Reprinted From “The Journal of Sales and Marketing Management” (www.salesandmarketing.com) :
Tips to Enhance Personal Presentation Skills In the Digital Age
Article | Mon, 01/07/2013 - 01:00
Marc H. Kalan
Part I of III
In the current age of emails, texts, tweets and social media, the importance of personal communication, whether one-to-one or in front of a group, has never been more important, nor more difficult to accomplish. While the movement to digital communications channels provides speed and potentially broad reach, they generally fail to incorporate that which makes each of us unique, our personalities and human traits. From my experiences in the business and academic worlds, whether delivering a business presentation, making a sales pitch, or over the past decade teaching business classes, the ability to engage colleagues, clients or students, has become more challenging and critical.
For the business executive, manager, sales representative, in fact from virtually every functional area, this vital skill set is often overlooked in favor of analytic analysis, or the creation and utilization of the next ”hot app” for our ever-increasing reliance on the individual’s smartphone or tablet. There is no argument that texting, tweeting (with its 140-character limit), posting on social media such as Facebook and Linked-In, and other digital options, are rapidly becoming our modern “lingua franca.” PowerPoint, with its disengaging format of slides rather than speech, has become the preferred “modus operandi” of the business world, supplanting the individual as the focal point of corporate communication.
Yet none of these communications mediums delivers like a personal address. From hybriding the words of communication, to eliminating human characteristics such as body language and voice usage, modern digitized communications falls short. No matter how technology changes there will always be situations where a personal presentation is the most effective way to reach someone and convince them of something. The simple fact is there is nothing more powerful than one’s ability to forcefully deliver a speech, presentation, lecture, address or other personal communication. An individual’s presence is that unique element that differentiates these from a written, or in today’s environment tweeted, communication.
A major part of any lecture is without question the material you are sharing. Yet we all know that a good presentation goes well beyond the material. So what makes one presenter more interesting, engaging and successful than another? We’ve all experienced both excellent speakers who make time fly by, as well as dreadful speakers, who make every minute seem to last forever. So what makes the difference? Here are some tips I’ve picked up during my career that might help your presentations be more engaging, impactful and memorable.
Kalan’s Presentation Tips: Part I
Organization Balanced with Flexibility – Be organized, be prepared, know wha ...
Reprinted From The Journal of Sales and Marketing Management” (w.docx
1. Reprinted From “The Journal of Sales and Marketing
Management” (www.salesandmarketing.com) :
Tips to Enhance Personal Presentation Skills In the Digital Age
Article | Mon, 01/07/2013 - 01:00
Marc H. Kalan
Part I of III
In the current age of emails, texts, tweets and social media, the
importance of personal communication, whether one-to-one or
in front of a group, has never been more important, nor more
difficult to accomplish. While the movement to digital
communications channels provides speed and potentially broad
reach, they generally fail to incorporate that which makes each
of us unique, our personalities and human traits. From my
experiences in the business and academic worlds, whether
delivering a business presentation, making a sales pitch, or over
the past decade teaching business classes, the ability to engage
colleagues, clients or students, has become more challenging
and critical.
For the business executive, manager, sales representative, in
fact from virtually every functional area, this vital skill set is
often overlooked in favor of analytic analysis, or the creation
and utilization of the next ”hot app” for our ever-increasing
reliance on the individual’s smartphone or tablet. There is no
argument that texting, tweeting (with its 140-character limit),
posting on social media such as Facebook and Linked-In, and
other digital options, are rapidly becoming our modern “lingua
franca.” PowerPoint, with its disengaging format of slides
rather than speech, has become the preferred “modus operandi”
of the business world, supplanting the individual as the focal
2. point of corporate communication.
Yet none of these communications mediums delivers like a
personal address. From hybriding the words of communication,
to eliminating human characteristics such as body language and
voice usage, modern digitized communications falls short. No
matter how technology changes there will always be situations
where a personal presentation is the most effective way to reach
someone and convince them of something. The simple fact is
there is nothing more powerful than one’s ability to forcefully
deliver a speech, presentation, lecture, address or other personal
communication. An individual’s presence is that unique element
that differentiates these from a written, or in today’s
environment tweeted, communication.
A major part of any lecture is without question the material you
are sharing. Yet we all know that a good presentation goes well
beyond the material. So what makes one presenter more
interesting, engaging and successful than another? We’ve all
experienced both excellent speakers who make time fly by, as
well as dreadful speakers, who make every minute seem to last
forever. So what makes the difference? Here are some tips I’ve
picked up during my career that might help your presentations
be more engaging, impactful and memorable.
Kalan’s Presentation Tips: Part I
Organization Balanced with Flexibility – Be organized, be
prepared, know what you want to cover and in what order. Yet
also be flexible. Be comfortable allowing your presentation to
flow with the interests of your audience, which may not be
immediately evident. And while you exercise the option to
follow an unplanned path, always remember what you intended
to accomplish and bring your audience back to that destination.
You are in control of the flow and pace. Don’t feel so
constrained to “stick to your script” when opportunities to
expand beyond present themselves. Take advantage and capture
your listeners by speaking “to them” and not “at them”.
Introduce Yourself - Always introduce yourself as well as all of
those who will be presenting you so your attendees are aware of
3. your full team. Be sure to consider your relationship with the
audience (do you have an existing relationship or are you a new
face to them). Your introduction has several objectives:
· The first objective is to begin the relationship with your
listeners, if you are already familiar to them, this is a chance to
remind and renew that familiarity.
· A second objective is to begin to build rapport and trust –
don’t assume these already exist. Trust especially needs to be
earned. Audiences are skeptical; it’s a normal human
characteristic. The ability to read your audience and gauge
levels of trust as well as skepticism provides valuable insights
towards building strong bonds. Generally audiences are warm
and inviting. They are there because they anticipate a valuable
experience. Understanding this expectation is important.
· Third, we all like to know about others, especially those
talking to us as experts, or peers, or subordinates. Let the
audience know who you are and why you are there. If you are
being introduced by a third party, provide them with a few key
facts that are relevant to the audience as well as the subject
material (after all they are here to learn from your expertise so
remind them of just that).
· Fourth, audience member names: while it may not be practical
in every situation if you are able to learn and utilize individual
names this often enables those participants to feel more of a
personal connection to you, stimulating rapport and reinforcing
that trust. If practical consider having name signs for audience
members – keeping in mind you need to be able to read those
names easily and clearly from your presentation location. I now
require this simple act in each of my courses and I find it a
great method for rapidly building and enhancing my ability to
interact with individual audience members, while drawing each
member of the audience in.
· Fifth, if you are wearing a name tag, place it on your right
side (not left which seems logical to a right handed person). Not
only do people read from your right to left (their left to right),
but if you are shaking hands this places your name tag out in
4. front and avoids forcing those you are greeting from being
forced to look “across your chest”.
Cell Phones and Other Electronic Devices – Audience members
texting, emailing, tweeting, surfing the net, etc. are not engaged
in your presentation. These behaviors are distracting both to
you and those in the audience. Other than for taking notes, I
always ask for electronic devices to be turned off while I’m
speaking. In my classes, I have been known to ask those
breaking this request to leave the room.
Bring a Passion – It starts right here, right at the beginning, the
opportunity to win or lose your audience. Your personal
commitment to your presentation is paramount, and nobody can
or should care about your subject more than you do. Your
audience will read this from word one, and once lost it is
difficult, if not impossible, to regain. A comment I often hear
these days is that I bring a passion to each of my classes, a
passion that is seen and appreciated by my addressees. So bring
your passion and grab your audience with it.
Individual skill areas to enhance your physical presence and
managing the overall presentation experience will be covered in
parts II and III, which will be posted here on Wednesday and
Friday (Jan. 9 and 11).
Marc H. Kalan is a marketing/business development executive
with more than 30 years of diverse consumer marketing
experience at clients (from established Fortune 500 to start-
ups), suppliers, and promotional marketing agencies. Kalan’s
background includes a foundation in brand and sales
management. Upon an extensive industry career he began
teaching at the college and graduate level in 2003 and now
serves full time on the faculty of the Rutgers Business School,
Department of Supply Chain Management and Marketing
Sciences. Kalan can be reached at [email protected] or
[email protected] .
5. Tips to Enhance Personal Presentation Skills in the Digital Age:
Part II
Article | Wed, 01/09/2013 - 06:00
Marc H. Kalan
Editor’s Note: “Consistently better sales presentations could be
the most important New Year’s resolution your team could
make,” Rutgers Business School Professor Marc Kalan stated in
an article that was posted here on Monday. He introduced the
need for strong personal presentation skills, beginning with
organization and a personal passion. In Part II, we move into
individual skill areas to enhance your physical presence and
abilities to maximize the focus and attention of your audience.
From my experiences in the business and academic worlds,
whether delivering a business presentation, making a sales
pitch, or over the past decade, teaching business classes, the
ability to engage colleagues, clients or students has become
more challenging and critical.
Here are more tips I’ve picked up during my career that might
help your sales and marketing team’s presentations be more
engaging, impactful and memorable.
· Open strong – Catch your listeners’ attention from the start
and engage them in your subject. In today’s fast-paced, rapidly
changing world, attention spans are decreasing, so you need to
grab your audience right away. Audiences are there because
they want to learn from you. An interesting fact and/or
rhetorical question are two tools to engage and draw your
audience into your talk. Just be sure these are relevant to your
listeners, their backgrounds and interests. Concentrate on
making them feel comfortable. A relaxed and comfortable
audience is ready to welcome you and absorb your talk.
· Speak clearly– Don’t mumble, don’t cover your mouth or hold
a paper or script in front of yourself blocking the audience’s
view. This is a common error that creates a distinct barrier
between you, the speaker and your listeners. Notes are fine, I
use them all the time; just keep notes below face level.
Listeners like to see who they are listening to.
6. · Avoid filling space with non-words– So many speakers feel
the need to fill every moment with sound, fearing the lack of
sound communicates something, although I have yet to figure
out what that is. This is a major point of challenge for most
speakers who fill space with what speakers call “non-words.”
The most egregious non-word being the ever present “ummm,”
followed by the use of conformational expressions such as
“like” or “OK.” While occasionally useful terms, in the vast
majority of cases (and always with “ummm”) these space fillers
actually are a negative. There is truth to the expression “silence
is golden.”
· Don’t speak too quickly– We speak faster than we can listen
and consider what’s being said. Don’t rush yourself. Use
pauses, they allow your listeners to catch up to you and digest
what they have heard. In fact, those pauses are comforting to
the audience and seem much longer to the speaker than to the
listener.
· Make eye contact– Look at your audience often, and look at
individuals and not just the “general audience.” I mean really
look at individuals. Look them right in the eyes. Be sure to
include individuals in all parts of the room, as well as way in
the back. You will draw them, and those around them, into your
presentation and they will reward you with their attention and
interest. Eye contact also provides you with excellent listener
“cues” that will let you know how the audience is reacting to
your presentation. Wandering and “sleepy” eyes tell you a lot.
You can use these cues to adjust your talk as warranted.
· Stick with your natural style– Your individual style and
personality should come through. Personal body language is a
powerful communication tool. If you are naturally lively, be
lively. If you are naturally more reserved, that is fine, too. Just
don’t recede away. Your “natural style” will create a forceful
presence.
· Stories and anecdotes add depth and reality– Stories may be
the most effective way to convey information, as well as to
provide “color commentary” to an audience while building a
7. relationship with them. It confirms and reinforces you as the
“expert,” and demonstrates a practical knowledge that only
comes from experience. Stories are easier for people to recollect
than straightforward information. They are entertaining, often
relatable on a personal level, and probably the most remembered
and repeated part of any talk. It’s not a coincidence that many
of history’s most notable “communicators”, individuals like
Aesop, Plato, Jesus and Lincoln, utilized stories and parables to
make and reinforce key points.
· End strong – A strong key point – perhaps the answer to the
rhetorical question that started your talk or a challenge to the
audience with another rhetorical question – are great ways to
“leave them wanting more.”
Part III, which will be posted on Friday, will look at how to
manage the overall presentation experience.
Marc H. Kalan is a marketing/business development executive
with more than 30 years of diverse consumer marketing
experience at clients (from established Fortune 500 to startups),
suppliers and promotional marketing agencies. Kalan’s
background includes a foundation in brand and sales
management. He began teaching at the college and graduate
level in 2003 and now serves full time on the faculty of the
Rutgers Business School, Department of Supply Chain
Management and Marketing Sciences. Kalan can be reached at
[email protected] or [email protected].
Tips to Enhance Personal Presentation Skills in the Digital Age:
Part III
Article | Sun, 01/13/2013 - 01:00
Marc H. Kalan
Editor’s Note: “Consistently better sales presentations could be
the most important New Year’s resolution your team could
8. make,” Rutgers Business School Professor Marc Kalan stated in
an article that posted here on Monday. He introduced the need
for strong personal presentation skills, beginning with
organization and a personal passion. In Part II, we move into
individual skill areas to enhance your physical presence and
abilities to maximize the focus and attention of your audience.
In Part I the author presented the need for strong presentation
skills in today’s digital age. Part II expanded upon the subject
with specifics on voice, eye and body languages. Part III
focuses on managing the overall presentation experience and
provides suggestions to leave your audience wanting more. It’s
Friday the 13th, and it’s going to be your lucky day!
You have been polite to your audience and now it's your time to
shine. Here is my last set of tips for better presentations in
2013.
Don’t Let Others Get Into Your Head– Don’t be overly nervous
or exhibit stage freight. Although many of us feel awkward
getting up in front of an audience, it is up to you to “own the
room” and be in charge. Your audience will react to your
confidence.
Demand the attention your presentation deserves– Even those
who seem to drift away bring a part of them that wants to be
drawn into your talk. You just have to engage that part of them
with a nugget of new information, an engaging story or
something that has relevance for them. Once engaged, you can
demand your audience’s attention by your presence. They are
there to hear you and will appreciate your being in command of
the room.
Mistakes and Missed Points– These can happen and often do.
But in most situations no one but you will know, so don’t point
them out or feel obligated to correct minor miscues. More often
than not it’s better to just keep moving forward. And in those
cases where the missed point is critical there is no need to
apologize for having missed or skipped something. Just
incorporate it where it falls as “another important aspect worth
mentioning.”
9. Speaking Alone or In A Group– If you are working alone, make
the audience a partner in your presentation by engaging specific
individuals around the room with a short question or two.
Consider how a few questions (even rhetorical questions) can
capture the attention of listeners. If you are part of a group, be
sure each member has a meaningful role (or why else are they
there?).
Questions and Answers– Time permitting, open the floor to
questions and really respond. When asked a question, don’t rush
with a response. Instead make each question a chance to
reinforce your relationship with your listeners, and start by
repeating the question back to the audience. This will:
· Confirm you understand what the questioner is asking; clarity
is important and not always self-evident.
· Enable the whole audience to hear the question, which is often
not the case. Often those not hearing or knowing the question
become left out and lose interest and focus. This is especially
true when multiple “unheard” questions have been asked.
· Give you time to think. Thinking before talking is more than
just a good idea; it’s a chance to consider your response and its
applicability for your audience.
· Maximize your opportunity to respond to the whole audience
and not just to the questioner. Avoid getting into a one to one
discussion when speaking to a group. Its fine to begin your
response focused on the questioner, but once begun expand your
response to incorporate the entire audience by looking around
and not just at a single individual, your questioner.
Thank Your Audience– This seems like such a logical and
normal thing, yet speakers often forget this simple courtesy. Be
sure to thank your audience for their attention, their interest,
their consideration, or just for the time spent with you.
Recognition of the importance of their time, the most limited
asset for most people, is a great way to leave a positive
impression and communicates respect. Every speaker gains
stature by acknowledging that respect.
Effective presentation skills are ever more important in today’s
10. limited-attention environment. Ironically, as the digital age
opens even more channels of communication, opportunities to
showcase your knowledge, points of view, new ideas, business
updates and personality continue to become more constrained by
competitive time pressures. For most professionals, the chances
to speak in person and captivate a live audience are limited.
This makes each and every one precious. It all comes down to
developing a style that engages your listeners, building rapport
and trust so that you stand out as a speaker, enjoyed and
remembered by your audience.
While there is no single style or form for effective
presentations, we do know that even when content is the same
some presenters are just more interesting, engaging and
successful than others. This has never been more important than
in today’s era of quickly seen and forgotten social media.
Effective presentation skills are a valuable part of your
professional arsenal. Build them and use them.
Perhaps its best summed up with this simple statement: Have
fun: Your audience will feel it and they will have fun too.
Marc H. Kalan is a marketing/business development executive
with more than 30 years of diverse consumer marketing
experience at clients (from established Fortune 500 to startups),
suppliers and promotional marketing agencies. Kalan’s
background includes a foundation in brand and sales
management. He began teaching at the college and graduate
level in 2003 and now serves full time on the faculty of the
Rutgers Business School, Department of Supply Chain
Management and Marketing Sciences. Kalan can be reached at
[email protected]com or [email protected].
The Brand Report Card
by Kevin Lane Keller
11. Reprint r00104
JANUARY – FEBRUARY 2000
Reprint Number
Narcissistic Leaders: The Incredible Pros, the Inevitable Cons R
0 0 1 0 5
Co-opting Customer Competence R 0 0 1 0 8
Coevolving: At Last, a Way to Make Synergies Work R 0 0 1 0
3
A Market-Driven Approach to Retaining Talent R 0 0 1 0 1
Common Sense and Conflict: R 0 0 1 1 1
An Interview with Disney’s Michael Eisner
A Modest Manifesto for Shattering the Glass Ceiling R 0 0 1 0 7
Communities of Practice: The Organizational Frontier R 0 0 1 1
0
F O R E T H O U G H T
The Power of Positive Deviancy F 0 0 1 0 1
Green Reporting F 0 0 1 0 2
The Electronic Negotiator F 0 0 1 0 3
The New Atlantic Century F 0 0 1 0 4
Performance Appraisal Reappraised F 0 0 1 0 5
The Mismanagement of Advertising F 0 0 1 0 6
H B R C A S E S T U DY
When the Boss Won’t Budge R 0 0 1 0 6
12. P E R S P E C T I V E S
The Future of Commerce R 0 0 1 1 2
T H I N K I N G A B O U T. . .
Discovering New Value in Intellectual Property R 0 0 1 0 9
M A N AG E R ’ S TO O L K I T
The Brand Report Card R 0 0 1 0 4
B O O K I N R E V I E W
Beating Microsoft at Its Own Game R 0 0 1 0 2
MICHAEL MACCOBY
C.K. PRAHALAD AND
VENKATRAM RAMASWAMY
KATHLEEN M. EISENHARDT AND
D. CHARLES GALUNIC
PETER CAPPELLI
SUZY WETLAUFER
DEBRA E. MEYERSON AND
JOYCE K. FLETCHER
ETIENNE C. WENGER AND WILLIAM M. SNYDER
JERRY STERNIN AND ROBERT CHOO
ANS KOLK
13. A CONVERSATION WITH KATHLEEN VALLEY
HERMANN SIMON AND MAX OTTE
DICK GROTE
JOHN PHILIP JONES
REGINA FAZIO MARUCA AND
JOHN M. MILHAVEN
ADRIAN J. SLYWOTZKY; CLAYTON M.
CHRISTENSEN AND RICHARD S. TEDLOW;
AND NICHOLAS G. CARR
KEVIN G. RIVETTE AND
DAVID KLINE
KEVIN LANE KELLER
J. BRADFORD DELONG AND
A. MICHAEL FROOMKIN
uilding and properl y managing brand equit y
has become a priority for companies of all sizes,
in all types of industries, in all types of markets.
After all, from strong brand equity flow customer loy-
15. more about how your particular
brand is configured. Constructing
similar report cards for your com-
petitors can give you a clearer picture
of their strengths and weaknesses.
One caveat: Identifying weak spots
for your brand doesn’t necessarily
mean identifying areas that need
more attention. Decisions that might
seem straightforward – “We haven’t
paid much attention to innovation:
let’s direct more resources toward
R&D” – can sometimes prove to be
serious mistakes if they undermine
another characteristic that custom-
ers value more.
The Top Ten Traits
The world’s strongest brands share
these ten attributes:
1. The brand excels at delivering
the benefits customers truly desire.
Why do customers really buy a prod-
uct? Not because the product is a
collection of attributes but because
those attributes, together with the
brand’s image, the service, and many
other tangible and intangible factors,
create an attractive whole. In some
cases, the whole isn’t even some-
thing that customers know or can say
they want.
16. Consider Starbucks. It’s not just a
cup of coffee. In 1983, Starbucks was
a small Seattle-area coffee retailer.
Then while on vacation in Italy,
Howard Schultz, now Starbucks
chairman, was inspired by the ro-
mance and the sense of community
he felt in Italian coffee bars and cof-
fee houses. The culture grabbed him,
and he saw an opportunity.
“It seemed so obvious,” Schultz
says in the 1997 book he wrote with
Dori Jones Yang, Pour Your Heart
Into It. “Starbucks sold great coffee
beans, but we didn’t serve coffee by
the cup. We treated coffee as pro-
duce, something to be bagged and
sent home with the groceries. We
stayed one big step away from the
heart and soul of what coffee has
meant throughout centuries.”
And so Starbucks began to focus
its efforts on building a coffee bar
culture, opening coffee houses like
those in Italy. Just as important, the
company maintained control over
the coffee from start to finish – from
the selection and procurement of the
beans to their roasting and blending
to their ultimate consumption. The
extreme vertical integration has paid
off. Starbucks locations thus far have
successfully delivered superior bene-
17. fits to customers by appealing to all
five senses – through the enticing
aroma of the beans, the rich taste of
the coffee, the product displays and
attractive artwork ador ning the
walls, the contemporary music play-
ing in the background, and even the
cozy, clean feel of the tables and
chairs. The company’s startling suc-
cess is evident: The average Star-
bucks customer visits a store 18
times a month and spends $3.50 a
visit. The company’s sales and prof-
its have each grown more than 50%
annually through much of the 1990s.
2 . Th e b ra n d s t ays re l eva nt. In
strong brands, brand equity is tied
both to the actual quality of the prod-
uct or service and to various intangi-
ble factors. Those intangibles include
“user imagery” (the type of person
who uses the brand); “usage imagery”
(the type of situations in which the
brand is used); the type of personality
the brand portrays (sincere, exciting,
competent, rugged); the feeling that
the brand tries to elicit in customers
(purposeful, warm); and the type of
relationship it seeks to build with its
customers (committed, casual, sea-
sonal). Without losing sight of their
core strengths, the strongest brands
stay on the leading edge in the prod-
uct arena and tweak their intangi-
bles to fit the times.
18. Gillette, for example, pours mil-
lions of dollars into R&D to ensure
that its razor blades are as technolog-
ically advanced as possible, calling
attention to major advances through
subbrands (Trac II, Atra, Sensor,
Mach3) and signaling minor im-
provements with modifiers (Atra
4 harvard business review January–February 2000
M A N A G E R ’ S T O O L K I T • T h e B r a n d R e p o r
t C a r d
Rate your brand on a scale
of one to ten (one being
extremely poor and ten
being extremely good) for
each characteristic below.
Then create a bar chart
that reflects the scores. Use
the bar chart to generate
discussion among all those
individuals who participate
in the management of
your brands. Looking at
the results in that manner
should help you identify
areas that need improve-
ment, recognize areas in
which you excel, and learn
more about how your partic-
ular brand is configured.
It can also be helpful to
19. create a report card and chart
for competitors’ brands
simply by rating those
brands based on your own
perceptions, both as a com-
petitor and as a consumer.
As an outsider, you may
know more about how their
brands are received in the
marketplace than they do.
Keep that in mind as you
evaluate your own brand.
Try to look at it through the
eyes of consumers’ rather
than through your own
knowledge of budgets,
teams, and time spent on
various initiatives.
Rating
Your Brand
Kevin Lane Keller is the E.B. Os-
born Professor of Marketing at the
Amos Tuck School of Business at
Dartmouth College in Hanover,
New Hampshire. He is the author of
Strategic Brand Management (Pren-
tice-Hall, 1998).
20. harvard business review January–February 2000 5
T h e B r a n d R e p o r t C a r d • M A N A G E R ’ S T O
O L K I T
The brand excels at delivering the benefits
customers truly desire.
Have you attempted to uncover unmet consumer needs
and wants? By what methods? Do you focus relentlessly
on maximizing your customers’ product and service
experiences? Do you have a system in place for getting
comments from customers to the people who can effect
change?
The brand stays relevant.
Have you invested in product improvements that
provide better value for your customers? Are you in
touch with your customers’ tastes? With the current
market conditions? With new trends as they apply
to your offering? Are your marketing decisions based
on your knowledge of the above?
The pricing strategy is based on consumers’
perceptions of value.
Have you optimized price, cost, and quality to meet or
exceed customers’ expectations? Do you have a system
in place to monitor customers’ perceptions of your
brand’s value? Have you estimated how much value
your customers believe the brand adds to your product?
The brand is properly positioned.
21. Have you established necessary and competitive points
of parity with competitors? Have you established
desirable and deliverable points of difference?
The brand is consistent.
Are you sure that your marketing programs are not
sending conflicting messages and that they haven’t
done so over time? Conversely, are you adjusting your
programs to keep current?
The brand portfolio and hierarchy make sense.
Can the corporate brand create a seamless umbrella
for all the brands in the portfolio? Do the brands in that
portfolio hold individual niches? How extensively do
the brands overlap? In what areas? Conversely, do the
brands maximize market coverage? Do you have a brand
hierarchy that is well thought out and well understood?
The brand makes use of and coordinates a full
repertoire of marketing activities to build equity.
Have you chosen or designed your brand name, logo,
symbol, slogan, packaging, signage, and so forth to
maximize brand awareness? Have you implemented
integrated push and pull marketing activities that
target both distributors and customers? Are you aware
of all the marketing activities that involve your brand?
Are the people managing each activity aware of one
another? Have you capitalized on the unique capabili-
ties of each communication option while ensuring that
the meaning of the brand is consistently represented?
The brand’s managers understand what the
brand means to consumers.
Do you know what customers like and don’t like about
22. a brand? Are you aware of all the core associations
people make with your brand, whether intentionally
created by your company or not? Have you created
detailed, research-driven portraits of your target
customers? Have you outlined customer-driven
boundaries for brand extensions and guidelines for
marketing programs?
The brand is given proper support, and that
support is sustained over the long run.
Are the successes or failures of marketing programs
fully understood before they are changed? Is the brand
given sufficient R&D support? Have you avoided the
temptation to cut back marketing support for the brand
in reaction to a downturn in the market or a slump in
sales?
The company monitors sources of brand equity.
Have you created a brand charter that defines the
meaning and equity of the brand and how it should be
treated? Do you conduct periodic brand audits to assess
the health of your brand and to set strategic direction?
Do you conduct routine tracking studies to evaluate
current market performance? Do you regularly
distribute brand equity reports that summarize all
relevant research and information to assist marketers
in making decisions? Have you assigned explicit
responsibility for monitoring and preserving brand
equity?
score
Plus, SensorExcel). At the same
23. time, Gillette has created a consis-
tent, intangible sense of product su-
periority with its long-running ads,
“The best a man can be,” which are
tweaked through images of men at
work and at play that have evolved
over time to reflect contemporary
trends.
These days, images can be tweaked
in many ways other than through tra-
ditional advertising, logos, or slogans.
“Relevance” has a deeper, broader
meaning in today’s market. Increas-
ingly, consumers’ perceptions of a
company as a whole and its role in so-
ciety affect a brand’s strength as well.
Witness corporate brands that very
visibly support breast cancer research
or current educational programs of
one sort or another.
3. The pricing strategy is based
on consumers’ perceptions of value.
The right blend of product quality,
design, features, costs, and prices is
very difficult to achieve but well
worth the effort. Many managers are
woefully unaware of how price can
and should relate to what customers
think of a product, and they there-
fore charge too little or too much.
For example, in implementing its
value-pricing strategy for the Cas-
cade automatic-dishwashing deter-
24. gent brand, Procter & Gamble made
a cost-cutting change in its formu-
lation that had an adverse effect on
the product’s performance under
certain – albeit somewhat atypical –
water conditions. Lever Brothers
quickly countered, attacking Cas-
cade’s core equity of producing “vir-
tually spotless” dishes out of the
dishwasher. In response, P&G im-
mediately returned to the brand’s
old formulation. The lesson to P&G
and others is that value pricing
should not be adopted at the expense
of essential brand-building activities.
By contrast, with its well-known
shift to an “everyday low pricing”
(EDLP) strategy, Procter & Gamble
did successfully align its prices with
consumer perceptions of its prod-
ucts’ value while maintaining ac-
ceptable profit levels. In fact, in the
fiscal year after Procter & Gamble
switched to EDLP (during which it
also worked very hard to streamline
operations and lower costs), the com-
pany reported its highest profit mar-
gins in 21 years.
4.The brand is properly positioned.
Brands that are well positioned oc-
cupy particular niches in consumers’
minds. They are similar to and dif-
ferent from competing brands in cer-
25. tain reliably identifiable ways. The
most successful brands in this regard
keep up with competitors by creat-
ing points of parity in those areas
where competitors are trying to find
an advantage while at the same time
creating points of difference to
achieve advantages over competi-
tors in some other areas.
The Mercedes-Benz and Sony
brands, for example, hold clear ad-
vantages in product superiority and
match competitors’ level of service.
Saturn and Nordstrom lead their re-
spective packs in service and hold
their own in quality. Calvin Klein
and Harley-Davidson excel at pro-
viding compelling user and usage
imagery while offering adequate or
even strong performance.
Visa is a particularly good example
of a brand whose managers under-
stand the positioning game. In the
1970s and 1980s, American Express
maintained the high-profile brand
in the credit card market through a
series of highly effective marketing
programs. Trumpeting that “mem-
bership has its privileges,” Ameri-
can Express came to signify status,
prestige, and quality.
In response, Visa introduced the
Gold and the Platinum cards and
26. launched an aggressive marketing
campaign to build up the status of
its cards to match the American Ex-
press cards. It also developed an ex-
tensive merchant delivery system to
differentiate itself on the basis of
superior convenience and accessi-
bility. Its ad campaigns showcased
desirable locations such as famous
restaurants, resorts, and events that
did not accept American Express
while proclaiming, “Visa. It’s every-
where you want to be.” The aspira-
tional message cleverly reinforced
both accessibility and prestige and
helped Visa stake out a formidable
position for its brand. Visa became
the consumer card of choice for fam-
ily and personal shopping, for per-
sonal travel and entertainment, and
even for international travel, a for-
mer American Express stronghold.
Of course, branding isn’t static,
and the game is even more difficult
when a brand spans many product
categories. The mix of points of par-
ity and point of difference that
works for a brand in one category
may not be quite right for the same
brand in another.
5. The brand is consistent. Main-
taining a strong brand means striking
the right balance between continu-
27. ity in marketing activities and the
kind of change needed to stay rele-
vant. By continuity, I mean that the
brand’s image doesn’t get muddled
or lost in a cacophony of marketing
efforts that confuse customers by
sending conflicting messages.
Just such a fate befell the Michelob
brand. In the 1970s, Michelob ran ads
featuring successful young profes-
sionals that confidently proclaimed,
“Where you’re going, it’s Michelob.”
The company’s next ad campaign
trumpeted, “Weekends were made
for Michelob.” Later, in an attempt
to bolster sagging sales, the theme
was switched to “Put a little week-
end in your week.” In the mid-1980s,
managers launched a campaign
telling consumers that “The night
belongs to Michelob.” Then in 1994
we were told, “Some days are better
than others,” which went on to ex-
plain that “A special day requires a
special beer.” That slogan was subse-
quently changed to “Some days were
made for Michelob.”
Pity the poor consumers. Previous
advertising campaigns simply re-
quired that they look at their cal-
endars or out a window to decide
whether it was the right time to
drink Michelob; by the mid-1990s,
28. they had to figure out exactly what
kind of day they were having as well.
After receiving so many different
messages, consumers could hardly
6 harvard business review January–February 2000
M A N A G E R ’ S T O O L K I T • T h e B r a n d R e p o r
t C a r d
Maintaining a strong brand means striking the
right balance between continuity and change.
be blamed if they had no idea when
they were supposed to drink the
beer. Predictably, sales suffered.
From a high in 1980 of 8.1 million
barrels, sales dropped to just 1.8 mil-
lion barrels by 1998.
6. The brand portfolio and hierar-
chy make sense. Most companies do
not have only one brand; they create
and maintain different brands for
different market segments. Single
product lines are often sold under
different brand names, and different
brands within a company hold dif-
ferent powers. The corporate, or
companywide, brand acts as an um-
brella. A second brand name under
that umbrella might be targeted at
the family market. A third brand
name might nest one level below the
29. family brand and appeal to boys, for
example, or be used for one type of
product.
Brands at each level of the hierar-
chy contribute to the overall equity
of the portfolio through their indi-
vidual ability to make consumers
aware of the various products and
foster favorable associations with
them. At the same time, though,
each brand should have its own
boundaries; it can be dangerous to
try to cover too much ground with
one brand or to overlap two brands
in the same portfolio.
The Gap’s brand portfolio pro-
vides maximum market coverage
with minimal overlap. Banana Re-
public anchors the high end, the Gap
covers the basic style-and-quality
terrain, and Old Navy taps into the
broader mass market. Each brand
has a distinct image and its own
sources of equity.
BMW has a par ticularly well-
designed and implemented hierar-
chy. At the corporate brand level,
BMW pioneered the luxury sports
sedan category by combining seem-
ingly incongruent style and perfor-
mance considerations. BMW’s
clever advertising slogan, “The ulti-
30. mate driving machine,” reinforces
the dual aspects of this image and is
applicable to all cars sold under the
BMW name. At the same time, BMW
created well-differentiated subbrands
through its 3, 5, and 7 series, which
suggest a logical order and hierarchy
of quality and price.
General Motors, by contrast, still
struggles with its brand portfolio
and hierarchy. In the early 1920s,
Alfred P. Sloan decreed that his com-
pany would offer “a car for every
purse and purpose.” This philosophy
led to the creation of the Cadillac,
Oldsmobile, Buick, Pontiac, and
Chevrolet divisions. The idea was
that each division would appeal to
a unique market segment on the
basis of price, product design, user
imagery, and so forth. Through the
years, however, the marketing over-
lap among the five main GM divi-
sions increased, and the divisions’
distinctiveness diminished. In the
mid-1980s, for example, the com-
pany sold a single body type (the J-
body) modified only slightly for the
five different brand names. In fact,
advertisements for Cadillac in the
1980s actually stated that “motors
for a Cadillac may come from other
divisions, including Buick and Olds-
31. mobile.”
In the last ten years, the company
has attempted to sharpen the divi-
sions’ blurry images by reposition-
ing each brand. Chevrolet has been
positioned as the value-priced, entry-
level brand. Saturn represents no-
haggle customer-oriented service.
Pontiac is meant to be the sporty,
per for mance-oriented brand for
young people. Oldsmobile is the
brand for larger, medium-priced
cars. Buick is the premium, “near
luxury” brand. And Cadillac, of
course, is still the top of the line. Yet
the goal remains challenging. The
financial performance of Pontiac
and Saturn has improved. But the
top and bottom lines have never re-
gained the momentum they had
years ago. Consumers remain con-
fused about what the brands stand
for, in sharp contrast to the clearly
focused images of competitors like
Honda and Toyota.
7. The brand makes use of and co-
ordinates a full repertoire of market-
ing activities to build equity. At its
most basic level, a brand is made up
of all the marketing elements that
can be trademarked – logos, symbols,
slogans, packaging, signage, and so
on. Strong brands mix and match
these elements to perform a number
32. of brand-related functions, such as
enhancing or reinforcing consumer
awareness of the brand or its image
and helping to protect the brand both
competitively and legally.
Managers of the strongest brands
also appreciate the specific roles that
different marketing activities can
play in building brand equity. They
can, for example provide detailed
product information. They can show
consumers how and why a product
is used, by whom, where, and when.
They can associate a brand with a
person, place, or thing to enhance or
refine its image.
Some activities, such as traditional
advertising, lend themselves best to
“pull” functions –those meant to cre-
ate consumer demand for a given
product. Others, like trade promo-
tions, work best as “push” pro-
grams – those designed to help push
the product through distributors.
When a brand makes good use of all
its resources and also takes particu-
lar care to ensure that the essence of
the brand is the same in all activi-
ties, it is hard to beat.
Coca-Cola is one of the best exam-
ples. The brand makes excellent use
of many kinds of marketing activi-
ties. These include media advertis-
33. ing (such as the global “Always
Coca-Cola” campaign); promotions
(the recent effort focused on the re-
turn of the popular contour bottle,
for example); and sponsorship (its
extensive involvement with the
Olympics). They also include direct
response (the Coca-Cola catalog,
which sells licensed Coke merchan-
dise) and interactive media (the
company’s Web site, which offers,
among other things, games, a trading
post for collectors of Coke memora-
bilia, and a virtual look at the World
of Coca-Cola museum in Atlanta).
Through it all, the company always
reinforces its key values of “original-
ity,” “classic refreshment,” and so
Boundaries are important. Overlapping two
brands in the same portfolio can be dangerous.
T h e B r a n d R e p o r t C a r d • M A N A G E R ’ S T O
O L K I T
harvard business review January–February 2000 7
on. The brand is always the hero in
Coca-Cola advertising.
8. The brand’s managers under-
stand what the brand means to con-
sumers. Managers of strong brands
appreciate the totality of their
34. brand’s image – that is, all the differ-
ent perceptions, beliefs, attitudes,
and behaviors customers associate
with their brand, whether created in-
tentionally by the company or not.
As a result, managers are able to
make decisions regarding the brand
with confidence. If it’s clear what
customers like and don’t like about
a brand, and what core associations
are linked to the brand, then it
should also be clear whether any giv-
en action will dovetail nicely with
the brand or create friction.
The Bic brand illustrates the kinds
of problems that can arise when
managers don’t fully understand
their brand’s meaning. By emphasiz-
ing the convenience of inexpensive,
disposable products, the French
company Société Bic was able to cre-
ate a market for nonrefillable ball-
point pens in the late 1950s, dispos-
able cigarette lighters in the early
1970s, and disposable razors in the
early 1980s. But in 1989, when Bic
tried the same strategy with per-
fumes in the United States and Eu-
rope, the effort bombed.
The perfumes – two for women
(“Nuit” and “Jour”) and two for men
(“Bic for Men” and “Bic Sport for
Men”) – were packaged in quarter-
ounce glass spray bottles that looked
35. like fat cigarette lighters and sold for
about $5 each. They were displayed
in plastic packages on racks at
checkout counters throughout Bic’s
extensive distribution channels,
which included 100,000 or so drug-
stores, super markets, and other
mass merchandisers. At the time of
the launch, a Bic spokesperson de-
scribed the products as logical exten-
sions of the Bic heritage: “High qual-
ity at affordable prices, convenient
to purchase and convenient to use.”
The company spent $20 million on
an advertising and promotion blitz
that featured images of stylish peo-
ple enjoying the perfumes and used
the tag line “Paris in your pocket.”
What went wrong? Although their
other products did stand for conve-
nience and for good quality at low
prices, Bic’s managers didn’t under-
stand that the overall brand image
lacked a certain cachet with cus-
tomers – a critical element when
marketing something as tied to emo-
tions as perfume. The marketers
knew that customers understood the
message they were sending with
their earlier products. But they didn’t
have a handle on the associations
that the customers had added to the
brand image – a utilitarian, imper-
sonal essence – which didn’t at all
36. lend itself to perfume.
By contrast, Gillette has been
careful not to fall into the Bic trap.
While all of its products benefit from
a similarly extensive distribution
system, it is very protective of the
name carried by its razors, blades,
and associated toiletries. The com-
pany’s electric razors, for example,
use the entirely separate Braun
name, and its oral care products are
marketed under the Oral B name.
9. The brand is given proper sup-
port, and that support is sustained
over the long run. Brand equity must
be carefully constructed. A firm
foundation for brand equity requires
that consumers have the proper
depth and breadth of awareness and
strong, favorable, and unique associ-
ations with the brand in their mem-
ory. Too often, managers want to
take shortcuts and bypass more ba-
sic branding considerations – such
as achieving the necessary level of
brand awareness – in favor of concen-
trating on flashier aspects of brand
building related to image.
A good example of lack of support
comes from the oil and gas industry
in the 1980s. In the late 1970s, con-
sumers had an extremely positive
37. image of Shell Oil and, according to
market research, saw clear differ-
ences between that brand and its
major competitors. In the early
1980s, however, for a variety of rea-
sons, Shell cut back considerably on
its advertising and marketing. Shell
has yet to regain the ground it lost.
The brand no longer enjoys the same
special status in the eyes of con-
sumers, who now view it as similar
to other oil companies.
Another example is Coors Brew-
ing. As Coors devoted increasing at-
tention to growing the equity of its
less-established brands like Coors
Light, and introduced new products
like Zima, ad support for the flag-
ship beer plummeted from a peak of
about $43 million in 1985 to just $4
million in 1993. What’s more, the fo-
cus of the ads for Coors beer shifted
from promoting an iconoclastic, in-
dependent, western image to reflect-
ing more contemporary themes. Per-
haps not surprisingly, sales of Coors
beer dropped by half between 1989
and 1993. Finally in 1994, Coors be-
gan to address the problem, launch-
ing a campaign to prop up sales that
returned to its original focus. Mar-
keters at Coors admit that they did
not consistently give the brand the
38. attention it needed. As one com-
mented: “We’ve not marketed Coors
as aggressively as we should have in
the past ten to 15 years.”
10. The company monitors sources
of brand equity. Strong brands gen-
erally make good and frequent use of
in-depth brand audits and ongoing
brand-tracking studies. A brand audit
is an exercise designed to assess the
health of a given brand. Typically, it
consists of a detailed internal descrip-
tion of exactly how the brand has
been marketed (called a “brand in-
ventory”) and a thorough external
investigation, through focus groups
and other consumer research, of ex-
actly what the brand does and could
mean to consumers (called a “brand
exploratory”). Brand audits are par-
ticularly useful when they are sched-
uled on a periodic basis. It’s critical
for managers holding the reins of a
brand portfolio to get a clear picture
of the products and services being of-
fered and how they are being mar-
keted and branded. It’s also impor-
tant to see how that same picture
looks to customers. Tapping cus-
tomers’ perceptions and beliefs often
uncovers the tr ue meaning of a
8 harvard business review January–February 2000
M A N A G E R ’ S T O O L K I T • T h e B r a n d R e p o r
39. t C a r d
Tapping customers’ perceptions and beliefs
often uncovers the true meaning of a brand.
cerned that some of its characters
(among them Mickey Mouse and
Donald Duck) were being used in-
appropriately and becoming over-
exposed. To determine the severity
of the problem, Disney undertook an
extensive brand audit. First, as part
of the brand inventory, managers
compiled a list of all available Dis-
ney products (manufactured by the
company and licensed) and all third-
party promotions (complete with
point-of-purchase displays and rele-
vant merchandising) in stores world-
wide. At the same time, as part of a
brand exploratory, Disney launched
its first major consumer research
study to investigate how consumers
felt about the Disney brand.
The results of the brand inventory
were a revelation to senior man-
agers. The Disney characters were
on so many products and marketed
in so many ways that it was difficult
to understand how or why many of
the decisions had been made in the
first place. The consumer study only
reinforced their concerns. The study
40. indicated that people lumped all the
product endorsements together.
Disney was Disney to consumers,
whether they saw the characters in
films, or heard them in recordings, or
associated them with theme parks
or products.
Consequently, all products and
services that used the Disney name
or characters had an impact on Dis-
ney’s brand equity. And because of
the characters’ broad exposure in the
marketplace, many consumers had
begun to feel that Disney was ex-
ploiting its name. Disney characters
were used in a promotion of Johnson
Wax, for instance, a product that
would seemingly leverage almost
nothing of value from the Disney
name. Consumers were even upset
when Disney characters were linked
to well-regarded premium brands
like Tide laundry detergent. In that
case, consumers felt the characters
added little value to the product.
Worse yet, they were annoyed that
the characters involved children in a
purchasing decision that they other-
wise would probably have ignored.
If consumers reacted so negatively
to associating Disney with a strong
brand like Tide, imagine how they
reacted when they saw the hundreds
41. of other Disney-licensed products
and joint promotions. Disney’s char-
acters were hawking everything from
diapers to cars to McDonald’s ham-
burgers. Consumers reported that
they resented all the endorsements
because they felt they had a special,
personal relationship with the char-
acters and with Disney that should
not be handled so carelessly.
As a result of the brand inventory
and explorator y, Disney moved
quickly to establish a brand equity
team to better manage the brand
franchise and more selectively eval-
uate licensing and other third-party
promotional opportunities. One of
the mandates of this team was to en-
sure that a consistent image for Dis-
ney – reinforcing its key association
with fun family entertainment – was
conveyed by all third-party products
and services. Subsequently, Disney
declined an offer to cobrand a mutual
fund designed to help parents save
for their children’s college expenses.
Although there was a family associa-
tion, managers felt that a connection
with the financial community sug-
gested associations that were incon-
sistent with other aspects of the
brand’s image.
The Value of Balance
Building a strong brand involves
42. maximizing all ten characteristics.
And that is, clearly, a worthy goal.
But in practice, it is tremendously
difficult because in many cases when
a company focuses on improving
one, others may suffer.
Consider a premium brand facing
a new market entrant with compara-
ble features at a lower price. The
brand’s managers might be tempted
to rethink their pricing strategy.
Lowering prices might successfully
block the new entrant from gaining
market share in the short term. But
what effect would that have in the
long term? Will stepping outside its
definition of “premium” change the
brand in the minds of its target cus-
tomers? Will it create the impres-
sion that the brand is no longer top
of the line or that the innovation is
no longer solid? Will the brand’s
message become cloudy? The price
change may in fact attract customers
brand, or group of brands, revealing
where corporate and consumer
views conflict and thus showing
managers exactly where they have
to refine or redirect their branding
efforts or their marketing goals.
Tracking studies can build on
brand audits by employing quanti-
tative measures to provide current
43. information about how a brand is
performing for any given dimension.
Generally, a tracking study will col-
lect information on consumers’ per-
ceptions, attitudes, and behaviors
on a routine basis over time; a thor-
ough study can yield valuable tacti-
cal insights into the short-term ef-
fectiveness of marketing programs
and activities. Whereas brand audits
measure where the brand has been,
tracking studies measure where the
brand is now and whether marketing
programs are having their intended
effects.
The strongest brands, however,
are also supported by formal brand-
equity-management systems. Man-
agers of these brands have a written
document –a “brand equity charter”–
that spells out the company’s gen-
eral philosophy with respect to
brands and brand equity as concepts
(what a brand is, why brands matter,
why brand management is relevant
to the company, and so on). It also
summarizes the activities that make
up brand audits, brand tracking, and
other brand research; specifies the
outcomes expected of them; and in-
cludes the latest findings gathered
from such research. The charter
then lays out guidelines for imple-
menting brand strategies and tactics
and documents proper treatment of
44. the brand’s trademark – the rules for
how the logo can appear and be used
on packaging, in ads, and so forth.
These managers also assemble the
results of their various tracking sur-
veys and other relevant measures
into a brand equity report, which is
distributed to management on a
monthly, quarterly, or annual basis.
The brand equity report not only de-
scribes what is happening within a
brand but also why.
Even a market leader can benefit
by carefully monitoring its brand, as
Disney aptly demonstrates. In the
late 1980s, Disney became con-
harvard business review January–February 2000 9
T h e B r a n d R e p o r t C a r d • M A N A G E R ’ S T O
O L K I T
from a different market segment to
try the brand, producing a short-
term blip in sales. But will those cus-
tomers be the true target? Will their
purchases put off the brand’s original
market?
The trick is to get a handle on how
a brand performs on all ten attributes
and then to evaluate any move from
all possible perspectives. How will
45. this new ad campaign affect cus-
tomers’ perception of price? How
will this new product line affect the
brand hierarchy in our portfolio?
Does this tweak in positioning gain
enough ground to offset any poten-
tial damage caused if customers feel
we’ve been inconsistent?
One would think that monitoring
brand performance wouldn’t neces-
sarily be included in the equation.
But even effectively monitoring
brand performance can have nega-
tive repercussions if you just go
through the motions or don’t fol-
low through decisively on what
you’ve learned.
Levi-Strauss’s experiences are
telling. In the mid-1990s, the com-
pany put together a comprehensive
brand-equity-measurement system.
Practically from the time the sys-
tem was installed, it indicated that
the brand image was beginning to
slip, both in terms of the appeal of
Levi’s tight-fitting flagship 501 brand
of jeans and how contemporary and
cutting edge the overall Levi’s brand
was. The youth market was going
for a much baggier look; competitors
were rushing in to fill the gap. Dis-
tracted in part by an internal reengi-
neering effort, however, Levi’s was
slow to respond and when it did, it
46. came up with underfunded, trans-
parently trendy ad campaigns that
failed to resonate with its young tar-
get market. Its market share in the
jeans category plummeted in the lat-
ter half of the 1990s. The result?
Levi’s has terminated its decades-
long relationship with ad agency
Foote, Cone & Belding and is now at-
tempting to launch new products
and new ad campaigns. For Levi’s,
putting in the system was not
enough; perhaps if it had adhered
more closely to other branding prin-
ciples, concentrating on innovating
and staying relevant to its custom-
ers, it could have better leveraged its
market research data.
Negative examples and caution-
ary words abound, of course. But it is
important to recognize that in strong
brands the top ten traits have a posi-
tive, synergistic effect on one an-
other; excelling at one characteristic
makes it easier to excel at another.
A deep understanding of a brand’s
meaning and a well-defined brand
position, for example, guide devel-
opment of an optimal marketing
program. That, in turn, might lead
to a more appropriate value-pricing
strategy. Similarly, instituting an ef-
fective brand-equity-measurement
system can help clarify a brand’s
47. meaning, capture consumers’ reac-
tions to pricing changes and other
strategic shifts, and monitor the
brand’s ability to stay relevant to
consumers through innovation.
Brand Equity as a Bridge
Ultimately, the power of a brand lies
in the minds of consumers or cus-
tomers, in what they have experi-
enced and learned about the brand
over time. Consumer knowledge is
really at the heart of brand equity.
This realization has important man-
agerial implications.
In an abstract sense, brand equity
provides marketers with a strategic
bridge from their past to their future.
That is, all the dollars spent each
year on marketing can be thought of
not so much as expenses but as in-
vestments – investments in what
consumers know, feel, recall, be-
lieve, and think about the brand.
And that knowledge dictates appro-
priate and inappropriate future di-
rections for the brand – for it is con-
sumers who will decide, based on
their beliefs and attitudes about a
given brand, where they think that
brand should go and grant permis-
sion (or not) to any marketing tactic
or program. If not properly designed
and implemented, those expendi-
48. tures may not be good investments –
the right knowledge structures may
not have been created in consumers’
minds – but they are investments
nonetheless.
Ultimately, the value to market-
ers of brand equity as a concept de-
pends on how they use it. Brand eq-
uity can help marketers focus,
giving them a way to interpret their
past marketing performance and de-
sign their future marketing pro-
grams. Everything the company
does can help enhance or detract
from brand equity. Marketers who
build strong brands have embraced
the concept and use it to its fullest to
clarify, implement, and communi-
cate their marketing strategy.
Reprint r00104
To place an order, call 1-800-988-0886.
M A N A G E R ’ S T O O L K I T • T h e B r a n d R e p o r
t C a r d
10 harvard business review January–February 2000
49. The Balanced Scorecard –
Measures that Drive
Performance
by Robert S. Kaplan and David P. Norton
Reprint 92105
Harvard Business Review
HBR
JANUARY–FEBR AU RY 1992
The Balanced Scorecard—Measures
that Drive Performance
Robert S. Kaplan and David P. Norton
What you measure is what you get. Senior execu- other. They
realize that no single measure can pro-
vide a clear performance target or focus attention ontives
understand that their organization’s measure-
ment system strongly affects the behavior of the critical areas of
the business. Managers want a
balanced presentation of both financial and opera-managers and
employees. Executives also under-
stand that traditional financial accounting measures tional
measures.
During a year-long research project with 12 compa-like return-
on-investment and earnings-per-share
can give misleading signals for continuous improve- nies at the
50. leading edge of performance measure-
ment, we devised a ‘‘balanced scorecard’’—a set ofment and
innovation—activities today’s competitive
environment demands. The traditional financial per- measures
that gives top managers a fast but compre-
hensive view of the business. The balanced scorecardformance
measures worked well for the industrial
era, but they are out of step with the skills and com- includes
financial measures that tell the results of
actions already taken. And it complements the fi-petencies
companies are trying to master today.
As managers and academic researchers have tried nancial
measures with operational measures on
customer satisfaction, internal processes, and the or-to remedy
the inadequacies of current performance
measurement systems, some have focused on mak- ganization’s
innovation and improvement activi-
ties—operational measures that are the drivers ofing financial
measures more relevant. Others have
said, ‘‘Forget the financial measures. Improve opera- future
financial performance.
Think of the balanced scorecard as the dials andtional measures
like cycle time and defect rates; the
financial results will follow.’’ But managers should indicators
in an airplane cockpit. For the complex
task of navigating and flying an airplane, pilots neednot have to
choose between financial and operational
measures. In observing and working with many com- detailed
information about many aspects of the
51. flight. They need information on fuel, air speed, alti-panies, we
have found that senior executives do not
rely on one set of measures to the exclusion of the tude,
bearing, destination, and other indicators that
summarize the current and predicted environment.
Reliance on one instrument can be fatal. Similarly,
Robert S. Kaplan is the Arthur Lowes Dickinson Professor of
the complexity of managing an organization todayAccounting at
the Harvard Business School. David P. Norton is
requires that managers be able to view performancepresident of
Nolan, Norton & Company, Inc., a Massachusetts-
based information technology consulting firm he cofounded. in
several areas simultaneously.
Copyright q 1991 by the President and Fellows of Harvard
College. All rights reserved.
While giving senior managers information fromThe balanced
scorecard allows managers to look
at the business from four important perspectives. four different
perspectives, the balanced scorecard
minimizes information overload by limiting the(See the exhibit
‘‘The Balanced Scorecard Links Per-
formance Measures.’’) It provides answers to four number of
measures used. Companies rarely suffer
from having too few measures. More commonly,basic questions:
they keep adding new measures whenever an em-
ployee or a consultant makes a worthwhile sugges-▫ How do
customers see us? (customer perspective)
52. ▫ What must we excel at? (internal perspective) tion. One
manager described the proliferation of new
measures at his company as its ‘‘kill another tree▫ Can we
continue to improve and create value?
(innovation and learning perspective) program.’’ The balanced
scorecard forces managers
to focus on the handful of measures that are most▫ How do we
look to shareholders? (financial per-
spective) critical.
The Balanced Scorecard Links Performance Measures
How Do We Look
to Shareholders?
How Do
Customers See Us? What Must We Excel At?
Can We Continue
to Improve and
Create Value?
Customer Perspective
GOALS MEASURES
Internal Business Perspective
GOALS MEASURES
Financial Perspective
GOALS MEASURES
53. Innovation and Learning
Perspective
GOALS MEASURES
72 HARVARD BUSINESS REVIEW January–February 1992
Several companies have already adopted the bal-
anced scorecard. Their early experiences using the Other
Measures for thescorecard have demonstrated that it meets
several
managerial needs. First, the scorecard brings to- Customer’s
Perspective
gether, in a single management report, many of the
A computer manufacturer wanted to be the com-seemingly
disparate elements of a company’s com-
petitive leader in customer satisfaction, so it mea-petitive
agenda: becoming customer oriented, short-
sured competitive rankings. The company got theening response
time, improving quality, emphasizing
rankings through an outside organization hired toteamwork,
reducing new product launch times, and
talk directly with customers. The company alsomanaging for the
long term.
wanted to do a better job of solving customers’ prob-
Second, the scorecard guards against suboptimiza-
lems by creating more partnerships with other sup-
tion. By forcing senior managers to consider all the pliers. It
measured the percentage of revenue from
important operational measures together, the bal- third-party
relationships.
54. anced scorecard lets them see whether improvement
in one area may have been achieved at the expense The
customers of a producer of very expensive
of another. Even the best objective can be achieved medical
equipment demanded high reliability. The
company developed two customer-based metrics forbadly.
Companies can reduce time to market, for
its operations: equipment up-time percentage andexample, in
two very different ways: by improving
mean-time response to a service call.the management of new
product introductions or
by releasing only products that are incrementally
A semiconductor company asked each major cus-different from
existing products. Spending on setups
tomer to rank the company against comparable sup-can be cut
either by reducing setup times or by in-
pliers on efforts to improve quality, delivery time,creasing
batch sizes. Similarly, production output
and price performance. When the manufacturer dis-
and first-pass yields can rise, but the increases may
covered that it ranked in the middle, managers made
be due to a shift in the product mix to more standard,
improvements that moved the company to the top
easy-to-produce but lower-margin products. of customers’
rankings.
We will illustrate how companies can create their
own balanced scorecard with the experiences of one
semiconductor company—let’s call it Electronic Cir-
cuits Inc. ECI saw the scorecard as a way to clarify,
simplify, and then operationalize the vision at the
55. top of the organization. The ECI scorecard was de- company
receives an order to the time it actually
delivers the product or service to the customer. Forsigned to
focus the attention of its top executives on
a short list of critical indicators of current and future new
products, lead time represents the time to mar-
ket, or how long it takes to bring a new product
fromperformance.
the product definition stage to the start of shipments.
Quality measures the defect level of incoming prod-
ucts as perceived and measured by the customer.
Customer Perspective: How Do Quality could also measure on-
time delivery, the ac-
curacy of the company’s delivery forecasts. The com-Customers
See Us?
bination of performance and service measures how
the company’s products or services contribute to cre-Many
companies today have a corporate mission
that focuses on the customer. ‘‘To be number one in ating value
for its customers.
To put the balanced scorecard to work, companiesdelivering
value to customers’’ is a typical mission
statement. How a company is performing from its should
articulate goals for time, quality, and perfor-
mance and service and then translate these goalscustomers’
perspective has become, therefore, a pri-
ority for top management. The balanced scorecard into specific
measures. Senior managers at ECI, for
example, established general goals for customer per-demands
that managers translate their general mis-
56. sion statement on customer service into specific formance: get
standard products to market sooner,
improve customers’ time to market, become custom-measures
that reflect the factors that really matter
to customers. ers’ supplier of choice through partnerships with
them, and develop innovative products tailored toCustomers’
concerns tend to fall into four catego-
ries: time, quality, performance and service, and cost. customer
needs. The managers translated these gen-
eral goals into four specific goals and identified anLead time
measures the time required for the com-
pany to meet its customers’ needs. For existing prod-
appropriate measure for each. (See the exhibit ‘‘ECI’s
Balanced Scorecard.’’)ucts, lead time can be measured from the
time the
HARVARD BUSINESS REVIEW January–February 1992 73
To track the specific goal of providing a continuous in exactly
the right quantities at exactly the right
time directly to the production process and can mini-stream of
attractive solutions, ECI measured the per-
cent of sales from new products and the percent of mize,
through electronic data interchange, the ad-
ministrative hassles of ordering, invoicing, andsales from
proprietary products. That information
was available internally. But certain other measures paying for
materials.
57. forced the company to get data from outside. To as-
sess whether the company was achieving its goal of
providing reliable, responsive supply, ECI turned to Internal
Business Perspective: What Must
its customers. When it found that each customer We Excel at?
defined ‘‘reliable, responsive supply’’ differently, ECI
created a database of the factors as defined by each Customer-
based measures are important, but they
of its major customers. The shift to external mea- must be
translated into measures of what the com-
sures of performance with customers led ECI to pany must do
internally to meet its customers’
redefine ‘‘on time’’ so it matched customers’ expecta-
expectations. After all, excellent customer perfor-
tions. Some customers defined ‘‘on-time’’ as any mance derives
from processes, decisions, and actions
shipment that arrived within five days of scheduled occurring
throughout an organization. Managers
delivery; others used a nine-day window. ECI itself need to
focus on those critical internal operations
had been using a seven-day window, which meant that enable
them to satisfy customer needs. The sec-
that the company was not satisfying some of its cus- ond part of
the balanced scorecard gives managers
tomers and overachieving at others. ECI also asked that internal
perspective.
its top ten customers to rank the company as a sup-
plier overall.
Depending on customers’ evaluations to define
some of a company’s performance measures forces Other
Measures for thethat company to view its performance through
cus-
Internal Businesstomers’ eyes. Some companies hire third
parties to
58. perform anonymous customer surveys, resulting in a Perspective
customer-driven report card. The J.D. Powers quality
survey, for example, has become the standard of per- One
company recognized that the success of its
TQM program depended on all its employees inter-formance for
the automobile industry, while the
nalizing and acting on the program’s messages. TheDepartment
of Transportation’s measurement of on-
company performed a monthly survey of 600 ran-time arrivals
and lost baggage provides external stan-
domly selected employees to determine if they weredards for
airlines. Benchmarking procedures are yet
aware of TQM, had changed their behavior becauseanother
technique companies use to compare their
of it, believed the outcome was favorable, or hadperformance
against competitors’ best practice.
become missionaries to others.
Many companies have introduced ‘‘best of breed’’
comparison programs: the company looks to one in-
Hewlett-Packard uses a metric called breakeven
dustry to find, say, the best distribution system, to time (BET)
to measure the effectiveness of its product
another industry for the lowest cost payroll process,
development cycle. BET measures the time required
and then forms a composite of those best practices for all the
accumulated expenses in the product and
to set objectives for its own performance. process development
cycle (including equipment ac-
quisition) to be recovered by the product’s contribu-In addition
to measures of time, quality, and perfor-
tion margin (the selling price less manufacturing,mance and
service, companies must remain sensitive
59. delivery, and selling expenses).to the cost of their products. But
customers see price
as only one component of the cost they incur when
A major office products manufacturer, wanting todealing with
their suppliers. Other supplier-driven
respond rapidly to changes in the marketplace, setcosts range
from ordering, scheduling delivery, and
out to reduce cycle time by 50%. Lower levels ofpaying for the
materials; to receiving, inspecting,
the organization aimed to radically cut the times
handling, and storing the materials; to the scrap, re-
required to process customer orders, order and re-
work, and obsolescence caused by the materials; and ceive
materials from suppliers, move materials and
schedule disruptions (expediting and value of lost products
between plants, produce and assemble prod-
output) from incorrect deliveries. An excellent sup- ucts, and
deliver products to customers.
plier may charge a higher unit price for products
than other vendors but nonetheless be a lower cost
supplier because it can deliver defect-free products
74 HARVARD BUSINESS REVIEW January–February 1992
The internal measures for the balanced scorecard Innovation and
Learning Perspective:
should stem from the business processes that have Can We
Continue to Improve
the greatest impact on customer satisfaction—
60. and Create Value?factors that affect cycle time, quality,
employee
skills, and productivity, for example. Companies
should also attempt to identify and measure their The customer-
based and internal business process
measures on the balanced scorecard identify the pa-company’s
core competencies, the critical technolo-
gies needed to ensure continued market leadership. rameters
that the company considers most im-
portant for competitive success. But the targets forCompanies
should decide what processes and com-
petencies they must excel at and specify measures success keep
changing. Intense global competition
requires that companies make continual improve-for each.
Managers at ECI determined that submicron tech- ments to their
existing products and processes and
have the ability to introduce entirely new productsnology
capability was critical to its market position.
They also decided that they had to focus on manu- with
expanded capabilities.
A company’s ability to innovate, improve, and learnfacturing
excellence, design productivity, and new
product introduction. The company developed oper- ties directly
to the company’s value. That is, only
through the ability to launch new products, createational
measures for each of these four internal busi-
ness goals. more value for customers, and improve operating
effi-
ciencies continually can a company penetrate newTo achieve
61. goals on cycle time, quality, productiv-
ity, and cost, managers must devise measures that markets and
increase revenues and margins—in
short, grow and thereby increase shareholder value.are
influenced by employees’ actions. Since much of
the action takes place at the department and work- ECI’s
innovation measures focus on the company’s
ability to develop and introduce standard productsstation levels,
managers need to decompose overall
cycle time, quality, product, and cost measures to rapidly,
products that the company expects will form
the bulk of its future sales. Its manufacturing im-local levels.
That way, the measures link top manage-
ment’s judgment about key internal processes and provement
measure focuses on new products; the goal
is to achieve stability in the manufacturing of newcompetencies
to the actions taken by individuals
that affect overall corporate objectives. This linkage products
rather than to improve manufacturing of ex-
isting products. Like many other companies, ECI usesensures
that employees at lower levels in the organi-
zation have clear targets for actions, decisions, and the percent
of sales from new products as one of its
innovation and improvement measures. If sales
fromimprovement activities that will contribute to the
company’s overall mission. new products are trending
downward, managers can
explore whether problems have arisen in new
productInformation systems play an invaluable role in
62. helping managers disaggregate the summary mea- design or new
product introduction.
In addition to measures on product and processsures. When an
unexpected signal appears on the
balanced scorecard, executives can query their infor-
innovation, some companies overlay specific im-
provement goals for their existing processes. Formation system
to find the source of the trouble.
If the aggregate measure for on-time delivery is poor, example,
Analog Devices, a Massachusetts-based
manufacturer of specialized semiconductors, expectsfor
example, executives with a good information
system can quickly look behind the aggregate managers to
improve their customer and internal
business process performance continuously. Themeasure until
they can identify late deliveries,
day by day, by a particular plant to an individual company
estimates specific rates of improvement for
on-time delivery, cycle time, defect rate, and yield.customer.
If the information system is unresponsive, how- Other
companies, like Milliken & Co., require that
managers make improvements within a specific timeever, it can
be the Achilles’ heel of performance
measurement. Managers at ECI are currently lim- period.
Milliken did not want its ‘‘associates’’ (Milli-
ken’s word for employees) to rest on their laurelsited by the
absence of such an operational informa-
tion system. Their greatest concern is that the after winning the
Baldridge Award. Chairman and
63. CEO Roger Milliken asked each plant to implementscorecard
information is not timely; reports are
generally a week behind the company’s routine a ‘‘ten-four’’
improvement program: measures of pro-
cess defects, missed deliveries, and scrap were to
bemanagement meetings, and the measures have yet
to be linked to measures for managers and employ- reduced by a
factor of ten over the next four years.
These targets emphasize the role for continuous im-ees at lower
levels of the organization. The company
is in the process of developing a more responsive provement in
customer satisfaction and internal
business processes.information system to eliminate this
constraint.
HARVARD BUSINESS REVIEW January–February 1992 75
ECI’s Balanced Business Scorecard
Financial Perspective
GOALS
Percent of sales from new
products
MEASURES
Customer Perspective
65. Prosper
Succeed
Cash flow
Quarterly sales growth
and operating income
by division
Increased market share
and ROE
Technology
capability
Manufacturing
excellence
Design
productivity
New product
introduction
Manufacturing geometry
vs. competition
Cycle time
Unit cost
Yield
Silicon efficiency
Engineering efficiency
66. Actual introduction
schedule vs. plan
Technology
leadership
Manufacturing
learning
Product
focus
Time to
market
Time to develop next
generation
Process time to maturity
Percent of products that
equal 80% sales
New product introduction
vs. competition
Internal
Business Perspective
76 HARVARD BUSINESS REVIEW January–February 1992
from 70% to 96% and yield jumped from 26% toFinancial
Perspective: How Do We Look
51%. Did these breakthrough improvements in qual-to
Shareholders?
ity, productivity, and customer service provide sub-
67. stantial benefits to the company? Unfortunately not.
During the same three-year period, the company’sFinancial
performance measures indicate whether
the company’s strategy, implementation, and execu- financial
results showed little improvement, and its
stock price plummeted to one-third of its July 1987tion are
contributing to bottom-line improvement.
Typical financial goals have to do with profitability, value. The
considerable improvements in manufac-
turing capabilities had not been translated into in-growth, and
shareholder value. ECI stated its finan-
cial goals simply: to survive, to succeed, and to pros- creased
profitability. Slow releases of new products
and a failure to expand marketing to new and perhapsper.
Survival was measured by cash flow, success
by quarterly sales growth and operating income by more
demanding customers prevented the company
from realizing the benefits of its manufacturingdivision, and
prosperity by increased market share
by segment and return on equity. achievements. The operational
achievements were
real, but the company had failed to capitalize on them.But given
today’s business environment, should
senior managers even look at the business from a The disparity
between improved operational per-
formance and disappointing financial measuresfinancial
perspective? Should they pay attention to
short-term financial measures like quarterly sales creates
frustration for senior executives. This frustra-
68. tion is often vented at nameless Wall Street analystsand
operating income? Many have criticized finan-
cial measures because of their well-documented in- who
allegedly cannot see past quarterly blips in fi-
nancial performance to the underlying long-term val-
adequacies, their backward-looking focus, and their
inability to reflect contemporary value-creating ac- ues these
executives sincerely believe they are
creating in their organizations. But the hard truth istions.
Shareholder value analysis (SVA), which fore-
casts future cash flows and discounts them back to that if
improved performance fails to be reflected in
the bottom line, executives should reexamine thea rough
estimate of current value, is an attempt to
make financial analysis more forward looking. But basic
assumptions of their strategy and mission. Not
all long-term strategies are profitable strategies.SVA still is
based on cash flow rather than on the
activities and processes that drive cash flow. Measures of
customer satisfaction, internal busi-
ness performance, and innovation and improvementSome critics
go much further in their indictment
of financial measures. They argue that the terms of are derived
from the company’s particular view of the
world and its perspective on key success factors.
Butcompetition have changed and that traditional finan-
cial measures do not improve customer satisfaction, that view is
not necessarily correct. Even an excellent
set of balanced scorecard measures does not guaranteequality,
69. cycle time, and employee motivation. In
their view, financial performance is the result of op- a winning
strategy. The balanced scorecard can only
translate a company’s strategy into specific measur-erational
actions, and financial success should be the
logical consequence of doing the fundamentals well. able
objectives. A failure to convert improved opera-
tional performance, as measured in the scorecard, intoIn other
words, companies should stop navigating by
financial measures. By making fundamental im- improved
financial performance should send execu-
tives back to their drawing boards to rethink the com-
provements in their operations, the financial num-
bers will take care of themselves, the argument goes. pany’s
strategy or its implementation plans.
As one example, disappointing financial measuresAssertions
that financial measures are unneces-
sary are incorrect for at least two reasons. A well- sometimes
occur because companies don’t follow up
their operational improvements with another rounddesigned
financial control system can actually en-
hance rather than inhibit an organization’s total of actions.
Quality and cycle-time improvements can
create excess capacity. Managers should be preparedquality
management program. (See the insert, ‘‘How
One Company Used a Daily Financial Report to to either put the
excess capacity to work or else get
rid of it. The excess capacity must be either used byImprove
Quality.’’) More important, however, the
70. alleged linkage between improved operating perfor- boosting
revenues or eliminated by reducing ex-
penses if operational improvements are to be broughtmance and
financial success is actually quite tenu-
ous and uncertain. Let us demonstrate rather than down to the
bottom line.
As companies improve their quality and responseargue this
point.
Over the three-year period between 1987 and 1990, time, they
eliminate the need to build, inspect, and
rework out-of-conformance products or to resched-a NYSE
electronics company made an order-of-mag-
nitude improvement in quality and on-time delivery ule and
expedite delayed orders. Eliminating these
tasks means that some of the people who performperformance.
Outgoing defect rate dropped from 500
parts per million to 50, on-time delivery improved them are no
longer needed. Companies are under-
HARVARD BUSINESS REVIEW January–February 1992 77
How One Company Used a Daily Financial Report
to Improve Quality*
In the 1980s, a chemicals company became commit- crease
productivity, and reduce consumption of energy
ted to a total quality management program and began and
materials.
to make extensive measurements of employee partici- That
71. feedback and empowerment had visible results.
pation, statistical process control, and key quality indi- When,
for example, a hydrogen compressor failed, a
cators. Using computerized controls and remote data supervisor
on the midnight shift ordered an emergency
entry systems, the plant monitored more than 30,000 repair crew
into action. Previously, such a failure of a
observations of its production processes every four noncritical
component would have been reported in the
hours. The department managers and operating person- shift log,
where the department manager arriving for
nel who now had access to massive amounts of real- work the
following morning would have to discover it.
time operational data found their monthly financial The
midnight shift supervisor knew the cost of losing
reports to be irrelevant. the hydrogen gas and made the decision
that the cost
But one enterprising department manager saw things of
expediting the repairs would be repaid several times
differently. He created a daily income statement. Each over by
the output produced by having the compressor
day, he estimated the value of the output from the pro- back on
line before morning.
duction process using estimated market prices and sub- The
department proceeded to set quality and output
tracted the expenses of raw materials, energy, and records. Over
time, the department manager became
capital consumed in the production process. To approxi-
concerned that employees would lose interest in contin-
mate the cost of producing out-of-conformance product, ually
improving operations. He tightened the parame-
he cut the revenues from off-spec output by 50% to ters for in-
spec production and reset the prices to reflect
100%. a 25% premium for output containing only negligible
72. The daily financial report gave operators powerful fractions of
impurities. The operators continued to im-
feedback and motivation and guided their quality and prove the
production process.
productivity efforts. The department head understood The
success of the daily financial report hinged on
that it is not always possible to improve quality, reduce the
manager’s ability to establish a financial penalty for
energy consumption, and increase throughput simulta- what had
previously been an intangible variable: the
neously; tradeoffs are usually necessary. He wanted the quality
of output. With this innovation, it was easy to
daily financial statement to guide those tradeoffs. The see
where process improvements and capital invest-
difference between the input consumed and output pro- ments
could generate the highest returns.
duced indicated the success or failure of the employees’
efforts on the previous day. The operators were empow-
*Source: ‘‘Texas Eastman Company,’’ by Robert S. Kaplan,
Har-
vard Business School Case No. 9-190-039.ered to make
decisions that might improve quality, in-
standably reluctant to lay off employees, especially because of
the improved quality and delivery perfor-
mance), and increase the flow of new products to thesince the
employees may have been the source of
the ideas that produced the higher quality and re- market. These
actions can generate added revenues
with only modest increases in operating expenses. Ifduced cycle
time. Layoffs are a poor reward for past
improvement and can damage the morale of re- marketing and
sales and R&D do not generate the
73. increased volume, the operating improvements willmaining
workers, curtailing further improvement.
But companies will not realize all the financial bene- stand as
excess capacity, redundancy, and untapped
capabilities. Periodic financial statements remindfits of their
improvements until their employees and
facilities are working to capacity—or the companies executives
that improved quality, response time, pro-
ductivity, or new products benefit the company onlyconfront the
pain of downsizing to eliminate the ex-
penses of the newly created excess capacity. when they are
translated into improved sales and
market share, reduced operating expenses, or higherIf
executives fully understood the consequences of
their quality and cycle-time improvement programs, asset
turnover.
Ideally, companies should specify how improve-they might be
more aggressive about using the newly
created capacity. To capitalize on this self-created ments in
quality, cycle time, quoted lead times, de-
livery, and new product introduction will lead tonew capacity,
however, companies must expand
sales to existing customers, market existing products higher
market share, operating margins, and asset
turnover or to reduced operating expenses. The chal-to entirely
new customers (who are now accessible
78 HARVARD BUSINESS REVIEW January–February 1992
74. lenge is to learn how to make such explicit linkage taken those
actions. In that way, the systems try to
control behavior. Such measurement systemsbetween operations
and finance. Exploring the com-
plex dynamics will likely require simulation and cost fit with
the engineering mentality of the Industrial
Age.modeling.
The balanced scorecard, on the other hand, is well
suited to the kind of organization many companies
are trying to become. The scorecard puts strategy
Measures that Move and vision, not control, at the center. It
establishes
goals but assumes that people will adopt whateverCompanies
Forward
behaviors and take whatever actions are necessary
to arrive at those goals. The measures are designedAs
companies have applied the balanced scorecard,
we have begun to recognize that the scorecard repre- to pull
people toward the overall vision. Senior man-
agers may know what the end result should be, butsents a
fundamental change in the underlying as-
sumptions about performance measurement. As the they cannot
tell employees exactly how to achieve
that result, if only because the conditions in whichcontrollers
and finance vice presidents involved in
the research project took the concept back to their employees
operate are constantly changing.
This new approach to performance measurementorganizations,
the project participants found that
75. they could not implement the balanced scorecard is consistent
with the initiatives under way in many
companies: cross-functional integration, customer-without the
involvement of the senior managers who
have the most complete picture of the company’s supplier
partnerships, global scale, continuous
improvement, and team rather than individual ac-vision and
priorities. This was revealing because
most existing performance measurement systems countability.
By combining the financial, customer,
internal process and innovation, and organizationalhave been
designed and overseen by financial ex-
perts. Rarely do controllers need to have senior man- learning
perspectives, the balanced scorecard helps
managers understand, at least implicitly, many inter-agers so
heavily involved.
Probably because traditional measurement sys- relationships.
This understanding can help managers
transcend traditional notions about functional barri-tems have
sprung from the finance function, the
systems have a control bias. That is, traditional per- ers and
ultimately lead to improved decision making
and problem solving. The balanced scorecard keepsformance
measurement systems specify the particu-
lar actions they want employees to take and then companies
looking—and moving—forward instead
of backward.measure to see whether the employees have in fact
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