STRATEGIC MANAGEMENT BY MARTINSONS

WEEK 4 TUTORIAL

BALANCED SCORECARD
AND
STRATEGY MAP

WHAT ARE THEY ?

WHY DO WE DEVELOP THEM ?
HOW CAN WE DEVELOP THEM ?
 BALANCED SCORECARD
Robert Kaplan & David Norton (1992-1996)

Trigger: Only 5% of employees understood their firm’s strategy.

Only 25% of managers had incentives linked to strategy.
Only 40% of firms linked budgets to strategy.

Financial Perspective
Are we satisfying our
shareholders?

Customer Perspective Process Perspective

Are we delighting (or at least Are we doing the right things?
satisfying) our customers? Are we doing things right?

Learning & Growth

Perspective
Are we prepared for the future?
(knowledge/skills, technology, etc.)
 BALANCED SCORECARD

Financial
Past

Customer Internal Process

Outside Inside

Innovation / Learning
(Resources/Abilities)
Future

Links aims to activities & allocations

FOCUS & ALIGNMENT

 BALANCED SCORECARD EXAMPLES
FROM PROFESSOR MARIS
ELECTRONIC CIRCUIT MAKER REGIONAL AIRLINE

F I NA
NCI A
L

CUS
TOM
E R

P RO
CE S
SES

I&L
↓
 STRATEGIC MANAGEMENT BY MARTINSONS
WEEK 4 TUTORIAL

What are the advantages of BSC?

• Helps clarify how a business can achieve
sustained, good financial performance.
• Helps understand how different aspects of
the business lead to good financial
performance.
• All important aspects of the company are
measured and monitored.
• Help balance the company's long-term and
short-term goals.
 3 Business Segments (Product Divisions)

Microsoft will also apply Artificial Intelligence through 3 different strategic initiatives.
First, it will cater to customers looking to add AI functionality to their applications by offering AI
developer tools and services in Azure.
Second, it will infuse AI in everything from its software to its laptops in an effort to
improve the customer experience.
Third, the company will leverage AI to improve all of its internal operations.
Since Microsoft generates most of its revenue from its Productivity & Business Process
and Intelligence Cloud segments, the company is likely to prioritize AI there.
Satya Nadella, Microsoft’s chief executive,
said that the layoffs will reduce costs amid
economic uncertainty and allow Microsoft
to refocus on strategic priorities such as
artificial intelligence.
 BALANCED SCORECARD FOR
Microsoft Business Division ("MBD") offerings consist of the Microsoft
Office system (comprising mainly the core Office product, Office 365,
SharePoint, Exchange, Lync) and Microsoft Dynamics business solutions.

… so, essentially, Microsoft Office software.

include metrics like cash flow, sales performance, operating income, or return or equity

Financial KPIs? How and when to measure?

1. time 2. quality 3. performance/service 4. cost
includes metrics like market share in target segments, the percentage of sales from new products, on-time delivery, net promoter score

Customer KPIs? How and when to measure?

includes aspects like unit costs, cycle times, yield, error rates
long term injury (why : put more weight on social responsibility > need more care on employee

Internal Processes KPIs? How and when to measure?

Innovate / Learn
employee engagement scores, retention rate of high-performing staff, skill increase of staff

KPIs? How and when to measure?

Resources
 STRATEGIC MANAGEMENT BY MARTINSONS
WEEK 4 TUTORIAL

Does BSC have any disadvantages?

• Information overload;
• Choosing or specifying metrics can be difficult or
arbitrary;
• The difficulty and cost of obtaining the required
information;
• Different goals may conflict with each other;
STRATEGIC MANAGEMENT BY MARTINSONS
WEEK 4 TUTORIAL
what is a strategy map ?
simple and logical graphic
showing case-and-effect

why do we need a strategy map?

- picture > thousand words (easily understood by more employee)
- empower employees to become better contributors
- communicates the value of intangible resources(intangible to tangible)
(e.g. employee knowledge, company’s culture)

Can you design a strategy map for MS?

how to design

step 1 : define your mission, vision and core values

step 2 : define the four perspectives
step 3 : set strategic priorities and business goals
step 4 : describe the rationale

*need to have cause and effect in archieving the goal

STRATEGY MAP FOR
BUSINESS DIVISION (MBD)

What you want

Financial to achieve?

How to attract
Customer and retain
customers?

Processes & What you need

Activities to do?

Resources & What you need

to do it?
Capabilities innovate, learn,
develop, acquire
 FROM KPIs TO A STRATEGY MAP
EXAMPLE FROM OUR LECTURE

What are the causal relationships among strategic objectives

in BSC?
For example,
• employees better trained in quality management tools →
• the improved process cycle times and process defects →
• shorter customer lead times, improved on-time delivery, and fewer
defects experienced by customers →
• higher satisfaction, retention, and spending →
• higher revenues and margins.
 FROM KPIs TO A STRATEGY MAP
EXAMPLE FROM OUR LECTURE
What is the weakest link in a strategy map and Balanced
Scorecard? strongest link : customer <-> financial
performance highly affect the revenue

• the learning and growth perspective

• the learning and growth perspective

was “the black hole of the Balanced
Scorecard.”
although there is training, hard to translate the intangible resources to the tangible one
FROM KPIs TO A STRATEGY MAP
EXAMPLE FROM OUR LECTURE
STRATEGIC MANAGEMENT BY MARTINSONS
WEEK 4 TUTORIAL

BALANCED SCORECARD
AND
STRATEGY MAP

WHAT ARE THEY ?

WHY DO WE DEVELOP THEM ?
HOW CAN WE DEVELOP THEM ?