Transforming Strategy into Action Today

1. Transforming Strategy into Action Today Michael Ensley

2. 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

3. 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)

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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.

11. 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

12. 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

13. 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

14. 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

15. 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

18. 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.

19. Scorecard Projects / Process Greatest Value • Strategy Management • Business Process Performance Management • Performance Monitoring • Red-Yellow-Green Reporting • Report Cards High Value Marginal Value

20. 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

21. Transforming Strategy into Action Today Questions?

22. 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)