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STRATEGY SIMULATIONTHE BALANCED SCORECARD

FOR COURSES IN:

STRATEGY

IMPLEMENTING STRATEGY

MANAGERIAL ACCOUNTING

BY V.G. NARAYANAN, HARVARD BUSINESS SCHOOL

STRATEGY SIMULATIONTHE BALANCED SCORECARD

In this multi-player simulation, students experience the benefits and challenges of using a scorecard to implement strategic initiatives and monitor firm performance. Students work together in small teams to choose a strategy for their company, create a strategy map, develop a balanced scorecard, choose initiatives to implement their strategy, and use feedback from the balanced scorecard to adjust their implementation approach over time. At the conclusion of the simulation, each team’s company will be purchased by a private investor. The goal of the simulation is to maximize firm value.

Prerequisites and Play Students should be familiar with the balanced scorecard concept before playing the simulation. Although it can be played by individuals, the author recommends dividing students into small teams. Each team will have 1 Data Entry role and 1, 2, or 3 Data Analyst roles. The Data Entry player is responsible for submitting the team’s decisions. Due to the breadth and complexity of the simulation, the author recommends allowing students to play 1 or more practice rounds before making their final selections. Instructors can do this by enabling the practice mode.

Students must select initiatives that support their company’s strategy.

Administration tools on next page

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Creating a Scorecard Students prepare by reading the Delta/Signal Corp case to learn the company background. Each team then creates a unique stock ticker symbol, chooses a market segment, and selects 1 of the 4 possible strategies for their company: Customer Integration, Product Innovation, Low Initial Cost, or Low Lifetime Cost. Students select objectives and metrics that will match their chosen strategy and then create a strategy map.

Financial and Scorecard Data Financial and scorecard metric data is updated after each simulation round. Students should analyze this data so they can determine which initiatives are creating the desired performance improvements and which are not. Students can review the Metric Dashboard, History, and Graphs screens to perform their analysis.

The Strategy Map shows the cause-and-effect relationships between objectives.

The Analyze screens allow students to determine the success of their initiatives.

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Funding Initiatives The simulation consists of 8 rounds, each representing 6 months of elapsed time. In each round, teams decide which initiatives to fund in order to achieve their strategic objectives. Students review the different options and fund as many initiatives as they would like, up to a $25 million maximum budget. While the initiative choices from the previous round automatically carry over, students can make adjustments based on their analysis of the results. At the conclusion of the simulation, the team’s company will be purchased by a private investor. The buyout price will be based on the company’s financial position and future prospects.

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STRATEGY SIMULATIONTHE BALANCED SCORECARD

IN THIS SIMULATION

Practice Mode: Setting the simulation to practice mode allows students to play through the first 4 rounds repeatedly. Practice rounds allow students to experiment with possible choices prior to making permanent decisions for their company.

Control Group: Instructors can assign certain student teams to be part of a control group. Control group players will not select objectives or see a balanced scorecard, but they will see the financial metrics, and all other aspects of simulation play will be the same.

Results Section: The instructor results section provides key statistics and graphs that summarize student performance.

Administration Options and ToolsA comprehensive Teaching Note covers key learning objectives. Students will:

� Learn how firms use the balanced scorecard to define strategy, implement strategy, and measure strategy execution.

� Understand that a strategy is more likely to be effective if the initiatives implemented are synergistic with the strategy.

� Explore how a good balanced scorecard can help companies take midcourse corrective actions.

� Recognize that financial metrics are often lagging, volatile, and noncontrollable measures of firm performance.

� Examine the advantages and disadvantages of measuring a small or large number of metrics.

� Understand how using the balanced scorecard is like financial variance analysis extended to nonfinancials.

� Learn how a well-designed strategy map can help managers think about and communicate strategy.

DEVELOPED IN PARTNERSHIP WITH FORIO ONLINE SIMULATIONS

PRODUCT #114701

Multi-player Seat Time: 75 minutes

Product #M00004 MC207620118 © 2018 Harvard Business School Publishing Harvard Business Publishing is an affiliate of Harvard Business School.

Printed on Recycled Paper

The Private Equity Valuation debrief screen shows the various buyout prices for the class.