcess and Workshop

CEG Strategic Action Plan Process CEG Strategic Action Plan Process FlowchartFlowchart

OVERVIEWOVERVIEW

NOWNOW

Business Analysis

Pestlied

Strategic SWOT

Paradigm Shift Analysis

Magic Wand List/Whinge List

Management Buy-InInterviews

WHEREWHERE

Mission

Purpose

Core Values

Objectives

Core Business Statement

Sustainable Competitive Advantage

Growth Strategies

Ranking Issues

Scenario Planning

Vision / DestinationStatement

HOWHOW

Strategies

Initiatives – Action Plans

Strategic Accountabilities

Budgets

Strategy Map

Balanced ScorecardKPI’S/Initiatives

Communication Plan

Critical Issues

ACTIONACTION

Leadership

Strategic Mapping

Corrective Action

Middle Mgt / Team Leader

High PerformanceTeams

Emerging Issues

Reporting

PerformanceManagement

People First

Situation ReviewSituation Review Strategic PlanStrategic Plan Business PlanBusiness Plan ImplementationImplementation

Module One – Module One – What is Strategy?What is Strategy?

What is Strategy?What is Strategy?

To achieve superiors profitability and value to customers

Competition is about a relative advantage and is dependent on differentiation

Operational effectiveness is essential but is not a replacement for strategy

DefinationDefination A business plan is a formal statement of a set of business goals, the

reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.

For-profit business plans typically focus on financial goals, such as profit or creation of wealth.

Business plans may be internally or externally focused. Externally focused plans target goals that are important to external stakeholders, particularly financial stakeholders. They typically have detailed information about the organization or team attempting to reach the goals

Internally focused business plans target intermediate goals required to reach the external goals. They may cover the development of a new product, a new service, a new IT system, a restructuring of finance, the refurbishing of a factory or a restructuring of the organization. An internal business plan is often developed in conjunction with a balanced scorecard or a list of critical success factors

Business plans that identify and target internal goals, but provide only general guidance on how they will be met are called strategic plans.

DefinationDefination Strategic planning is an organization's process of defining its

strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. Various business analysis techniques can be used in strategic planning, including SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats ) and PEST analysis (Political, Economic, Social, and Technological analysis) or STEER analysis (Socio-cultural, Technological, Economic, Ecological, and Regulatory factors) and EPISTEL (Environment, Political, Informatic, Social, Technological, Economic and Legal).

Strategic planning is the formal consideration of an organization's future course. All strategic planning deals with at least one of three key questions: "What do we do?" "For whom do we do it?" "How do we excel?“ In business strategic planning, the third

question is better phrased "How can we beat or avoid competition?". Our point of differentiation

What is What is StrategicStrategic Thinking? Thinking?

Anticipation; reading the game Big picture; knowing what to do Conscious and deliberate; leadership

“I skate to where I think the puck will be.”

Wayne Gretsky

Planned versus Emergent StrategyPlanned versus Emergent Strategy

PlannedStrategy

RealisedStrategy

Adopted Strategy

Unrealised Strategy

EmergentStrategy

Developed Continuously as New Issues Arise

Formal Once-a-year

Planning & Budgeting

What happens in practice will always be some blend of what is intended and what emerges along the way - Mintzberg (1994)

Objectives & BenefitsObjectives & BenefitsOfOf

Strategic PlansStrategic Plans

Objective Objective

Improve Shareholder Value

Revenue Growth Strategies

Productivity Strategy

Increase valueto customer

Grow new business in existing and new customers

Improve coststructure

Improve use of assets

Revenue Growth Strategies Revenue Growth Strategies Increase Revenue Better Margins and Product Mix Services

Market Penetration Product Expansion

Existing products / services in existing

markets

New products in existing markets

Market Expansion Diversification

Existing products in new markets

New products in new markets

Existing Markets

New Markets

Existing Products / Services New Products / Services

THE COST OF QUALITY

Sigma Level

Defects per Million Opportunities

Cost of Quality

2308,537 (Non-competitive companies)

Not applicable

3 66,807 25 – 40% of sales

4 6,212 (Industry average) 15 – 25% of sales

5 233 5 – 15% of sales

6 3.4 (World class) <1% of sales

Each sigma shift provides a 10% net income improvement

Source: Six Sigma, M Harry & R Schroeder

Six Sigma – A measure of productivity Six Sigma – A measure of productivity variationvariation

Keys to SuccessKeys to Success

1. People First

2. Strategy

3. Sales (Revenue Growth)

4. Operational Innovation

5. Teams

People FirstPeople First

“Right people on the bus, wrong people off the bus and the right

people in the right seats”

PRINTERSJim Collins “Good to Great” please reference

StrategyStrategy

1. Differentiate

2. Customers, Customers, Customers! Focus

3. Increase Revenue

4. Operational Efficiency

“Obstacles are what you see if you lose sight of the goal”

StrategyStrategy

Teams and TrainingTeams and Training

Teams are the foundation of

High Performance Companies – Try as you might, you cannot get

to high performance without them.

Strategic Planning Workshop

Vision

Business Statement

Objective

Prioritise Issues

1 Page Plan

Business Plan

Critical Issues

StrategiesAction Plans

Now – Where? – How?Now – Where? – How?

60 – 100 Issues

SWOT/PEST

Situational Review

Situational Review Situational Review

Magic Wand List / “Whinge List” Management Interviews PESTLIED STEER Strategic SWOT Strategic Marketing Business Analysis

NOWNOW

The Strategic Plan The Strategic Plan

Vision / Destination Statement Mission Core Values Purpose Core Business Statement Sustainable Competitive Advantage Position the Product Portfolio Growth Strategies Defining Critical Issues Scenario Planning

WHEREWHERE

Business Plan Business Plan

Critical Issues Strategies Initiatives – Action Plans Strategic Accountabilities Budgets Strategy Map Balanced Scorecard KPIs / Initiatives Communication Plan

HOWHOW

ImplementationImplementation

People First Leadership Strategy Mapping Corrective Action Middle Management / Team Leader High Performance Teams Emerging Issues Reporting Performance Management

ACTIONACTION

Module Three – Module Three – Now – SituationalNow – Situational

ReviewReview

Situational Review Situational Review

Magic Wand List / “Whinge List” Management Interviews PESTLIED Strategic SWOT Review current business documentation

Marketing and sales plans Business plans ( last year) Employee & customer surveys Financials/Budgets Research

NOWNOW

Stretch BrainstormStretch Brainstorm (Magic Wand) (Magic Wand)

If you did not have to worry about time or money, what would I change about my

business.My business “issues list”

Management InterviewsManagement Interviews Purpose of interviews: Purpose of interviews: The easiest way to identify the key/critical

issues in a business is to undertake a series of interviews of between 30 minutes – 1 hour duration across the organisation using our diagnostic questionnaire. Within 2 or 3 days you will have identified everything you need to know about the business including culture, the politics, priorities, opportunities, issues, inhibitors etc.

Interview a cross section of individuals at all levels – Senior management, middle/line mangers, supervisory level and some frontline staff

Ensure you interview senior managers of marketing, sales, operations, technology, HR, finance, innovation/product, etc

Ensure confidentiality ( consider using an internal/external consultant) typically undertake a minimum of 8 and maximum of 30 interviews

Use Diagnostic General Questionnaire attached Summarise issues into Issue List Template and complete

Diagnostic Questionnaire Survey Identify issues into their appropriate category – management,

marketing, sales, operations etc. Please note an issue can be in more than one category

Demographic

Economical

SocialPolitical

Legal

Technical

Environmental

International

Demographic

ORGANISATION

PESTLIED PESTLIED Model –Model –What’s happening in the What’s happening in the world around us?world around us?(Source: Annual Reports)(Source: Annual Reports)

STRENGTHS WEAKNESSES

SWOT

OPPORTUNITIES THREATS

Internal

External

Build Greater Capability

Respond Cautiously

Fix or Improvise

Consider Responses

Assess Internal Capabilities

Assess External Environment

Summarise from questionaire

Module Four – Module Four – Where – Strategic PlanWhere – Strategic Plan

The Strategic Plan The Strategic Plan

Vision Mission/Purpose Core Values Core Business Statement Sustainable Competitive Advantage Porters 5 Forces Customer Value Proposition Growth Strategies – Objectives & Goals Defining Critical Issues

WHEREWHERE

DefinitionsDefinitions Vision: Defines the desired or intended future state of a specific

organization or enterprise in terms of its fundamental objective and/or strategic direction. Vision is a long term aim, a view of how the organization would like the world in which it operates to be.

Mission: Defines the fundamental purpose of an organization or an enterprise, basically describing why it exists. A corporate Mission can last for many years, or for the life of the organization. It is not an objective with a timeline, but rather the overall goal that is accomplished over the years as objectives are achieved that are aligned with the corporate mission.

Values: Beliefs that are shared among the stakeholders of an organization. Values drive an organization's culture and priorities.

Values include the stated values and the “real values”. Real values can be described as “what really happens here” . The “real values” unless understood can impact a businesses ability to implement its plan

PlanningTip

Vision, Mission, Values Vision, Mission, Values Walt Disney ExampleWalt Disney Example

Purpose To make people happy

Core Values No cynicism

Nurturing and promulgation of “wholesome” American values

Creativity, dreams and imagination

Fanatical attention to consistency and detail

Preservation and control of the Disney magic

Mission Disney’s overriding objective is to create shareholder value by continuing to be the world’s premiere entertainment company from a creative strategic and financial standpoint.

Culture of one of the World’s Leading Culture of one of the World’s Leading Technology CompaniesTechnology Companies

Quality Team Open Communication

Stretch Goals

Teamwork Empowerment Trust

Frugality No Technology Religion

Drive Change

Customer

The CORE PROCESS: We market, design and construct..

The PRODUCT: quality new homes..

The CUSTOMER: for high net worth individuals.

Business Statement ExampleBusiness Statement Example

Up market project home builder

Sustainable Competitive AdvantageSustainable Competitive Advantage

DEFINITION:

The point of difference or winning edge that will enable you to beat others in the same business.

DefinationDefination Competitive advantage is, in very basic words, a position a firm occupies against its competitors. According to Michael Porter, the three methods for creating a sustainable competitive advantage are

through: 1. Cost leadership - Cost advantage occurs when a firm delivers the same services as its competitors but

at a lower cost; [1]

2. Differentiation - Differentiation advantage occurs when a firm delivers greater services for the same price of its competitors. They are collectively known as positional advantages because they denote the firm's position in its industry as a leader in either superior services or cost; [2]

3. Focus (economics) - A focused approach requires the firm to concentrate on a narrow, exclusive competitive segment (market niche), hoping to achieve a local rather than industry wide competitive advantage. There are cost focus seekers, who aim to obtain a local cost advantage over competition and differentiation focuser, who are looking for a local difference. [3]

Many forms of competitive advantage cannot be sustained indefinitely because the promise of economic rents invites competitors to duplicate the competitive advantage held by any one firm.

A firm possesses a sustainable competitive advantage when its value-creating processes and position have not been able to be duplicated or imitated by other firms, [4]. Sustainable competitive advantage results, according to the resource-based view theory in the creation of above-normal (or supranormal) rents in the long run..

The primary factors of competitive advantage are innovation, reputation and relationships. Competitive advantage occurs when a organization acquires or develops an attribute or combination of

attributes that allows it to outperform its competitors. These attributes can include access to natural resources, such as high grade ores or inexpensive power, or access to highly trained and skilled personnel human resources. New technologies such as robotics and information technology either to be included as a part of the product, or to assist making it

Discipline of Market Leaders Discipline of Market Leaders

Operational Excellence

Customer Intimacy

Product leadership

Adapted from Kaplan & Norton (2000)

Price Consistent Quality Speed

Service Relationship Flexibility

Features Innovation Speed to Market

The idea is to be excellent at one and very good at the other two !!!!The idea is to be excellent at one and very good at the other two !!!!

Stuck In The MiddleStuck In The Middle

High Margin

Low Volume

PRICE QUALITY

High Volume

Low Margin

Competitive AdvantageCompetitive Advantage

Operations Strategy

Sustainable Competitive Advantage

Marketing Strategy

HumanResourceStrategy

FinancialStrategy

InnovationStrategy

Hyundai BMW

Competitive Advantage Exercise Competitive Advantage Exercise Hyundai ( price & volume)

BMW /Mercedes( quality)

Marketing Market on TV and mass newspapers to their their age segments

Market in business magazines, prestige events, selective TV shows and CRM

Operations Located in low cost countries with high volume highly mechanised production

Germany is benchmark & replicate in South Africa, USA highly mechanised production

Innovation Copy Lead innovation

Human Resource Strategy

Low cost with selective areas of expertise

Highly qualified workforce – engineers etc

Finance Lowest cost Huge innovation budget – lead the world

Step 2: Sustainable Competitive Step 2: Sustainable Competitive AdvantageAdvantage

ABILITY TO BEAT COMPETITORS

VA

LU

E T

O C

US

TO

ME

RS

DEVELOP YOUR SCA

Low 0

High 10

5

5 10 High

Step 3: Sustainable Competitive AdvantageStep 3: Sustainable Competitive Advantage

PERVASIVENESS SCORE

1. ___________________2. ___________________3. ___________________4. ___________________5. ___________________

_______________________________________________________________________________________________

TOP 5 ITEMS

How will you WIN?

Use attached Success Factors Template

A simple way to think about what is your A simple way to think about what is your Sustainable Competitive Advantage Step 1Sustainable Competitive Advantage Step 1

ITEMS THAT ARE CRITICAL TO THE SUCCESS OF YOUR BUSINESS

1. ___________________2. ___________________3. ___________________4. ___________________5. ___________________6. ___________________7. ___________________8. ___________________9. ___________________10. ___________________

11. ___________________12. ___________________13. ___________________14. ___________________15. ___________________16. ___________________17. ___________________18. ___________________19. ___________________20. ___________________

Porter’s 5 Forces Nature of CompetitionPorter’s 5 Forces Nature of Competition

Industrycompetitors

Rivalry amongexisting firms

Substitutes

Potential newEntrant

Suppliers Buyers

Threat of new entrants Bargaining power

of buyers

Threat of substitute products

Bargaining powerof suppliers

Source: Michael E Porter Competitive Advantage: Creating and Sustaining Superior Performance Free Press 1985

Porters 5 ForcesPorters 5 Forces

The Customer Value Proposition The Customer Value Proposition Private SectorPrivate Sector

What Benefits Are We Offering to Customers?

Product & Service Attributes Image Relationship+ +

• Brand• Status• Reputation

• Empathy• Personal• Membership• Intimacy

• Price• Features• Build and Dynamic Quality• Accessibility and Convenience• Speed and Consistency• Self-Managed and Reach• Error-Free• Safety• Comfort• Choice and Flexibility

The challenge is to identify whateach customer segment prefersand to deliver those preferences.

What Benefits Are We Offering to Customers?

Product & Service Attributes Image Relationship+ +

• Brand• Status• Reputation

• Empathy• Personal• Membership• Intimacy

• Price• Features• Build and Dynamic Quality• Accessibility and Convenience• Speed and Consistency• Self-Managed and Reach• Error-Free• Safety• Comfort• Choice and Flexibility

The challenge is to identify whateach customer segment prefersand to deliver those preferences.

Strategy Canvas ExampleStrategy Canvas Example

price

meals

lounges

seating choices hub

connectivity

friendly service speed

frequentdepartures

low

high

Offerings

The Strategy Canvas of the Short-Haul Airline Industry

Factors Of Competition

Other Airlines

Southwest

Car

See reference page

Case Study - Southwest AirlinesCase Study - Southwest Airlines

No seatassignments

No baggagetransfers

Limitedpassenger

service

Short-haul, point-to-pointroutes betweenmidsize cities

and secondary airports

Frequent,reliable

departures

Very lowticket prices

Lean, highlyproductiveground & gate crews

Highaircraft

utilisation

Nomeals

Highcompensationof employees

15 - minutegate

turnarounds

Flexibleunion

contracts

High levelof employee

stockownership

Limited use of travelagents

Noconnectionswith other

airlines

Standardisedfleet of 737

aircraft

Automaticticketingmachines

“Southwestthe low-fare

airline”

Porter’s Activity MapSource: Porter on Competition

PositioningPositioning

Short-haul, point-to-pointroutes betweenmidsize cities

and secondary airports

Frequent,reliable

departures

Very lowticket prices

Standardisedfleet of 737

aircraft

“Southwestthe low-fare

airline”

Leunig View

The positioning of Southwest is multiple in the sense that it is serving part of the needs of some customers (ie. getting them to the target city at a convenient time) who use other airlines, whilst it may be serving all of the needs of other customers who can only pay low fares and are not fussed about landing at a secondary airport. If I had to pick it I would say that the positioning is a mixture of Variety and Access-based positioning. It is broadly targeted in that it ignores the more idiosyncratic needs of particular customer groups. (The Model T Ford of air travel!)

No seatassignments

No baggagetransfers

Limitedpassenger

service

Short-haul, point-to-pointroutes betweenmidsize cities

and secondary airports

Very lowticket prices

Nomeals

Limited use of travelagents

Noconnectionswith other

airlines

Standardisedfleet of 737

aircraft

Trade-offsTrade-offs

Leunig View

No seatassignments

No baggagetransfers

Limitedpassenger

service

Short-haul, point-to-pointroutes betweenmidsize cities

and

secondary airports

Frequent,reliable

departures

Lean, highlyproductiveground & gate crews

Highaircraft

utilisation

Nomeals

Highcompensationof employees

15 - minutegate

turnarounds

Flexibleunion

contracts

High levelof employee

stockownership

Limited use of travelagents

Noconnectionswith other

airlines

Standardisedfleet of 737

aircraft

Automaticticketingmachines

Enabling StrategiesEnabling Strategies

Leunig View

Objectives/GoalsObjectives/Goals

WHAT ARE THE KEY OBJECTIVESYOU ARE TARGETTING?

01/02 02/03 03/04 04/05 05/061. __________________________________________2. __________________________________________3. __________________________________________4. __________________________________________5. __________________________________________6. __________________________________________

Module Five – Module Five – How – Business PlanHow – Business Plan

Business Plan Business Plan

Critical Issues Strategies Initiatives – Action Plans Strategic Accountabilities – Who When Budgets – how much Balanced Scorecard & Strategy Map Measurements & KPIs

HOWHOW

What are the critical issues and how What are the critical issues and how do we determine them?do we determine them?

Critical Issues: Critical issues are issues identified that will impact a businesses ability to implement its strategy. These issues cover all areas/processes of the business plus culture, politics, customers, suppliers. In a business planning context they all need to be addressed for the following reasons

1. They are interlinked: Interconnectivity is a concept that can be summarized as that all parts of a system interact with and rely on one another simply by the fact that they occupy the same system, and that a system is difficult or sometimes impossible to analyze through its individual parts considered alone.

2. Prioritisation: Once all the critical issues have been identified and in the “How” part of the business plan we describe how to address them i.e.. critical issue (CI)>strategy to address CI > Action Plan > Who > When > How Much > Measures > Links to other CI’s, we can then determine the priority

3. Determining the critical issues allows one to address resourcing and budgetary issues i.e. We do not have enough recourses or money to address all the CI , which ones go first, how do we sequence

Determining critical issues Step 1: Take the issues list compiled from management and staff

questionnaires and list in category/process i.e. Management, marketing etc Review the list of issues in each category to determine critical issues –

remember there will be several issues that are similar that identify an issue/theme identified by several people through the questionnaire

What are the critical issues and how What are the critical issues and how do we determine them? ( continued)do we determine them? ( continued)

Determining critical issues Step 1: Take the issues list compiled from management and staff

questionnaires and list in category/process i.e. Management, marketing etc Step 2: Review the list of issues in each category to determine critical issues

– remember there will be several issues that are similar that identify an issue/theme identified by several people through the questionnaire

Step 3: List in Critical issue summary

Exercise: Take issue list template and work out what the critical issues are

There are normally 2 or 3 Critical Issues per Category

PlanningTip

Critical Issues Exercise Critical Issues Exercise AnswersAnswersManagement Brand & Marketing Senior job roles Bringing on & empowering middle management Review organisational structure of x division

Competitor reviews Brand & marketing strategy review Lack of penetration in x segment

Sales Operations Leveraging sales & marketing across the channel Develop the sales culture Sales Strategy Lack of sales process Key account management Leverage our resources

File management, protocol & storage Review and update our processes in line with new technology Project Management of IT integration Supply chain review (printing, telco, stationary, freight/couriers) Making the key supplier relationship work effectively Gross Margin

Critical Issues Exercise answersCritical Issues Exercise answersFinance Innovation Review general ledger requirements Review management reporting Early warning key performance indicators Cash and cash management Shareholder communication Review key supplier reporting Quantify capital requirements going forward

Review how we innovate Develop an innovation culture

Human Resources Technology Career Path Development HR Job Role clarification and interaction with managers Communication Look at High Performance Team Process Training (team training, project mgt, leadership, HR training, sales & key account mgt, KPI training, technology, mentoring)

Smooth implementation of new technology SAP Look at our IT resource (internal vs. Outsourcing) Printer, copier & outsourcing / productivity Intranet Server

Critical Issues Critical Issues

Management Marketing

1. Sales / Channel 1. Customers

1. Competitors 1. Suppliers

Critical Issues Critical Issues

Technology Culture

1. Human Resources 1. Operations

1. Finance 1. Innovation

Critical Issue Action Plan TemplateCritical Issue Action Plan TemplateCritical Issue Action Plan

Critical Issue Description:

Strategy:

Action Plans:

Who:

When:

How Much:

How to measure the results:

Action Comments

1

2

3

4

Example Critical Issue/Action PlanExample Critical Issue/Action Plan

NO ISSUE STRATEGY / ACTIONS

1.1 Management team development

ISSUE:

The business plan calls for 25% growth over the next 3years. We need to develop a top management team capable of operating with more complexity in a challenging enviroment

STRATEGY:

We need to review HO capabilities and resourcing requirements for the next 3 years and determine the capabilities required to run this size business and when should we be recruiting and or developing internal staff.

The same would apply for middle managers and supervisors

ACTIONS:

1.Eight of the top 10 key roles have been filled

2.Communicate the business plan in 1 or 2 day offsite and get others input – include leadership development program on second d ay.

3.Allocate action plans to members of the team as a way of testing and developing them

4.Develop and or source leadership and skill programs for all staff including coaching, effective communication and working as a team

WHO: CEO & HR Director

WHEN: March 2010

COST: $55,000

Benefits of a Business PlanBenefits of a Business Plan

Lead to better management and superior business performance

Help you win the war against your competitors

Lead to better decision making Result in better management Offset uncertainty brought about

change Lead to better control (keeping

the business ‘on track’) Help people work smarter Help to build confidence about

the business

Help to integrate personal and business goals

Enhance any funding needs Improve efficiency Help identify emerging problems

and threats Facilitate the coordination of work

activities Increase the focus on results Put you in charge of your

business

Operational and Strategic BudgetingOperational and Strategic Budgeting

Strategic Initiatives

Enhancement

Maintenance

Operations

Infrastructure

10%ManageStrategically

65%

25%

ImproveOperating Efficiency &Effectiveness

Why Is Strategy Execution So Difficult?Why Is Strategy Execution So Difficult?

Only 5% of the work force

understands the strategy

85% of executive teams spend less

than one hour per month discussing

strategy

60% of organizations don’t

link budgets to strategy

Only 25% of managers have

incentives linked to strategy

STRATEGY

The Vision Barrier

Strategy is not understood by those who must implement it

The Management BarrierManagement systems are designed for operational control and little time is spent on strategy

The Operational BarrierBudgeting process is separated

from strategic planning

The People BarrierPersonal goals, incentives and

competencies are not linked to strategy

Module Six – Module Six – How - ImplementationHow - Implementation

ImplementationImplementation

People First Leadership Balanced Scorecard/Strategy Mapping Corrective Action Middle Management / Team Leader High Performance Teams Emerging Issues Reporting Performance Management

ACTIONACTION

Balanced Scorecard - Strategy MapsBalanced Scorecard - Strategy Maps

“The formulation of great strategies is an art,and it will always remain so. But the description of strategy should not be an art. If people can describe strategy in a more disciplined way, they will increase the likelihood of its successful implementation.”

Kaplan & Norton

DefinitionDefinition From Wikipedia, the free encyclopedia The Balanced Scorecard (BSC) is a strategic performance management tool for measuring whether the

smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy.

By focusing not only on financial outcomes but also on the operational, marketing and developmental inputs to these, the Balanced Scorecard helps provide a more comprehensive view of a business, which in turn helps organizations act in their best long-term interests.

Organizations were encouraged to measure, in addition to financial outputs, those factors which influenced the financial outputs. For example, process performance, market share / penetration, long term learning and skills development, and so on.

The underlying rationale is that organizations cannot directly influence financial outcomes, as these are "lag" measures, and that the use of financial measures alone to inform the strategic control of the firm is unwise. Organizations should instead also measure those areas where direct management intervention is possible. In so doing, the early versions of the Balanced Scorecard helped organizations achieve a degree of "balance" in selection of performance measures. In practice, early Scorecards achieved this balance by encouraging managers to select measures from three additional categories or perspectives: "Customer," "Internal Business Processes" and "Learning and Growth.“

Strategy Maps: measures are selected based on a set of "strategic objectives" plotted on a "strategic linkage model" or

"strategy map With this modified approach, the strategic objectives are distributed across the four measurement perspectives, so as to "connect the dots" to form a visual presentation of strategy and measures.

To develop a strategy map, managers select a few strategic objectives within each of the perspectives, and then define the cause-effect chain among these objectives by drawing links between them. A balanced scorecard of strategic performance measures is then derived directly from the strategic objectives. This type of approach provides greater contextual justification for the measures chosen, and is generally easier for managers to work through.

The Balanced Scorecard Strategy MapThe Balanced Scorecard Strategy MapKaplan and NortonKaplan and Norton

Product Leadership

Customer Intimacy

FinancialPerspective

Customer Perspective

Internal ProcessPerspective

Learning &Growth Perspective

Customer ValueProposition

Improve Shareholder Value

Revenue Growth Strategy

Productivity Strategy

Build the franchise

Increase value

to customers

Improve use of assets

Improve cost structure

Employee competencies Corporate cultureTechnology

Process No 1New ProductDevelopment

Process No 2Brand Development

Process No 3Retail & OutletManagement

Process No 4Operations

Operational Excellence

Components of a Balanced ScorecardComponents of a Balanced Scorecard

Strategic Objectives Measures Targets Initiatives

Lea

rnin

gIn

tern

alC

ust

om

er

Fin

anci

al F1 - Improve ReturnsF2 - Broaden Revenue Mix

F3 - Reduce Cost Structure

C1 - Increase Customer Satisfaction With Our Products & People

C2 - Increase Satisfaction “After the Sale”

I1 - Understand Our CustomersI2 - Create Innovative Products

I3 - Cross-Sell Products

I4 - Shift Customers to Cost-Effective Channels

I5 - Minimize Operational Problems

I6 - Responsive Service

L1 - Develop Strategic SkillsL2 - Provide Strategic InfoL3 - Align Personal Goals

Return on Investment Revenue Growth

Deposit Service Cost Change

Share of Segment

Customer Retention

New Product Revenue

Cross-Sell Ratio

Channel Mix Change

Service Error Rate

Request Fulfillment Time

Skills Coverage Employee Satisfaction Revenue per Employee

15% +10%

-5%

20%

95%

10%

9%

TBD

<1%

<2 days

100% 80%

Finance 2000

Global Re-Engineers

Sales & marketing Reorganization & Training

QFD Project

Customer Database

Global Service Training Program

HRMS Knowledge

Management System

THEME THEME

FinancialPerspective

CustomerPerspective

InternalPerspective

Learning Perspective

Strategy Map Scorecard

Financial Outcomes

Learning / Development /

Technology Drivers

Process Drivers

Customer Outcomes

What A Good Scorecard Looks LikeWhat A Good Scorecard Looks Like

Mobil NMA&R’s Strategy MapMobil NMA&R’s Strategy Map (Kaplan & Norton (2000), The Strategy-Focused Organization)(Kaplan & Norton (2000), The Strategy-Focused Organization)

• Aligned• Personal Growth

• Functional Excellence• Leadership Skills• Integrated View

• Process Improvement• Y2K

• Personal Scorecard• Employee Feedback

• Strategic SkillCoverage Ratio

• Systems Milestones

Climate for Action Competencies Technology

A Motivated and Prepared Workforce

Create Nongasoline Products & Services

• New Product ROI• New Product

Acceptance Rate

UnderstandConsumerSegments

• Share of Target Segment

Best-in-ClassFranchise

Teams

• Dealer Quality Rating

ImproveHardware

Performance

• Yield Gap• Unplanned Downtime

On SpecOn Time

• Perfect Orders

UnderstandConsumerSegments

• Inventory Levels• Run-out Rate

Industry Cost Leader

• Activity Cost vs. Competition

ImproveEnvironmental, Health & Safety

• Environmental Incidents

• Safety Incidents

“Build the Franchise” “Increase Customer “Achieve Operational “Be a Good Value” Excellence” Neighbor”

“Delight the Consumer”

Recognize

Loyalty• Clean• Safe• Quality Product• Trusted Brand

Friendly,Helpful

Employees

SpeedyPurchase

Basic Differentiators

“Win-Win Dealer Relations”

Help

Develop Business

Skills

MoreConsumerProducts

• Mystery Shopper Rating

• Share of segment

• Dealer Profit Growth

• Dealer Satisfaction

New Sources of Nongasoline

Revenue

Increase Customer Profitability through

Premium Brands

Become Industry Cents Leader

• Nongasoline Revenueand Margin

• Volume vs. Industry• Premium Ratio

• Cash Expense (Cost per Gallon) vs. Industry

Maximize Use of Existing Assets

• Cash Flow

Revenue Growth Strategy Productivity Strategy

Increase ROCE to 12%

• ROCE• Net Margin (vs. Industry)Financial

Perspective

CustomerPerspective

Internal Perspective

Learning &GrowthPerspective

Mobil NMA&R’s Balanced ScorecardMobil NMA&R’s Balanced Scorecard (Kaplan & Norton [2000], The Strategy-Focused Organization)(Kaplan & Norton [2000], The Strategy-Focused Organization)

Financial Financial Growth F1 Return on Capital EmployedF2 Existing Asset UtilisationF3 ProfitabilityF4 Industry Cost LeaderF5 Profitable Growth

• ROCE• Cash Flow• Net Margin Rank (vs. Competition)• Full Cost per Gallon Delivered (vs. Competition)• Volume Growth Rate vs. Industry• Premium Ratio• Non-gasoline Revenue and Margin

Customer Delight the Consumer C1 Continually Delight the Targeted Consumer

Win-Win Dealer Relations C2 Build Win-Win Relations with Dealer

• Share of Segment in Selected Key Markets• Mystery Shopper Rating

• Dealer Gross Profit Growth• Dealer Survey

Internal Build the Franchise I1 Innovative Products and Services

I2 Best-in-Class Franchise Teams

Safe and Reliable I3 Refinery Performance

Competitive Supplier I4 Inventory Management

I5 Industry Cost Leader

Quality I6 On Spec, On Time

Good Neighbour I7 Improve EHS

• New Product ROI• New Product Acceptance Rate

• Dealer Quality Score

• Yield Gap• Unplanned Downtime

• Inventory Levels• Run-out Rate

• Activity Cost vs. Competition

• Perfect Orders

• Number of Environmental Incidents• Days Away from Work Rate

Learning Motivated and Prepared L1 Climate for ActionAnd Growth L2 Core Competencies and Skills

L3 Access to Strategic Information

• Employee Survey• Personal Balanced Scorecard (%)• Strategic Competency Availability• Strategic Information Availability

Strategic Themes Strategic Objectives Strategic Measures

Mobil NMA&R’s Educational BrochureMobil NMA&R’s Educational Brochure (Kaplan & Norton (2000), The Strategy-Focused Organization)(Kaplan & Norton (2000), The Strategy-Focused Organization)

NAM&R Strategic Themes

Will guide us to our vision and are defined above each graph.

NAM&R Strategic Measures

Will keep us focused on achieving NAM&R’s strategic themes. They are explained in the graphs and the bulleted text accompanying them.

Win/Win RelationshipImprove Dealer/Wholesale Marketer profitabilitythrough customer-driven products and servicesAnd by developing their business competencies.

Total profit earned at Mobil outlets and splitbetween our dealers/wholesaler marketers and Mobil

Dealer/Mobil Gross Profit

1993 1994 Target

Good NeighborProtect the health and safety of our people, the communities in which we work, and the environment we all share.

Composite of:• Reportable

releases to airand water

• Reportable spills• Community

reported incidents

Environmental Index

1993 1994 Target

On Spec On TimeProvide quality products supported by quality business processes that are on time and done right the first time.

Composite of:• Product off spec• Order shipped late• Business process

errors• Customer

complaints• Cost of rework

Quality Index

1993 1994 Target

Motivated & PreparedDevelop and value teamwork and the ability to think Mobil, act locally.

Survey of employees to measure how people perceive the Mobil workplace environment

Climate Survey

1993 1994 Target

Delight the ConsumerUnderstand our consumers’ needs better than anyone and offer them products and services with exceed their expectations.

The Mystery Shopper program rates how well each of our stations is delivering the “best buying experience.”

Mystery Shopper

1993 1994 Target

Financially StrongReward our shareholders by providing a superior long-term return which exceeds that of our peers.

Income divided by capital employed including all allocations

ROCE

1993 1994 Target

7%

8%

12%

Safe & ReliableMaintain a leadership position in safety while keeping our refineries fully utilized.

Manufacturing Reliability

1993 1994 Target

Days Away from Work

1993 1994 Target

Competitive SupplierProvide product to our terminals at a cost equal to or better than the competitive market maker.

Our cost to deliver product to the terminal vs. lowest cost provider.

Activity Cost vs. Competition

1993 1994 Target

“LINE OF SIGHT” ALIGNMENT

High

Low

Knowledgeof Strategy

High

Low

Knowledge of Work & Processes

Executive Middle Management

Individual

Bus. Unit Strategy

Corporate Strategy

Individual’sPerformance Plan

Leadership DevelopmentLeadership is about Change

KPI and PerformanceReport Back

Balanced Scorecard IdentifiesStrategic Initiatives and

Emerging Issues

Corrective Action

High Performance Culture

Capabilities Required Leadership

Team Leader High Performance Teams

Identification and Testing Leaders at all levels though

Strategy implementation

Strategic Objectives Measures Targets Initiatives

Le

arn

ing

Inte

rna

lC

us

tom

e

r

Fin

an

cia

l

F1 - Improve ReturnsF2 - Broaden Revenue Mix

F3 - Reduce Cost Structure

C1 - Increase Customer Satisfaction With Our Products & People

C2 - Increase Satisfaction “After the Sale”

I1 - Understand Our CustomersI2 - Create Innovative Products

I3 - Cross-Sell Products

I4 - Shift Customers to Cost-Effective Channels

I5 - Minimize Operational Problems

I6 - Responsive Service

L1 - Develop Strategic SkillsL2 - Provide Strategic InfoL3 - Align Personal Goals

Return on Investment Revenue Growth

Deposit Service Cost Change

Share of Segment

Customer Retention

New Product Revenue

Cross-Sell Ratio

Channel Mix Change

Service Error Rate

Request Fulfillment Time

Skills Coverage Employee Satisfaction Revenue per Employee

15% +10%

-5%

20%

95%

10%

9%

TBD

<1%

<2 days

100% 80%

Finance 2000

Global Re-Engineers

Sales & marketing Reorganization & Training

QFD Project

Customer Database

Global Service Training Program

HRMS Knowledge

Management System

THEME THEME

FinancialPerspective

CustomerPerspective

InternalPerspective

Learning Perspective

Strategy Map Scorecard

Balanced Scorecard

Linking Performance ManagementLinking Performance ManagementTo ChangeTo Change

Understanding Process Flow vs Understanding Process Flow vs Organisational StructureOrganisational Structure

Business Processes Cut Across Departments

Department

ADepartment

BDepartment

C

Customer Customer

Michael Porter’s Value ChainMichael Porter’s Value Chain

Generate Revenues

Develop Markets

Build Relationships

Manage Operations

Coordinate Logistics

Conduct R & D

CUSTOMERS

Primary Activities = Generic Core ProcessesPrimary Activities = Generic Core Processes

Michael Porter’s - Support Activities Michael Porter’s - Support Activities Infrastructure & Management ProcessesInfrastructure & Management Processes

Manage Human Resources

Manage Information

Administer the Business

Manage the Finances

Manage the Assets

Manage Risks

CORE

PROCESSES

Example - Manufacturing Company Example - Manufacturing Company

New Product Development

Core Processes

Order Generation and Fulfilment

Integrated Logistics

Example - Consumer Goods CompanyExample - Consumer Goods Company

New Product Development

Brand Development

Retail Outlet Management

Integrated Logistics

Eg. - Government Agencies in the USAEg. - Government Agencies in the USA

Establish [Agency's] Direction

Core Processes

Acquire Necessary Resources

Provide Capabilities

Execute the [Agency's] Mission

www.va.gov/fedsbest/www.va.gov/fedsbest/

Example - The Dupont Company Example - The Dupont Company

Planning

Core Processes

Deliver the Current Offering

Renewal

Identifying Core Processes - Guidelines Identifying Core Processes - Guidelines

They should face the customer.

Core processes represent core business. They do not have to cover 100% of all things the business does.

The management team should nominate core processes. A single person should not be tasked with the job.

The processes need to be defined at levels high enough so that major improvements are visible to everyone in the organisation or unit.

Identifying Core Processes - Guidelines Identifying Core Processes - Guidelines (continued)(continued)

They should be recognisable as the platform around which strategy is developed.

They should capture the major workflows, which result in something very quantifiable being offered to the customer. These workflows typically involve more than one function.

There should be minimum overlap between the core processes. The skills, technologies and sub-processes should be substantially different for each.

Identifying Core Processes - Guidelines Identifying Core Processes - Guidelines (continued)(continued)

It should be clear that measures of quantity, quality, cost, revenue, and time, applied to these processes would form the backbone of the organisation's performance measurement system.

It should be clear that all strategic contact points with the customer are covered.

Vagueness should be avoided. For example Manage the Business seems to say it all, but is at too high a cognitive level to work with.

Elevating a small process to core status puts it under the spotlight at management reviews. Forces it to be resourced and managed.

Template for Core Processes Template for Core Processes

Activity Core Processes Activity Core Processes

A subsidiary of a multinational manufacturing company that needed to increase their gross margin from 49% to 62% or close manufacturing operation and source from overseas.

Worst-in-class in inter-company benchmarking

Culture resistant to change with silo mentality

Top-heavy management

Case Study 1Case Study 1

Global FMCG Subsidiary

BACKGROUND

Set Vision of “best-in-class” and 62% Gross Margin within 15 months

Developed implementation plan and communicated it and restructured quickly

Focused on process across silos using Value Stream Analysis

Implemented high performance team culture and multi-skilling

Re-trained workforce ($0.75M)

Case Study 1Case Study 1

STRATEGY

Global FMCG Subsidiary

Introduced MRPII solution and performance measurement

Activity Based Costing to identify customer and product profitability

Co-ordination with marketing and customers to improve manufacturing velocity by standardisation of packaging

Re-equipment program ($4M)

Case Study 1Case Study 1

STRATEGY

Global FMCG Subsidiary

Case Study 1Case Study 1

Improved gross margin by 13% to 62% “Best-in-class” Reduced workforce from 150 to 75 and increased output

by 40% Reduced stock levels from 120 days to 45 days Reduced out-of-stocks from 30% to 5% Used some of the cost saving (part of the negotiation

with marketing dept for using consistent bottle shapes) to increase advertising budget by $3M and increased sales revenue by 20%

Developed a multi-skilled high performance team culture

RESULTS (15 MONTHS)

Global FMCG Subsidiary

Case Study 2Case Study 2

INTRODUCING SALES FORCE RE-ENGINEERING AND CRM TECHNOLOGY

2200 customers of which

Top 200 = 92% of total revenue

Top 24 customers = 80% of total revenue

98 sales force & customer service

Operating in a mature market with no perceived opportunity for growth

BACKGROUND

Case Study 2Case Study 2INTRODUCING SALES FORCE RE-ENGINEERING

AND CRM TECHNOLOGY

Introduced new CRM system with a sales process upgrade

Develop consultative/solution selling capability model Assessed all sales force personnel and restructured

sales force Activity Based Costing to identify customer and

product profitability Migrated 2000 customers to lower cost customer

service / call centre model or increased prices to get rid of unprofitable customers

Refocused sales team on generating sales growth from top 200 customers

STRATEGY

Identified growth opportunities that equated to 98% of current revenue

Increased gross margin

Reduced cost of sales force by $5 million

Case Study 2Case Study 2

INTRODUCING SALES FORCE RE-ENGINEERING AND CRM TECHNOLOGY

RESULTS