Balanced Scorecard Intro To Basic Concepts

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Balanced Scorecard Intro To Basic Concepts

  1. 1. BUILDING A STRATEGY FOCUSED ORGANIZATIONWITH THE BALANCED SCORECARDIntroduction to Basic ConceptsNg Aung SanVice President & Head (Strategy & Organization) 1
  2. 2. QUOTE… “ Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat. ” Sun Tzu The Art of War 2
  3. 3. Content 1.  Overview of BSC 3.  Customizing BSC to Architecture Strategy 2.  Closer look at Internal Process Clusters 3
  4. 4. BSC Perspectives #1 - Financial §  Defines the tangible outcome of strategy in traditional Financial terms §  How does success look like? #2 - Customer (External) §  Defines the Value Proposition for target existing and potential customers segments §  How can we become a Magnet company? #3 - Channel Partners (Int. Customers) §  Defines the Value Proposition for existing and potential channel partners/ agents §  How can we become a Magnet company? #4 - Business Model/ Int. Processes §  Defines the Vehicle for delivering the Value Proposition §  How can deliver on our promise? #5 - Organization Learning & Growth §  Defines the organization s intangible assets §  How can we align assets to support Business Model and Mobilize and sustain change? 4
  5. 5. #1 Financial Perspective Elaboration on Financial Perspective §  Summarizes readily measurable economic consequences of actions already taken. §  Typically comprise two broad drivers: §  Productivity driver (Improve cost structure/ Enhance asset yield) §  Revenue Growth driver (Expand revenue opportunities / Enhance customer value) #1 - Financial §  Defines the tangible outcome of strategy in Financial Measures traditional Financial terms Two distinct categories of Measures §  How does success look like? §  Productivity measures §  Revenue growth measures Examples of Productivity measures §  Total Assets §  Return on net assets/ total assets §  Gross margin/ NPAT §  Profit as % of Sales §  Profit/ Value added per employee §  Return on Equity/ Return on investments §  Market capitalization/ Share price/ Dividends §  Credit Rating Examples of Revenue Growth measures §  Total/ New Business Premiums (existing/ new sources) §  New Business Embedded Value (existing/ new sources) 5
  6. 6. #2 Customer Perspective Elaboration on Customer Perspective §  Identifies the markets and customer segments that organization will serve and compete §  Identifies the differentiated Value Propositions that the organization will offer to target market and customer segment #2 - Customer (External)§  Defines the Value Proposition for target existing Customer Measures and potential customers segments Two distinct categories of Measures§  How can we become a Magnet company? §  Measures of performance in markets and target customers §  Measures of Value Propositions organization will offer to target customers Examples of Customer Performance Measures §  Share in target Market and Customer segments §  Market and Customer segment profitability §  Sales Volume/ Sales Volume per channel §  No. of Customers §  Target customer acquisition/ retention rates §  Percentage of revenue from New Customers §  Target customer segments complaints/ compliments §  Brand recognition/ awareness in target customer segments Customer Value Proposition Measures §  Measures of elements of value propositions to be delivered 6
  7. 7. #3 Channel Partner Perspective Elaboration on Channel Partner Perspective §  Identifies the channel partners which organization can partner and work with §  Identifies the differentiated Value Propositions that the organization will offer to channel partners #3 - Channel Partners (Int. Customers) §  Defines the Value Proposition for existing Customer Measures and potential channel partners/ agents Two distinct categories of Measures §  How can we become a Magnet company? §  Measures of performance in target channels §  Measures of Value Propositions organization will offer to channel partners Examples of Channel Partner Performance Measures §  Channel product volume/ product mix §  Channel productivity/ profitability §  Channel market share §  Channel customer acquisition/ retention rates §  Channel development/ growth §  Percentage of revenue from new channels §  Channel complaints/ compliments §  Channel scorecard/ survey feedback Channel Partner Value Proposition Measures §  Measures of elements of value propositions to be delivered 7
  8. 8. #4 Business Model Perspective Elaboration on Business Model Perspective §  Describes how organization will deliver its customer and channel partner value propositions §  Identifies related process clusters that make up the organization. Broadly grouped into three process clusters: §  Operations Management cluster - Producing and delivering products to customer §  Customer Management cluster - Establishing and #4 - Business Model/ Int. Processes leveraging relationship with customers §  Innovation processes cluster - Developing new §  Defines the Vehicle for delivering the Value products, services, processes and relationships Proposition §  How can deliver on our promise? Business Model/ Internal Process Measures Examples of Operations Management measures §  Cost of key operating processes §  Marketing, selling, administrate expense as % of total costs §  No. of processes with substantial improvements §  Cycle time Examples of Customer Management measures §  No. of referrals/ Percentage of leads converted §  Customer response rate to campaigns §  No. of products per customer/ Depth of relationship §  Costs per new customer acquired Examples of Innovation measures §  Time to Market/ Percentage of product launches on-time §  No. of new products first-to-market §  No. of new applications from platform products §  No. of joint collaborative new product projects 8
  9. 9. #5 Learning & Growth Perspective Elaboration on Learning & Growth Perspective §  Defines organization s intangible asset and their role in strategy. Intangible assets classified into three categories: §  Human capital - Skills, talents and know how to perform activities, required by strategy §  Information capital - Information systems and infrastructure required to support the strategy §  Organization capital - Culture, Leadership, #5 - Organization Learning & Growth Alignment and Teamwork§  Defines the organization s intangible assets§  How can we align assets to support Business Model and Mobilize and sustain change? Business Model/ Internal Process Measures Examples of Human Capital readiness measures §  Training investment per employee/ Training hours §  Competency coverage ratio §  % of employees with advanced degrees §  Number of cross-trained employees §  Best practice sharing Examples of Information Capital readiness measures §  Strategic information ratio §  Knowledge management index Examples of Organizational Capital readiness measures §  Span of control per manager §  Quality of work environment §  Motivation index §  Turnover rate/ Absenteeism §  Strategic awareness 9
  10. 10. BSC comprise two main related elements – Strategy Map andScorecard Strategy Map Scorecard §  Visual representation of the cause-and-effect §  Translates objectives in strategy map into relationships that connects desired Financial, measures of success and targets, across Customer and Channel Partner outcomes respective financial/ non financial and with the Business Model drivers that will internal/ external perspectives. transform intangible assets into these outcomes §  Organizes in a structured way, bundles of aligned strategic initiatives – action plans and scarce resources e.g. people, funding §  Functions as a checklist for strategy s and capacity – required to meet targets for granular components and interrelationships respective measures, and achieve objectives – Missing components usually indicate incomplete or flawed strategy §  Functions as a checklist and resource deployment decision tool for strategic §  Provides an uniform and consistent way to initiatives – emphasis/ coverage of action describe strategy, so that objectives across plans and targeted allocation of resources. all perspectives and measures can be established and managed – through the §  Provides a cohesive, integrated and Scorecard systematic way to manage effective implementation of strategy 10
  11. 11. BSC Strategy Map depicts chain of cause-and-effectrelationships VISION Guided by and to achieve our Vision…… To achieve #1 - Financial Top-downour financialsuccess, and …What is the desired financial Thinking & Logic §  Defines the tangible outcome of goals we have to achieve…our Vision strategy in traditional Financial terms §  How does success look like?… And, togetherwith Channel #2 - Customer (External) …What is the unique set of benefits we willPartners, to our §  Defines the Value Proposition for target offer to customers for their patronage...Customers… existing and potential customers segments §  How can we become a Magnet company? #3 - Channel Partners (Int. Customers) …And our channel partners for … Needed to deliver their partnership... Value Proposition to §  Defines the Value Proposition for existing Channel Partner,… and potential channel partners/ agents §  How can we become a Magnet company? #4 - Business Model/ Int. …What do we have to do to … To build strategic ensure consistent delivery of capabilities to effectively Processes value propositions… execute the processes … §  Defines the Vehicle for delivering the Value Proposition §  How can deliver on our promise? Bottom-Up #5 - Organization Learning & Growth Test & Linkage §  Defines the organization s intangible …And what assets do we Align and enhance our Organizational Assets… assets have to develop §  How can we align assets to support Business Model and Mobilize and sustain change? 11
  12. 12. Financial perspective provides definition of success or valuein tangible financial termsFinancialPerspective Sustain growth in Shareholder Value Productivity Strategy Revenue Growth Strategy §  NPAT §  ROE/ ROI §  NBEV/ Premiums from new §  NBEV/ Premiums §  Expenses §  Investment returns products, markets & segment §  NBEV/ Prems. per Customer Improve Cost Enhance Expand Revenue Enhance Structure Asset Yield Opportunities Customer Value Typical Objectives §  Lower direct and §  Reduce working and fixed §  Tap into new sources of §  Deepen relationship with indirect expenses capital needed to support revenue (new products, existing customers business markets, segments) §  Improve investment yield §  Tap into new channels 12
  13. 13. Customer perspective identifies value proposition to be amagnet company to External Customers Sustain growth inFinancial Shareholder ValuePerspective Productivity Strategy Revenue Growth Strategy Improve Cost Enhance Expand Revenue Enhance Structure Asset Yield Opportunities Customer ValueCustomer (External) §  Customer profitability §  Market Share §  Customer §  CustomerPerspective §  Segment profitability §  Segment Share Acquisition Retention CUSTOMER VALUE PROPOSITION Product/ Service Attributes Relationship Image Price Quality/ Selection Functionality/ Reputation Returns Availability Features Service §  Product Price/ §  Bonus Levels §  Distribution §  Range of §  Product §  Quality & §  Brand Strength & Pricing §  Yields/ Channels/ Product Lines Features/ Coverage of §  Financial Strength Investment Reach Quality Support/ & Ratings Returns Service §  Identifies the customer and market segments in §  Unique configuration of seven pillars of Customer which organization will serve and compete Value Proposition differentiates organization: §  Identifies two distinct types of measures: §  What company expects to do for its customers better or differently than its competitors §  Measures of value propositions organization will deliver to target customers §  What draws customers to our company §  Measures of performance in the target segments §  Customers perceive where company stands, in relation to each of seven pillars, and decides on patronage 13
  14. 14. Channel partner perspective identifies value proposition tobe a magnet company to Channel Partners Sustain growth inFinancial Shareholder ValuePerspective Productivity Strategy Revenue Growth Strategy Improve Cost Enhance Expand Revenue Enhance Structure Asset Yield Opportunities Customer ValueCustomer Customer Value Proposition(External) Product/ Service Attributes Relationship ImagePerspective Quality/ Functionality/ Price Availability Selection Service Reputation Returns FeaturesChannel Partner (Agency) §  Agent Business Volume/ Mix §  Agents Recruited §  No. of Agents onPerspective §  Agent Productivity §  Agent Attrition Management Path CHANNEL VALUE PROPOSITION Sales Production Support Growth & Development Support Product Range Sales Support Brand Support Career & Agency Admin Support Comp. Mgmt. Support §  Identifies the channel partners which §  Unique configuration of six pillars of Channel Value organization can partner and work with Proposition differentiates organization: §  Identifies two distinct types of measures: §  What company expects to do for its channel partner better or differently than its competitors §  Measures of value propositions organization will deliver to target §  What draws existing partners/ agents to stay with channel partners/ agents us and new partners/ agents to join us. §  Measures of performance in the target channels §  Channel partners/ agents perceive where company stands, in relation to each of six pillars, and decides on partnership 14
  15. 15. Internal Processes/ Business perspective defines vehicle todeliver on Value Propositions… Sustain growth inFinancial Shareholder ValuePerspective Productivity Strategy Revenue Growth Strategy Improve Cost Enhance Expand Revenue Enhance Structure Asset Yield Opportunities Customer ValueCustomer Customer Value Proposition(External) Product/ Service Attributes Relationship ImagePerspective Quality/ Functionality/ Price Availability Selection Service Reputation Returns FeaturesChannel Partner Channel Value PropositionPerspective Sales Production Support Growth & Development Support Product Range Sales Support Brand Support Career & Agency Admin Support Comp. Mgmt. SupportInternal ProcessPerspective Customer Mgmt. Innovation Processes Operations Mgmt. Regulatory & Social Processes Processes Processes Process which expand and Processes which develop new products, Basic, day to day processes by Processes which help organizations deepen relationships with processes and services, to enable which companies produce their continually earn the right to targeted customers company to penetrate new markets existing products and deliver operate in communities and and customer segments them to customers countries in which they operate §  Identifies Four Process clusters that make §  Business Model enables organization to deliver on up the organization elements of value propositions. §  Changes to value propositions requires corresponding changes to business model 15
  16. 16. … And groups Organization s myriad existing and newprocesses into four Clusters Sustain growth inFinancial Shareholder ValuePerspective Productivity Strategy Revenue Growth Strategy Improve Cost Enhance Expand Revenue Enhance Structure Asset Yield Opportunities Customer ValueCustomer Customer Value Proposition(External) Product/ Service Attributes Relationship ImagePerspective Quality/ Functionality/ Price Availability Selection Service Reputation Returns FeaturesChannel Partner Channel Value PropositionPerspective Sales Production Support Growth & Development Support Product Range Sales Support Brand Support Career & Agency Admin Support Comp. Mgmt. SupportInternal ProcessPerspective Customer Mgmt. Innovation Processes Operations Mgmt. Regulatory & Social Processes Processes Processes Process which expand and Processes which develop new products, Basic, day to day processes by Processes which help organizations deepen relationships with processes and services, to enable which companies produce their continually earn the right to targeted customers company to penetrate new markets existing products and deliver operate in communities and and customer segments them to customers countries in which they operate §  Customer Selection §  Opportunity Identification §  Supply §  Environment §  Customer Acquisition §  R&D Portfolio §  Production §  Safety and Health §  Customer Retention §  Design/ Develop §  Distribution §  Employment §  Customers Growth §  Launch §  Risk Management §  Community 16
  17. 17. Learning & Growth perspective defines and alignsorganization s intangible assets, completing Strategy Map Sustain growth inFinancial Shareholder ValuePerspective Productivity Strategy Revenue Growth Strategy Improve Cost Enhance Expand Revenue Enhance Structure Asset Yield Opportunities Customer ValueCustomer Customer Value Proposition(External) Product/ Service Attributes Relationship ImagePerspective Quality/ Functionality/ Price Availability Selection Service Reputation Returns FeaturesChannel Partner Channel Value PropositionPerspective Sales Production Support Growth & Development Support Product Range Sales Support Brand Support Career & Agency Admin Support Comp. Mgmt. SupportInternal ProcessPerspective Customer Mgmt. Innovation Processes Operations Mgmt. Regulatory & Social Processes Processes Processes §  Customer Selection §  Opportunity Identification §  Supply §  Environment §  Customer Acquisition §  R&D Portfolio §  Production §  Safety and Health §  Customer Retention §  Design/ Develop §  Distribution §  Employment §  Customers Growth §  Launch §  Risk Management §  CommunityLearning & GrowthPerspective Organization s Intangible Assets Human Capital Information Capital Organizational Capital §  Skills/ Talent §  Systems §  Culture §  Knowledge §  Databases §  Leadership §  Capabilities §  Networks §  Alignment/ Teamwork 17
  18. 18. Closer look at Human Capital Readiness – Strategic JobFamilies, Headcount, Knowledge, Skills & Capabilities Sustain growth inFinancial Shareholder ValuePerspective Productivity Strategy Revenue Growth Strategy Improve Cost Enhance Expand Revenue Enhance Structure Asset Yield Opportunities Customer ValueCustomer Customer Value Proposition(External) Product/ Service Attributes Relationship ImagePerspective Quality/ Functionality/ Price Availability Selection Service Reputation Returns FeaturesChannel Partner Channel Value PropositionPerspective Sales Production Support Growth & Development Support Product Range Sales Support Brand Support Career & Agency Admin Support Comp. Mgmt. SupportInternal Process Perspective Customer Mgmt. Innovation Processes Operations Mgmt. Regulatory & Social Processes Processes ProcessesLearning & GrowthPerspective (illustrative for Human Capital Readiness – Identify Strategic Job Families) Operations Marketing BD Underwriters Executives Underwriters Executives BD Executives (No.) (No.) Executives (No.) ??? ??? ??? (No.) (No.) (No.)Competency Profile§  Knowledge List the Knowledge & Skills Required by various Strategic Job Families identified above§  SkillsReadiness Assessment (Assess HC Readiness in terms of adequacy of Headcount, required level of Knowledge & Skills) XX% XX% XX% XX% XX% XX% XX% XX% XX% 18
  19. 19. Strategy comprise complementary strategic themes that cutacross respective perspectives Sustain growth inFinancial Shareholder ValuePerspective Productivity Strategy Revenue Growth Strategy Improve Cost Enhance Expand Revenue Enhance Structure Asset Yield Opportunities Customer Value Strengthen franchise for sustainable growthCustomer Customer Value Proposition(External) Product/ Service Attributes Relationship ImagePerspective Quality/ Functionality/ Price Availability Selection Service Reputation Returns FeaturesChannel Partner Channel Value Proposition Transform Product MixPerspective Sales Production Support Growth & Development Support Product Range Sales Support Brand Support Career & Agency Admin Support Comp. Mgmt. Support Deliver profitInternal ProcessPerspective Customer Mgmt. Innovation Processes Operations Mgmt. Regulatory & Social Processes Processes Processes §  Customer Selection §  Opportunity Identification §  Supply §  Environment §  Customer Acquisition §  R&D Portfolio §  Production §  Safety and Health §  Customer Retention §  Design/ Develop §  Distribution §  Employment §  Customers Growth §  Launch §  Risk Management §  CommunityLearning & GrowthPerspective § Organization s Intangible Assets Human Capital Information Capital Organizational Capital §  Skills/ Talent §  Systems §  Culture §  Knowledge §  Databases §  Leadership §  Capabilities §  Networks §  Alignment/ Teamwork 19
  20. 20. BSC Scorecard translates Strategy objectives into Measures,Targets and Owners… Strategy Map (Strategic Business Unit) ScorecardTheme: TRANSFORM PRODUCT MIX Objectives PI/ KPIs Target Owner §  Deliver targets §  NBEV/ Premiums §  $ XXX §  ABCPerspective Financial NB EV §  Increase new §  Market share §  $ XXX §  DEF segment revenues §  Premiums from new segments §  GHJ Desired Desired §  $ XXX §  Increase wallet share §  Share of wallet §  KLM Volume Mix §  $ XXX §  Increase # of §  Depth of customer relationship §  $ XXX §  ABC Competent competent planners §  DEFPerspective §  % of premiums from referrals §  $ XXX Customer Planners §  Deliver consistent/ §  Returns/ bonus §  GHJ §  $ XXX Competitive Innovative competitive returns/ §  # of NTM features §  KLM §  $ XXX Returns features bonus §  NTM product features §  Enhance product §  # of NTM Products §  $ XXX §  ABCBusiness Model Channel Partner Innovative range §  # of Sales Leads §  $ XXX §  DEF Perspective Products/ Range §  Provide Customer §  % selling Linked/ NP products §  $ XXX §  GHJ knowledge §  KLM Sales Brand §  Linked/ NP Case Count & Size §  $ XXX §  Increase channel Support Support focus & productivity May be delivered also by §  Strengthen brand Shared Support Units Channel §  Enhance Operations/ §  Service levels §  $ XXX §  ABC Reliability Innovation Perspective Partner Asset Mgmt. reliability §  Investment returns §  $ XXX §  DEF §  Enhance consistency §  Peer/ Industry product rankings §  $ XXX §  GHJ Product Product Product of investment returns §  KLM §  Various process indicators §  $ XXX Fulfillment Dist. Innovation §  Develop Product Innovation process May be delivered also by FOCUS Shared Support Units §  Develop/ hire to §  HC readiness §  $ XXX §  ABCPerspective Strategic Job Cross Function obtain capabilities §  Product creation effectiveness §  $ XXX §  DEF Families Alignment L&G §  Align product creation §  Segment knowledge §  $ XXX §  GHJ §  Tap CRM §  Partner value add §  $ XXX §  KLM Strategic IT Strategic Systems collaborations §  Extend through collaborations 20
  21. 21. ...And Business Model and Organizational Assets Initiativesto deliver on Strategy Objectives and Targets Strategy Map (Strategic Business Unit) Scorecard InitiativesTheme: TRANSFORM PRODUCT MIX Objectives PI/ KPIs Target Owner Initiatives/ Activities §  Deliver targetsPerspective OUTCOME OF BUSINESS Financial NB EV §  Increase new segment revenues MODEL & ORGANIZATIONAL Desired Desired §  Increase wallet share ASSET INITIATIVES & Volume Mix ACTIVITIES §  Increase # of CompetentPerspective competent planners OUTCOME OF BUSINESS Customer Planners §  Deliver consistent/ MODEL & ORGANIZATIONAL Competitive Innovative competitive returns/ ASSET INITIATIVES & Returns features bonus ACTIVITIES §  NTM product features §  Enhance productBusiness Model Channel Partner Innovative range Perspective Products/ Range OUTCOME OF BUSINESS §  Provide Customer knowledge MODEL & ORGANIZATIONAL Sales Brand ASSET INITIATIVES & Support §  Increase channel Support focus & productivity ACTIVITIES §  Strengthen brand May be executed also by Shared Support Units Channel §  Enhance Operations/ §  Product Fulfillment Process Reliability Innovation Perspective Partner Asset Mgmt. reliability Initiative #1, #2, #3 §  Enhance consistency §  Product Distribution Process Product Product Product of investment returns Initiative #1, #2, #3 Fulfillment Dist. Innovation §  Develop Product §  Product Innovation Process FOCUS Innovation process May be executed also by Initiative #1, #2, #3 Shared Support Units §  Develop/ hire to §  HC Initiative #1, #2, #3Perspective Strategic Job Cross Function obtain capabilities §  IT Initiative #1, #2, #3 Families Alignment L&G §  Align product creation §  Alignment Initiative #1, #2, #3 Strategic IT Strategic §  Tap CRM §  Strategic Collaboration Systems collaborations §  Extend through Initiative #1, #2, #3 collaborations 21
  22. 22. Resources are then planned and committed to implementBusiness Model and Organizational Asset Initiatives Strategy Map (Strategic Business Unit) Scorecard Initiatives ResourcesTheme: TRANSFORM PRODUCT MIX Objectives PI/ KPIs Target Owner Initiatives §  Deliver targetsPerspective Financial NB EV §  Increase new segment revenues OUTCOME N.A. Desired Desired §  Increase wallet share Volume Mix §  Increase # of CompetentPerspective competent planners Customer Planners §  Deliver consistent/ competitive returns/ OUTCOME N.A. Competitive Innovative Returns features bonus §  NTM product features §  Enhance productBusiness Model Channel Partner Innovative range Perspective Products/ Range §  Provide Customer knowledge OUTCOME N.A. Sales Brand Support §  Increase channel Support focus & productivity §  Strengthen brand May reside in/ committed by Shared Support Units Channel §  Enhance Operations/ §  Initiative #1 §  $ XXX/ Reliability Innovation Perspective Partner Asset Mgmt. reliability §  Initiative #2 Headcount §  Enhance consistency §  Initiative #3 §  $ XXX/ Product Product Product of investment returns Headcount §  Initiative #4 Fulfillment Dist. Innovation §  Develop Product §  $ XXX/ FOCUS Innovation process May reside in/ committed Headcount by Shared Support Units §  Develop/ hire to §  Initiative #1 §  $ XXX/Perspective Strategic Job Cross Function obtain capabilities Headcount §  Initiative #2 Families Alignment L&G §  Align product creation §  Initiative #3 §  $ XXX/ §  Tap CRM Headcount Strategic IT Strategic §  Initiative #4 Systems collaborations §  Extend through §  $ XXX/ collaborations Headcount 22
  23. 23. Content 1.  Overview of BSC 3.  Customizing BSC to Architecture Strategy 2.  Closer look at Internal Process Clusters 23
  24. 24. Closer look at Internal Processes - BSC groups anOrganization s myriad internal processes into four Clusters Cluster 1 - Customer Management Cluster Understanding customers and value proposition that attracts them is fundamental to any strategy. Customer Management Processes help company acquire, sustain, and grow long-term, profitable relationship with targeted customers, viz.: 1.  Customer Selection – Identifying customer segments attractive to the company; Craft the value proposition to appeal to these segments; Create a brand image that attracts customers in these segment to the companys products and services 2.  Customer Acquisition – Communicate the message to the market, secure prospects; Covert prospects to customers 3.  Customer Retention – Ensure quality, correct problems; Develop loyalty in customers. 4.  Growing Relationship with Customers – Get to know customers, build relationships with them; Increase the company s share of targeted customers purchasing activity Cluster 2 - Innovation Management Cluster Processes that help companies create competitive advantage by bringing innovative products – well matched to target customers needs – to the market fast and efficiently. Successful Innovation drive customer acquisition and growth and margin enhancement and customer loyalty and includes four important processes, viz. 1.  Identify opportunities for new product and services – Anticipating future customer needs; Developing more effective product and services 2.  Manage the research and development portfolio – Actively manage the product/ offer portfolio for superior innovation and customer positioning, performance and profitability; Extend current product platforms into new and existing markets; Extend product portfolio through collaboration 3.  Design and develop new products and services- Concept development; Product planning; Detailed product and process engineering 4.  Bring the new products and services to market – Rapid launch of new products; Effective production of new products; Effective marketing, distribution and sales of new products 24
  25. 25. Closer look at Internal Processes - BSC groups anOrganization s myriad internal processes into four Clusters Cluster 3 – Operations Management Cluster Operations Management Processes are the basic, day-to-day processes by which companies produce their existing products and services and deliver them to customers. Successful management of processes that deliver goods and services to customers vital in helping organizations improve the cost, quality and responsiveness of critical processes, and includes four processes, viz.: 1.  Develop and sustain supplier relationships 2.  Produce products and services 3.  Distribute and deliver products and services to customers 4.  Manage Risk Cluster 4 – Regulatory & Social Cluster Regulatory and social processes help organizations continually earn the right to operate in the communities and countries in which they produce and sell 25
  26. 26. Customer Management Processes Sustain growth inFinancial Shareholder ValuePerspective Productivity Strategy Revenue Growth Strategy Improve Cost Increase Expand Revenue Enhance Customer Structure Asset Utilization Opportunities ValueCustomer Customer Value Proposition(External) Product/ Service Attributes Relationship ImagePerspective Price Quality/ Selection Functionality/ Reputation Returns Availability Features Service Channel Value PropositionChannelPartner Sales Production Support Growth & Development Support(Agency) Product Quality/ Sales Support Brand Support Agency Mgmt. Range Admin Support Career & Comp. SupportPerspectiveBusiness Model (Int. Process)Perspective Customer Mgmt. Innovation Processes Operations Mgmt. Regulatory & Social Processes Processes Processes §  Customer Selection §  Opportunity Identification §  Supply §  Environment §  Customer Acquisition §  R&D Portfolio §  Production §  Safety and Health §  Customer Retention §  Design/ Develop §  Distribution §  Employment §  Customers Growth §  Launch §  Risk Management §  CommunityLearning &Growth Perspective Human Capital Information Capital Organizational Capital - Culture, Leadership, Alignment, Teamwork 26
  27. 27. Closer look at Customer Management Processes Sustain growth in Financial Shareholder Value Perspective Productivity Strategy Revenue Growth Strategy Improve Cost Increase Expand Revenue Enhance Customer Structure Asset Utilization Opportunities Value Customer Customer Value Proposition (External) Product/ Service Attributes Relationship Image Perspective Price Quality/ Selection Functionality/ Reputation Returns Availability Features Service Channel Channel Value Proposition Partner Sales Production Support Growth & Development Support (Agency) Product Quality/ Agency Mgmt. Sales Support Admin Support Brand Support Career & Comp. Perspective Range Support Business Model (Int. Process) Perspective Customer Selection Customer Acquisition Customer Retention Customer Growth §  Understand segments §  Communicate Value Proposition §  Premium Customer Svc §  Cross-selling §  Screen unprofitable customers §  Customize mass marketing §  Sole-Source partnerships §  Solution selling §  Target high value customers §  Acquire/ convert leads §  Service excellence §  Partnering/ Integrated Mgmt. §  Manage the brand §  Loyal customers §  Customer educationLearning & Growth Perspective §  Market research §  Telemarketing §  Call centre protocols §  Consultative sales skills Human Capital §  Profitability analysis §  Product line knowledge §  Product line knowledge §  Customer/ Industry knowledge §  Market communication §  Customer communications §  Problem resolution §  Product line knowledge §  Partner management §  Customer feedback §  Customer database §  Database marketing §  Customer interaction centre §  Customer information feedback Information Capital §  Customer analytics §  Lead management §  Problem tracking system §  Portfolio planning models §  E-polling/ sampling §  Sales force automation §  Order Mgmt. System §  Integrated order management §  Customer profitability analysis §  Web site design §  Customer focused culture §  Customer focused culture §  Customer focused culture §  Customer focused culture Capital Org §  Personal goal alignment §  Personal goal alignment §  Personal goal alignment §  Personal goal alignment §  Best practice sharing §  Best practice sharing §  Best practice sharing §  Best practice sharing 27
  28. 28. Closer look at Customer Management Processes Perspective Objective Measure §  Create new sources of revenue §  Revenue from new customers §  Increase revenue per customer §  Share of wallet Financial §  Increase customer profitability §  Profits per customer (ABC) §  Improve sales productivity §  Cost of sales by channel §  Increase customer satisfaction with §  % customers highly satisfied (survey) value proposition §  Customer retention Customer §  Increase customer loyalty §  Depth of relationship §  % business from customer referrals §  Under customer segments §  Contribution by segment/ Market share in target segment §  Screen unprofitable customers §  Percentage of unprofitable customers Selection §  Target high value customers §  No. of strategic accounts §  Manage the brand §  Customer survey on Brand awareness/ preference §  Communicate value proposition §  Brand awareness (survey) §  Customer mass marketing §  Campaign response rate Internal Process Acquisition §  Acquire new customers §  No. of customer using promotions to sample product §  Cost per customer acquired/ Life time value (est.) of customer acquired §  No. of leads/ conversion rate §  Provide premier customer service §  No. of premier customers/ Time for customer to resolve concerns §  Create sole source partnerships §  No. of referrals to new customers Retention §  Provide service excellence §  No. of new customer acquired from referrals by existing customers §  Create highly loyal customers §  % revenue from sole source §  Service levels (by channel) §  Cross selling §  No. of products per customer §  Solution selling §  Cross market revenues Growth §  Partnering/ integrated management §  No. jointly developed service agreements §  Customer education §  No./ $ from gain sharing agreements §  Hours with customers 28
  29. 29. Closer look at Customer Management Processes Perspective Objective Measure §  Develop strategic competencies §  Human capital readiness Learning & Growth Human §  Attract and retain top talent §  Key employee turnover Capital §  Develop strategic CRM portfolio §  Application portfolio readiness Information §  Increase knowledge sharing §  No. of Customer Knowledge Mgmt. System employees Capital §  Create customer focused culture §  Customer survey Organization §  Create personal goal alignment §  Employee objectives linked to BSC Capital 29
  30. 30. Innovation Management Processes Sustain growth inFinancial Shareholder ValuePerspective Productivity Strategy Revenue Growth Strategy Improve Cost Increase Expand Revenue Enhance Customer Structure Asset Utilization Opportunities ValueCustomer Customer Value Proposition(External) Product/ Service Attributes Relationship ImagePerspective Price Quality/ Selection Functionality/ Reputation Returns Availability Features Service Channel Value PropositionChannelPartner Sales Production Support Growth & Development Support(Agency) Product Quality/ Sales Support Brand Support Agency Mgmt. Range Admin Support Career & Comp. SupportPerspectiveBusiness Model (Int. Process)Perspective Customer Mgmt. Innovation Processes Operations Mgmt. Regulatory & Social Processes Processes Processes §  Customer Selection §  Opportunity Identification §  Supply §  Environment §  Customer Acquisition §  R&D Portfolio §  Production §  Safety and Health §  Customer Retention §  Design/ Develop §  Distribution §  Employment §  Customers Growth §  Launch §  Risk Management §  CommunityLearning & GrowthPerspective Human Capital Information Capital Organizational Capital - Culture, Leadership, Alignment, Teamwork 30
  31. 31. Closer look at Innovation Management Processes Sustain growth inFinancial Shareholder ValuePerspective Productivity Strategy Revenue Growth Strategy Manage Total Life Revenue from Gross Margins: Cycle Production Costs New Products New ProductsCustomer Customer Value Proposition(External)Perspective High Performance First to Market Extend into Products New Markets Channel Value PropositionChannelPartner Sales Production Support Growth & Development Support(Agency) Product Quality/ Sales Support Brand Support Agency Mgmt. Range Admin Support Career & Comp. SupportPerspectiveBusiness Model (Int. Process)Perspective Identify Opportunity Manage the Portfolio Design & Develop Launch §  Anticipate customer needs §  Choose and manage mix of §  Supply §  Environment §  Discover new opportunities projects §  Production §  Safety and Health §  Extend products to new §  Distribution §  Employment applications §  Risk Management §  Community §  CollaborateLearning & GrowthPerspective Human Capital Information Capital Organization Culture Technology to explore, integrate Culture of Creativity Multi-disciplinary Skills and Speed to Market & Innovation 31
  32. 32. Closer look at Innovation Management Processes Perspective Objective Measure §  Revenue growth from existing customers §  Revenues and margins from existing customer from product released §  Revenue growth from new customers in last 12 months Financial §  Manage life cycle costs §  Percent growth in sales to existing customers §  Revenues and margins from new customers with new products §  Maintenance cost as percent of total manufacturing costs §  Offer enhanced product/ service §  Specific performance attribute of new product/ service functionality to customers §  Lead time relative to competitors §  First to market with new product service §  No. of new products/ service first to market Customer §  Extend products/ services to new segments §  Percent of products launches on time §  No. of new application from platform products §  Revenue from new markets and segments §  Anticipate future customer needs §  Time spent with key customers learning about their future §  Discover and develop new, more effective opportunities and needs Identify new products and services §  Number/ percent of new projects launched based on client input opportunities §  Number of nee projects or concepts presented for development §  Number of new value-added services identified Internal Process §  Actively mange the product portfolio for §  Actual vs. desired mix of projects (advanced development, platform, superior innovation and customer derivative and outsourced) positioning, performance and profitability §  Actual vs. desired spending on projects of each type §  Extend current product platforms into new and existing markets §  Technology ranking (independent peer review of current technology capabilities) §  Extend product portfolio through Manage the §  Net present value of products in project pipeline collaboration R&D Portfolio §  No. of project leveraged from existing platforms that are targeted at new markets §  No. of life cycle extension projects §  No. of licensed products §  No. of joint projects in new or emerging markets §  No. of technology or product partners 32

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