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Transforming Strategy into Action Today. Michael Ensley. Scorecarding & Strategy Management Goals. Need for Scorecarding & Strategy Management Effectively communicate strategy Identify & Prioritize Designing KPIs Setting Targets How to Manage Strategy effectively What a Scorecard is not.

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scorecarding strategy management goals
Scorecarding & Strategy Management Goals
  • Need for Scorecarding & Strategy Management
  • Effectively communicate strategy
  • Identify & Prioritize
  • Designing KPIs
  • Setting Targets
  • How to Manage Strategy effectively
  • What a Scorecard is not
operational pains
Operational Pains
  • Strategy is not executed upon effectively
    • Companies typically deliver only about 63 percent of their strategy’s financial performance potential (Economist Intelligence Unit)
    • 9 out of 10 organizations fail to execute their strategies (Fortune)
    • 2.5% of global businesses achieve 100 percent project success (PWC)
operational pains1
Operational Pains
  • Strategy is not executed upon effectively
    • 60-90% of corporate strategies fail (K&N)
  • Following the plan is restrictive
    • Takes too long
    • Far too detailed
  • Need to integrate innovation
    • Breakthrough performance
    • Co-creation
    • Blue Ocean
polling question
Polling Question
  • How well do you know your Corporate Strategy?
    • Can lay it out on napkin in casual conversation
    • Could probably cobble it together with a little thought
    • Not sure it is communicated to my level of the organization

84% of a recent survey were not able to articulate strategy

cascading pain
Cascading Pain

Lost Revenues

Loss of Cash Flow

Decline in Margins

Outcomes

  • Here are two core items that are the primary drivers behind our failure to execute upon strategy:
    • We lack a vehicle to communicate strategy in an effective manner
    • There is just too much information

Customer Abandonment

Inefficient Use of Resources

Increase in Expenses

Risks

Operational Excellence

Customer Intimacy

Product Innovation

Delays in Decision Making

Missed Opportunities

Suboptimal Processes

Rogue Interpretation

Multiple Versions of the Truth

Consequences

Can’t see impact of job

Create New Version

Can’t Filter What Matters

Ignore the data

Incorrect Incentive Alignment

Don’t Know Strategy

Too Much Information

Pains

business value
Business Value

If we could do a better job communicating strategy and filtering what matters, is it possible to think we could get a 5% increase in revenues?

Increase Revenues $50 Million

Margin Increases 43%

35% increase in Strategy Execution leads to 30% gain in shareholder value - HBS

telling a story
Telling a Story

Financial

Increase Revenues

Enhance Profitability

More customer value allows you to capture greater fiscal results

Customer

Create Customer Value

Better processes create greater customer value

Internal Process

Process Improvements

Understanding the customer

Innovation

Operational Excellence

Customer Intimacy

Product Leadership

Better people, culture and technology creates better process

Learning & Growth

People

Culture

Technology

slide9

Financial

Improve Profitability

Grow Revenue

Increase Market Share

Customer

Create Value for our Customers’ Customers

Create more time

Improve Quality of Life

Create more money

Internal Process

Solve their Problems

Improve Efficiency

Foster Innovation

Understand the Customer

Operational Excellence

Customer Intimacy

Product Leadership

Learning & Growth

Retain & Attract Great Employees

Customer Centric Culture

Enabling Technology

business focus
Business Focus

Internal Process

Process Improvements

Understanding the customer

Innovation

Operational Excellence

Customer Intimacy

Product Leadership

Operational Excellence

Wal~Mart, SouthWest

Customer Intimacy

Marriott, JetBlue

Product Leadership

Google, Cognos

  • Research suggests that companies that have achieved break through performance had one focus and became good at the others over time.
  • This also helps organizations create better identity around customer value. It tells a better story and helps focus on a “single” message.
designing metrics
Designing Metrics
  • KPIs
    • Efficiency (Outputs/Inputs or Drivers)
    • Effectiveness (Outcomes/Drivers)
  • Finding Agreement
    • Align to Customer Value
  • Setting Targets
    • Can be just as difficult and time consuming
kpi design
KPI Design
  • Understand the goals & objectives of the organization
  • business focus
      • Leadership
      • Intimacy
      • Operational Excellence
  • Time dimension
  • Strategic vs operational variations
  • Owners/analysts/reporters
  • KPI design test (next slide)
  • potential actions
  • key dimensions & supporting material
kpi design test
KPI Design Test
  • Outcome minded, the measure should linked to a goal our outcome
  • Understandable, everyone involved should be able to comprehend what is being measured, how it is calculated, and how it impacts the company
  • Actionable, changes in the KPI should elicit an action or response
  • Trusted, for it to be used the executives must have faith in the number, the data sources, and the analyst
  • Comparative, a measure that can be compared across a portfolio; or to competition or industry benchmarks provides far more information
  • Aligned with Customer Value, is a increase in a KPI good for us, yet bad for a customer
  • Measureable, a KPI must be measurable, even by proxy
setting targets
Setting Targets
  • Need to understand the story behind the metric
  • Hard targets vs. continuous improvement
  • Target behavior
  • Thresholds
  • Target policy
    • Who sets targets, who can change targets
    • Another form of communication
executing strategy the scorecard process design
Executing Strategy – the Scorecard process design
  • Driving core processes improvements
    • Creating customer value
    • Improving financial performance
  • Executing projects
    • Technology
    • Process improvements
  • Managing plan
    • Top line goals
    • Bottom line results
  • Managing KPIs
    • Efficiency & Effectiveness
    • Predictors of business/market change
what to measure
What to Measure
  • Strategy Management
    • manages Strategic Objectives. Each Objective has a weight to determine priority
  • Business Process Performance Management
    • manages the KPIs that represent how the company captures customer value
  • There is a difference between “Managing” and “Monitoring” – Use the Scorecard project to LIMIT what is measured, thus focusing the business.
scorecard projects process
Scorecard Projects / Process

Greatest Value

  • Strategy Management
  • Business Process Performance Management
  • Performance Monitoring
  • Red-Yellow-Green Reporting
  • Report Cards

High Value

Marginal Value

scorecard
Scorecard
  • The Scorecard is…
    • Is a Framework, a systematic approach to managing the key customer value propositions of the organization
    • A consistent tool
    • A trigger for a management discussion
    • A place to collect on going commentary, analysis, actions and projects
    • A Strategy communication vehicle
  • The scorecard is not…
    • An analytical tool in the sense of a cube
    • A collection of everything measurable
    • Something used on an ad-hoc basis
slide22
2.5% of global businesses achieve 100 percent project success (PWC)
  • Companies typically deliver only about 63 percent of their strategy’s financial performance potential (Economist Intelligence Unit)
  • 9 out of 10 organizations fail to execute their strategies (Fortune)