Novartis Balanced Scorecard and critical success factors

1. Buzzi Tania
Canavesi Roberta
Del Grosso Lara
Mognoni Federica
Morandi Eliana
Vitale Chiara

2. Index
 Firm presentation
 Strategy
 Critical success factors
 Cause - effect
 Balanced scorecard
 Financial
 Customer
 Internal process
 Innovation and learning

3. Firm presentation
 Novartis was created in 1996 through a merger of
Ciba-Geigy and Sandoz.
 Novartis and its predecessor companies trace
roots back more than 250 years, with a rich history
of developing innovative products.
 Building on this heritage, today Novartis focuses its
innovation skills on adressing the unmet needs of
patients worldwide
 Nowadays Novartis works in different sectors:
 Production of general drugs
 Production of chemicals treatments
 Production of vaccines

4. Strategy
 Mission
 to discover new ways to improve and
extend people’s lives
 Vision
 to be a trusted leader in changing the
practice of medicine
 Values
 Innovation, quality, collaboration,
performance, courage, integrity

5. Strategy
 Novartis’ broad strategy is to use science-based
innovation to deliver better patient outcomes in
growing areas of healthcare
 In particular, Novartis focus on:
 Grow on domestic market (Switzerland) and
international market: they’re trying to increase
market share in emergent markets (Asia, Africa,
Latin America);
 Powerful new technologies that have the potential
to help produce therapeutic breakthroughs;
 Improve overall stability by granting increasing
revenues from current customers

6. Critical success factors
Financials High returns (attractiveness for shareholders)
Efficient use of capital
Customer Satisfied, loyal customers
High product quality
Process Efficient production process
Innovation
and learning
Tradition of leadership in innovation
Constant improvement of technology and know-
how
High-end research lab
Motivated, competent and satisfied employees
 What elements are necessary for our firm to achieve
its mission and ensure its sucess?

7. The cause and effect chain
Customer
Internal process
Innovation and
learning
Financial
Improve
shareholder
value
creation
Improve
asset
utilization
Improve/
mantain
product quality
(customer
satisfaction)
Improve
product
distribution
Improve
after sales
services and
safety
Dispose
safely waste
and
byproducts
Keep improving
production
process and
inventory
management
Generate
innovation
Increase
employees
competences
and
satisfaction
Increase
internationali
zation

8. 1. Improve shareholder’s
value creation
Economic profit
ROI
ROE
Financial perspective
 The ROE of the firm shows that we
are able to generate profit with
the money of shareholders
invested (ROE = 26,53%);
 Our aim is to maintain and
improve the creation of
shareholders’ values.
 Therefore, the main KPI to assess
the perfomance are: EP, ROI,
ROE.

9. Financial perspective
 Taking into consideration the level
of ROA (ROA=12,86%), our firm is
using in an efficient way the
capital.
 Our goal is to improve asset
utilization
 It can be monitored by the
following indicators: investments
as % of sales; payback period;
fixed asset turnover.
2. Improve assets utilization
Investment as % of sale
Payback period
Fixed assets turnover (Tot
sales/Fixed assets)

10. Customer’s perspective
 Customers’ perspective is focused on
customers’ satisfaction and loyalty.
 The strategic objectives are based on
the financial investments the company is
planning to do, in order to achieve
higher standards in medical care.
 The first strategic objective is to keep on
improving products’ quality, in order to
meet the health needs of patients.
1. Improve-maintain
products’ quality
N° of withdrawn products/ n°
of total products’ portfolio
Customers’satisfaction
through surveys
% of adverse reaction to the
products took by the patient

11. Customer’s perspective
 The second objective focus on after-
sales service and safety control reports
to the FDA;
 Novartis products affect directly health
of people;
 It’s necessary to monitor closely safety
and after-sales complaints.
2. Improve after-sales
service and safety control
reports
Average time needed to fix a
defected product
N° of detailed annual reports to
the FDA

12. Customer’s perspective
 The last strategic objective is to
improve products’ distribution,
analyzing the delivery time.
3. Improve products
distribution
Average delivery time
N° of on time deliveries/total
deliveries
N° of completed deliveries/
total deliveries

13. Internal process perspective
1. Keep improving production
process and to improve
inventory management
Manufacturing cycle effectiveness
Inventory turnover times or days
Process parts-per-million (PPM)
defect rates
o Having an efficient and effective
production cycle is synonimous of
quality of products.
o The process should be monitored in
every single step, in particular here we
monitor:
o The whole manufactoring cycle
o The inventory effectiveness
o The quality of the products

14. Internal process perspective
2. Dispose safely waste and
byproducts
Hazardous waste recycled (%)
Not-hazardous waste recycled
(%)
o Due to the nature of the industry,
knowing how to dispose safely waste
and by products is fundamental;
o Balanced scorecard should monitor
recycling process effectiveness.

15. Innovation and learning
perspective
1. Generate
innovation
Innovation rate (n of new
products/n of product sold)
R&D investment/revenues on
new products
N° of project approved (US,
EU, JP markets)
 Leaderhip in innovation and costant
improvement of technology and
know-how are a must;
 For this reason, the balance
scorecard should constantly monitor
the level of innovation exploited by
the firm

16. Innovation and learning
perspective
 The innovation process is supported
by the presence of competent
employees in high-end research lab.
 It’s important to monitor the quality
(and satisfaction) of its employees.
2. Increase employees
competences and
satisfaction
N° of days training/N° orders
Training expenses/revenues
Suggestion for improvement
from employees

17. Innovation and learning
perspective
 An important objective that the firm
is striving to reach is a growing
presence all over the world,
measured by the market share.
 For this reason, the balanced
scorecard should measure
internationalization in terms of
market share, foreign turnover and
number of foreign employees.
3. Increase
internationalzation
Foreign turnover/Total sales
Market share in foreign
markets
N° of foreign employees/Total
employees

18. Summary
10StrategicObjectives
20% Financial
30% Customer
20% Internal
process
30% Innovation
and learning
29KPI
21% Financial
27% Customer
21% Internal
process
31% Innovation
and learning

19. Sources
 Novartis website
 Novartis 2016 report
 «Performance measurement and control
system for implementing strategy», Robert
Simons