New 13 strategy-maps bsc integrative-thinking

On Strategy Maps and Balanced
Scorecard
Ziya G. Boyacigiller
This presentation was created and given by Ziya
Boyacigiller who was leading Angel Investor and a loved
mentor to many young entrepreneurs in Turkey. We have
shared it on the web for everyone’s benefit. It is free to
use but please cite Ziya Boyacigiller as the source when
you use any part of this presentation. For more about
Ziya Boyacigiller’s contributions to the start-up Ecosystem
of Turkey, please go to www.ziyaboyacigiller.com

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Ziya G. Boyacigiller © 2005
Pulling It All Together
With “Strategy Maps” and
“Balanced Scorecard”
Ziya G. Boyacıgiller
Sabancı Ünıversitesi

3
Question:
Now What?
You get a new job. First thing you do is to apply
what you learned in this class to your new
company. You create and develop some
powerful ideas as to what is wrong, or missing,
or needs improvement… You develop a vision and
a strategy.
• What would you do next?
• How would you like the upper
management to measure the company’s
performance?
• How would you know if you are gaining
or losing ground?

4
Focusing question becomes:
Which activity do we
measure to control the
company’s performance?

5
In an airplane, reliance on one
dial can be fatal…
…that is why pilots need
multiple dials in the cockpit.

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“…no single measure can
provide a clear
performance target or
focus attention on the
critical areas of a
business” – which is a
complex system of activities
and interacts with external
environment…

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…that is why we need a
“Balanced ScoreCard” (BSC)
BSC shows both:
• Financial Measures – that tell the
results of actions already taken, and
• Operational Measures – that are the
drivers of future performance
(measures such as customer satisfaction, internal
processes, innovation & growth activities)

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A “business” needs more
than an idea…
If you can define:
1. Who is the customer?
2. What value (benefits/cost)
proposition do I have?
3. How do I deliver that value?
then, stakeholders will follow you. However, stakeholders
will ignore you if you only have an “idea”, and you cannot
define these three...

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BSC provides answers to
4 essential questions:
1. How do customers see us?
(customer perspective)
2. What must we excel at?
(internal processes perspective)
3. How can we continue to create
and improve value?
(innovation and growth perspective)
4. How do we look to stakeholders?
(financial/corporate perspective)

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BSC links Performance Measures
Financial / Corporate
Perspective
GOALS MEASURES
Internal Business
Perspective
GOALS MEASURES
Customer Perspective
GOALS MEASURES
Innovation & Growth
Perspective
GOALS MEASURES
Vision & Strategy
How do customers see us?
How do stakeholders see us?
What must we excel at?
How do we continue to
create value and grow?

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Why BSC?
(needle in a haystack)
• It is difficult to “focus” on strategic objectives
(local optimization vs global optimization)
• It is difficult to identify the conflicting
objectives and decide how to proceed
• It is difficult to know “what-to-do” and “what not-
to-do”
strategic focus
• It is difficult to communicate strategy
convincingly
(both up, lateral, and down)
• It is difficult to execute strategy
• It is difficult to measure performance
(companies rarely suffer from having too few measures. )

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Customer Perspective:
• Customers’ concerns :
– 1. Time
(orderdelivery, or definition  market)
– 2. Quality
(fulfill what customers want -- they will know it when
they see it…)
– 3. Performance & Service
(contribute to customers’ value generation process)
– 4. Cost
(enable customers to be in business, address total cost)

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Examples:
• Producer of very expensive
medical equipment:
– Equipment up time percentage
– Mean-time response to service calls
• Computer company wanted to
solve customers’ problems
through partnerships
– Percentage of third-party revenue

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Perspective
GOALS MEASURES
Internal Business
Perspective
GOALS MEASURES
GOALS MEASURES
Innovation & Growth
Perspective
GOALS MEASURES
Vision & Strategy

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Internal Business Perspective:
• Focus on critical internal processes
that will best enable the company to
satisfy customer needs.
• Must have information system
(backup data) available to understand
root-causes of problems.

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Examples:
• HP to measure effectiveness of new
product development activities:
– BET (breakeven time)
• One company to measure
effectiveness of TQM program:
– Monthly survey of randomly selected employees
to see if they are aware of the program, had it
changed their behavior, believed it worked, etc.

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Perspective
GOALS MEASURES
Internal Business
Perspective
GOALS MEASURES
GOALS MEASURES
Innovation & Growth
Perspective
GOALS MEASURES
Vision & Strategy

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Innovation & Growth Perspective:
• Growth and Innovation improve
shareholder value the most, make the
company most competitive in time.
• Growth comes from more customers
• Innovation results in improved profits
• Organizational Learning & Continuous
Improvement are also important
factors for growth and innovation.

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Examples:
• Plan for growth by hiring 10% of company employees from
universities and by on-the-job training (growth)
• Start “break-through projects” as 5% of all new product
development projects (innovation)
• Develop 2 new processes per year to obsolete existing high
volume production processes and improve productivity by
minimum 200% (innovation)
• Improve new product success (meet/exceed marketing
forecast by 3rd
year after introduction) by focusing on
definition, design, and merchandising processes
(organizational learning)
• Improve customer satisfaction ratings 1% per quarter
(continuous improvement)

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Perspective
GOALS MEASURES
Internal Business
Perspective
GOALS MEASURES
GOALS MEASURES
Innovation & Growth
Perspective
GOALS MEASURES
Vision & Strategy

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Financial/Corporate Perspective:
• Financial performance measures
indicate if the company’s strategy,
implementation, and execution are
contributing to bottom-line
performance.
• Typically these are after-the-fact
measures (lagging), such as:
• Profitability
• Growth (revenue, profit, market share, etc.)
• Shareholder value

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Examples:
One company stated its financial goals
as:
– To survive
 cash flow
– To succeed
 quarterly sales growth
 operating income by division
– To prosper
 increased market share by segment
 return on equity

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How to develop your BSC?
1. Develop a strategy map
a. Start by asking “What is the one most important objective
we have? Follow up by asking what is the “…next most
important…” until you run out of significant objectives.
b. For each objective in (a) above, continue by asking “What is
one most important factor that is stopping us from reaching
this objective?”. Follow up by asking what is the “…next most
important…” until you run out of significant factors.
c. Develop the linkages between each factor, making sure that
you don’t have conflicts (suck-and-blow objectives) – force
yourself to make trade-offs and decide what-not-to-do.

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Penny/Share/Quarter
profit growth
reduce new
shares offered
reduce costs
keep cash-flow
positive
“Strategy Maps” show strategic objectives
and their drivers i.e. cause-and-effect linkages
introduce
high-margin
products
general requirement
differentiator or high “fit”
measure of achievement
net profit by
quarter
number of shares
by quarter
average margin by quarter

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Integrative Thinking
When making any decision, people proceed through four steps:
Salience: what do we choose to pay attention to, and what not? In this
initial step, we decide which features are relevant to our decision.
Causality: how do we make sense of what we see? What sort of relations
do we believe exist between the various pieces of the puzzle?
Architecture, during which an overall mental model is constructed, based
upon our choices from the first two steps,
Resolution: what will our decision be, based on our reasoning?
Integrative thinkers approach these four steps in a very specific way. As shown
on the diagram below, in step one they consider more features of the
problem as salient to its resolution; they consider multi-directional and non-
linear causality between the salient features; they are able to keep the ‘big
picture’ in mind while they work on the individual parts of the problem; and
they find creative resolutions to the tensions inherent in the problem’s
architecture

26http://www.rotman.utoronto.ca/integrativethinking/definition.htm

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IT vs CT
(Integrative Thinkers vs Conventional Thinkers)
• Integrative thinkers build models rather than choose between them.
• Their models include consideration of numerous variables — customers,
employees, competitors, capabilities, cost structures, industry evolution,
and regulatory environment — not just a subset of the above.
• Their models capture the complicated, multi-faceted and
multidirectional causal relationships between the key variables in any
problem.
• Integrative thinkers consider the problem as a whole, rather than
breaking it down and forming out the parts.
• Finally, they creatively resolve tensions without making costly trade-
offs, turning challenges into opportunities.

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Penny/Share/Quarter
profit growth
reduce new
shares offered
reduce costs
keep cash-flow
positive
“Strategy Maps” show strategic objectives
and their drivers i.e. cause-and-effect linkages
introduce
high-margin
products
general requirement
differentiator or high “fit”
measure of achievement
net profit by
quarter
number of shares
by quarter
average margin by quarter

29
Ziya G. Boyacigiller (c) 2007
Kinepolis Strategy Map
resulting from its
Value Innovation
High Growth in Revenues & Profits

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2. Define strategic objectives and then
develop the objectives into a statement
Example:
a. STRATEGIC OBJECTIVE:
Cross-sell the product line.
b. OBJECTIVE STATEMENT:
We recognize that growing existing account and selling a broader set
of products to current customers represents the most efficient
approach to achieving greater profitability. Therefore, we will
target segments that represent the greatest opportunity for growth
and actively promote solutions to meet the needs of those customers.

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3. Define possible measures
Examples:
a. Share of customers with 2 or more products
b. Percent of quarterly revenue from sales of
multiple products to same customers
c. Growth per segment of customers with repeat
orders by quarter
3. Select final BSC measures
a. That are easier to implement & use,
b. Defines responsibility & accountability

32

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Summary
• Strategy requires Vision
• Vision & Strategy drive the
organizational resource allocation
and prioritization decisions
• BSC and Strategy Maps drive
execution of vision & strategy.

New 13 strategy-maps bsc integrative-thinking

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