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Balanced Scorecard Quick Wins

Mihai Ionescu, Senior Strategy Consultant, Owner Balanced Scorecard Romania, Author.


The BSC Adoption Quick Wins

Once implemented, the Strategic Management System based on the Balanced Scorecard framework produces significant & effective results within 1-3 years. However, the implementation provides several important Quick Wins, or 'low hanging fruits' if you like, immediately after the system goes live (within the first several months after launch). To name just a few:

  • Improved adequacy & adaptability of the formulated Strategy, developed with the contribution of the employees from all levels of the organization

  • Crystal-clear clarity regarding the Objectives, areas of focus and actions that will lead to the accomplishment of the top Corporate Goals, based on a well-structured and accurate causality-based Strategic Plan, developed with the contribution of the employees from all levels of the organization

  • Improved visibility into the performance & risk of Strategy's execution, both top-down and bottom-up, as well as horizontally, through corporate silos, based on a clear set of driving-driven correlations between the Internal Suppliers and the Internal Customers

  • Highly-accurate control, through well-timed Corrective Actions, of any projects and programs that have a strategic impact (the Strategic Initiatives), helping achieve, through their effects, the Strategic Objectives and the Corporate Goals

  • Enhanced Strategy-focused dialogue between the employees from all levels of the organization, with an improved accountability & motivation, due to the accurately-aligned, clear, quantified and monitored contribution they have to the Strategy Execution processes

The BSC Knowledge & Know-how Quick Wins

Even before the Strategy Management System based on the BSC framework goes live, there are a significant number of Knowledge & Know-how Quick Wins that are harvested before or during the implementation project. This article is focused on this type of Balanced Scorecard Quick Wins.

I have compiled below a list of Balanced Scorecard Knowledge & Know-how Quick Wins, related to the main Strategy Management issues that can be spotted in many companies, all over the world. Some of them are common with the issues pack that is specific for the Government & Public Sector. These issues arise from top & middle management executives' lack of understanding & know-how, which are addressed by the BSC Framework's Body of Knowledge. This BoK has been built on thousands of real-life BSC implementation projects.

The structure of the Issues & Quick Wins is based on the six stages of the Kaplan-Norton BSC Framework (Execution Premium Process™ - XPP), layered over the main Strategy Management processes, with several add-on components and details, mainly in the first stage of the framework.


1. Strategy Formulation (XPP: Develop the Strategy)

1.1. Strategy components & processes. The formulation process

Issues: When an executive team member uses concepts and terminology with strategic relevance, almost every other person in a conversation has a more or less different understanding, due to the diverse interpretation of such concepts and terminology and due to the lack of clarity about how the Strategy works.

Quick Wins: Gaining a clear and logic understanding of the Strategy core concepts (e.g. the separation between the operational and strategic layers) and of the terminology related to the Strategy components/concepts and processes, as well as of the Strategy Formulation process's workflow.


1.2. The Transient Competitive Advantage Cycle. The Strategic Horizon

Issues: The Competitive Advantage is often defined in subjective terms and regarded as sustainable on the long term. The Strategic Horizon definition and its setting process is often highly approximate and arbitrary.

Quick Wins: Understanding the Transient Competitive Advantage Cycle and how to set the Strategic Destination and the Strategic Horizon, based on a logical process and on a selection of the most relevant factors of influence.


1.3. The Strategic Choices & Canvas. The Positioning Dialogue

Issues: The available Strategic Choices used for defining the Transient Competitive Advantage are often limited to a few generic strategies and their relationships with the most relevant Strategy Models are seldom clear. At the same time, the Strategic Choices selection is often discussed solely at the executive level of the company, without a dialog involving all the organizational levels, especially the front-line employees, who posses a ground-level insight into the real-life relationships with the customers.

Quick Wins: Gaining a good understanding of how the Transient Competitive Advantage is defined by combining the where-to-play and how-to-win Strategic Choices and of how they relate to the relevant Strategy Models applicable. Understanding how the Positioning Dialogue works, collecting the bottom-up contribution of employees with direct customer contact (sales people, customer service, customer project managers, customer delivery teams, etc.).


1.4. The Competitive Factors and the how-to-win Strategic Choices

Issues: Of the main available Strategic Choices categories that regard the how-to-win Competitive Factors, only a few (the most popular ones) are usually known and considered for defining the Transient Competitive Advantage.

Quick Wins: Clearly understanding the full set of how-to-win Strategic Choices and how they can be combined for creating the allowed-to-win mix that represent a viable set of Competitor Factors. Going beyond the traditional generic strategies (competing on price, product differentiation, focus, or customer intimacy).


1.5. The Market Boundaries and the where-to-play Strategic Choices

Issues: Of the main Strategic Choices categories that regard the where-to-play Market Boundaries, only a few (the most popular ones) are usually known and considered for defining the Transient Competitive Advantage and they are often divided artificially between the Corporate Strategy and the Business Strategy, developed mainly in large corporations, but adopted by companies of all sizes.

Quick Wins: Clearly understanding the full set of where-to-play Strategic Choices and how they can be combined for creating the allowed-to-win mix that represents a viable set of Market Boundaries. Going beyond the traditional options (marketing STP: segmentation, targeting, positioning , new market entry, vertical integration, and so on).


1.6. The Strategic Analysis for best Strategic Choices selection

Issues: The Strategic Analysis process is often performed incompletely and decoupled from the Competitive Factors and Market Boundaries Strategic Choices, being reduced to using the PESTEL and Porter 5 Forces analysis to populate a static SWOT, TOWS or equivalent.

Quick Wins: Understanding how the macro & micro environment Factors of Influence are expected to affect the business, over the chosen Strategic Horizon, should each available Strategic Choice be selected. This allows the rating of the available Competitive Factors (how-to-win choices) and Market Boundaries (where-to-play choices), leading to a rational and criteria-based definition of the Strategic Choices mix that supports the Transient Competitive Advantage.


1.7. The Competitive Differentiation. The Differentiation Dialogue

Issues: In the absence of a rigorous competitive framework, the Strategic Positioning against the main competitors or categories of competitors is often subjective and misleading, potentially leading to destructive competition. At the same time, the Competitive Differentiation is often discussed solely at the executive level of the company, without a dialog involving all the organizational levels, especially the front-line employees, who posses a ground-level insight into the real-life competitive landscape.

Quick Wins: Gaining the understanding of the Competitive Differentiation analysis process methodology based on the Strategic Choices mix alternatives compared to those of the main competitors or categories of competitors, summarized on the Strategy Canvas template. Understanding how the Differentiation Dialogue works, collecting the bottom-up contribution of employees with direct competitive engagement (sales people, customer service, customer project managers, customer delivery teams, etc.).


1.8. The Strategic Analysis's Hypothesis & Estimated Parameters

Issues: Due to a weak management of the hypothesis and estimated parameters used within the Strategic Analysis, the Strategy Adaptation to future changes of the business environment cannot be systematically managed.

Quick Wins: Understanding how the Hypothesis Register and the Tolerances Register are created during the Strategy Analysis process and how they are further used in for Strategy Adaptation.


1.9. The Strategy Adaptation and the Strategic Scenarios

Issues: Due to the lack of a fully-operational system for monitoring the validation of the hypothesis and estimated parametersț evolution, defined during the Strategic Analysis, the adaptation of the Strategy to the changes of the business environment is slow and approximate. As a consequence, the triggering of the Strategic Scenarios cannot be managed systematically.

Quick Wins: Gaining the understanding of how the Strategy Adaptation Early Warning System is built, based on the Hypothesis & Tolerances Registers, how the Strategic Scenarios are defined, by clustering the associated triggering events and how the Strategic Scenarios are triggered by the Early Warning System that monitors the validation/invalidation of the hypothesis and the evolution of the estimated parameters outside their acceptable tolerance ranges.


1.10. The Strategic Gaps (Positioning and Coherence)

Issues: Because the Strategic Planning is based mainly or solely on strategic priorities and generic strategies, without a clear identification of the Strategic Positioning gaps and Coherence gaps that have to be closed, the Strategic Plan is often loosely-coupled or even uncoupled from the Strategy.

Quick Wins: Gaining the know-how of the Strategy Formulation process workflow, based on identifying the Positioning & Coherence Strategic Gaps, by comparing the current & desired positioning and the existing & required capabilities to support the Strategic Choices mix.


1.11. The Strategic Business Model and the Capabilities System

Issues: The unclear relationship between the Strategic Choices and the required Capabilities System changes makes it difficult or impossible to identify a significant part of the Cause-Effect relationships between the Strategic Objectives in the driving and driven perspectives.

Quick Wins: Understanding how the Strategic Business Model works and how to identify the level and configuration of the Capabilities required to support the changing of the Strategic Positioning (Strategic Choices).


1.12. Existing and Required Capabilities System. The Coherence Gaps

Issues: Without the clear and accurate identification of the Coherence Gaps between the existing and required Capabilities System, the Strategic Planning becomes approximate and loosely-coupled or uncoupled from the desired Strategic Positioning.

Quick Wins: Gaining the knowledge related to Capabilities System's structure and correlations, using a causality-linked perspectives configuration, as well as the know-how of defining the Strategic Coherence Gaps that are further used as input into the Strategic Planning process.


2. Strategic Planning (XPP: Translate the Strategy)

2.1. The Strategic Planning process and the BSC model

Issues: The Strategic Planning process is often understood in an approximate and incomplete way, mainly due to the lack of a logic and consistent model of components and correlations between them, based on a mature and stable Strategic Planning framework.

Quick Wins: Understanding of the Strategic Planning process workflow, based on the logical steps of defining the BSC model components (Strategic Objectives, Strategic Initiatives, KPI & KRI Measures and their Targets) and of the system of correlations between them (Cause-Effect relationships, Lead-Lag relationships, Objectives-Initiatives relationships, Initiatives-Lead KPI Measures), as well as with the Strategy Formulation output components, especially between the Strategic Gaps, on one side and the Strategic Objectives, Strategic Initiatives and the Lag KPI Measures, on the other side.


2.2. Strategic Objectives definition, based on the Strategic Gaps

Issues: The generic and approximate way of defining the Strategic Objectives leads to an inconsistent and unbalanced Strategic Plan, the most frequent mistake being the mixing of Strategic Objectives and urgent non-Strategic Objectives.

Quick Wins: Gaining the correct understanding of Strategic Objectives' definition methodology and modelling selection criteria, starting from the Strategic Gaps defined within the Strategy Formulation process, where each objective is expected to be achieved when its associated gaps have been closed.


2.3. The Cause-Effect relationships between the Strategic Objectives

Issues: The failure to clearly and consistently define the Cause-Effect relationships between the Strategic Objectives renders the entire Strategic Plan useless for its correct use as Strategic Decision-Support System and reduces its viability as an effective way to close the Strategic Gaps and bring the Strategic Choices and the Transitional Competitive Advantage, based on them, to life.

Quick Wins: Gaining the know-how regarding the methodology used to identify the Cause-Effect relationships between the driving and driven Strategic Objectives, set a modelling level and calculate the Modelling Coefficient for each driving Objective.


2.4. The Lag KPI Measures and the Performance Scorecard

Issues: One of the most difficult aspects related to the Strategic Planning is the translation of the (assumed) understanding of the difference between the operational and the strategic layers of management into the practice of building a truly strategic Performance Scorecard and identifying the Lag KPI Measures that are best suited to quantify the achievement of the Strategic Objectives.

Quick Wins: Understanding how the Lag KPI Measures are selected for each Strategic Objective, quantifying its level of achievement, as the Strategic Gaps that are associated with it are closed and how the weighting is defined for the Lag KPI Measures of each Objective.


2.5. The Targets Tree for the Lag KPI Measures

Issues: The annual Targets of the Lag KPI Measures are often set up by extrapolating the values in previous years, by benchmarking within the industry and sometimes by 'negotiation' within the executive team. Unfortunately, none of these methods can guarantee that once the Targets are reached, the corresponding Objectives would be achieved to the required degree for accomplishing the top Corporate Goals. This is another symptom of the 'strategic uncoupling', which can be observed when the driving Objectives are achieved, but their driven top Objectives or the top Corporate Goals are not.

Quick Wins: Learning how the Targets Tree works, how the top Corporate Goals' gaps are cascaded along the Cause-Effect relationships, to each driving Objectives' gaps, with Modelling Coefficient corrections applied, and then to each Lag KPI Measure's gap and annual Target, based on the baseline values. Understanding how the Targets Tree is validated with the values of the Strategic Gaps that are associated with the corresponding Objectives and their Lag KPI Measures, where it was possible to quantify the Strategic Gaps.


2.6. The Strategic Initiatives portfolio and the Strategic Action Dialogue

Issues: Much too often, the correlation of various projects and projects planned and the rolled-out throughout the organization have a weak, approximate or no correlation with the Strategy and, more specifically, they don't adequately support the achievement of the Strategic Objectives within a correctly-designed and consistent Strategic Plan. Furthermore, the development of the Strategic Initiatives portfolio and plan's execution doesn't involve the employees from all levels of the organization.

Quick Wins: Gaining the knowledge of how the Strategic Initiatives portfolio is correlated with the Strategic Objectives (and their underlying Strategic Gaps), based on the rationalization of the projects and programs planned or in progress, as well as on the analysis of the achievement viability for each Objective, based on its associated Initiatives. Understanding how the Strategic Action Dialogue is organized and how it can lead to a more reality-based portfolio, with the contribution of the employees from all levels of the organization.


2.7. The Strategic Initiatives Realization and Sequencing

Issues: Even if adequately correlated with the Strategic Objectives, the Strategic Initiatives are regarded as ordinary projects or programs, which don't lead to the full accomplishment of their associated Strategic Objectives. Moreover, the time sequencing of the Strategic Initiatives is defined based on reasons like apparent urgency, sponsoring preferences, resources mobilization, operational events non-overlapping or supplier delivery timing.

Quick Wins: Understanding the difference between the Strategic Initiatives and ordinary projects or programs, as the purpose of the Initiatives is not the delivery of a project scope, but the realization of the expected change effects that will allow the accomplishment of their associated Strategic Objectives. Gaining the know-how the sequencing of the strategic Initiatives is performed, driven by the Cause-Effect relationships between the Strategic Objectives achieved through the effect of the initiatives' realization.


2.8. The Led KPI Measures and the Lead-Lag Weighting

Issues: The balance between the post-fact results, quantified by the Lag KPI Measures and the Strategic Initiatives' realization effects/outcomes, quantified by the Lead KPI Measures is often ignored, leading to Performance Scorecard's lack of anticipation and effectiveness.

Quick Wins: Gaining the understanding of how the Lead KPI Measures are defined, based on the way the Strategic Objectives are achieved, as an effect of Strategic initiatives' realization/outcomes. Understanding how the Lead-Lag Weighting (between the Lead & Lag KPI Measures) is defined, for each of the Strategic Objectives.


2.9. Annual KPI Measures' Targets Break-up on Measurement Intervals

Issue: It's very seldom that we see a correct break-up of the annual KPI Measures' Targets being broken-up on measurement intervals (e.g. on monthly targets) and this has may have a huge effect on the possibility to execute the Strategic Plan over the planning cycle (e.g. over the year) in an accurately controlled manner. In many cases, due to this reason, the scorecards become practically useless.

Quick Wins: Gaining the know-how on how the annual Targets of the Lead KPI Measures are broken-up on measurement intervals, based on the relationship between the Strategic Initiatives and the Lag KPI Measures, and then how Lag KPI Measures' annual targets are broken-up on measurement intervals, considering the type and realization period of the initiatives associated with their Strategic Objective.


2.10. The KPI & KRI Measures Deseasonalization

Issues: The subjective, ad-hoc and approximate identification of the influence factors that may have influenced the current values of the KPI & KRI Measures usually leads to a partial or total false calculation and interpretation of the statuses of Measures and Objectives. This leads to delayed Corrective Actions, or lack of them, or even to an over-reaction to apparently bad statuses.

Quick Wins: Gaining the know-how on how to apply the denationalization of the KPI & KRI Measures, for filtering-out the influence factors' impact upon the measured values and correctly calculating the statuses of KPI & KRI Measures and the performance & risk statuses of their Strategic Objectives.


2.11. The Performance-Risk Integration. Risk-related Objectives types

Issues: Ignoring the balance between performance and risk in Strategic Management leads to a reduced probability of many Strategic Objectives' achievement. The failure to adequately integrate and manage the strategic performance and the strategic risk results in partial or total denial of reaching the Success Aspirations of the formulated Strategy.

Quick Wins: Understanding how the strategic performance & risk integration is achieved, based on the dual status calculation for some or all of the Strategic Objectives and how the Risk Scorecard is used, in conjunction with the Performance Scorecard. Understanding how the status is calculated for the Strategic Objectives, depending on their role in the integrated strategic performance & risk management.


2.12. Risk Factors, Risk Events, KRI Measures and Risk Mitigation

Issues: The strategic performance & risk integration methodology requires a system that is seldom designed and used properly. This leads to a low convergence of managing the performance in achieving the Strategic Objectives and mitigating the main risks that may hinder or deny their accomplishment.

Quick Wins: Understanding how the Risk Management is integrated within the Strategic Management process and how the Risk Factors, the Risk Events, the Key Risk Indicator (KRI) Measures, the Risk Appetite and the Risk Mitigation Initiatives are used consistently and correctly correlated with the Strategic Objectives.

... Continued in the second section of this article here.

3. Organizational Alignment (XPP: Align the Organization)

4. Operational Integration (XPP: Plan Operations)

5. Strategic Plan Execution (XPP: Monitor & Learn)

6. Strategy Adaptation (XPP: Test and Adapt)

Feedback is more than welcomed, as always.


Next article: https://www.ldquest.com/single-post/2017/09/20/Balanced-Scorecard-Quick-Wins-2

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