The Balanced Scorecard approach for developing strategy

In the 1970s and 1980s companies were starting to recognize that focusing purely on the hard aspects of business was not necessarily the route to success. The work was started by Tanner Pascal & Athos who wrote the book 'The Art of Japanese Management.'3 They identified that Japanese and Western companies were similar but differed in some important aspects. As a result they created the seven S. Model. Essentially they recognized that some of the softer aspects of management i.e. around people were extremely important to long term business success.

This theme was developed by Kaplan and Norton in the 1990s.4 They recognized that not only did an organisation need to take care of these softer issues, but they needed to be measuring their performance in four specific areas:

1.  Meeting customer needs and customer satisfaction

2.  Internal business processes which also includes information systems

3.  Staff performance, their skills learning and growth

4.  Financial performance

After Kaplan and Norton wrote their first successful book, the Balanced Scorecard,' they also came to realize that many of their clients who had brought them in to develop a balanced scorecard, were in fact really asking for help in developing their strategy. Their second book, 'The Strategy Focused Organization' 5 put together a very tidy model for developing strategy. It essentially described a four step process:

1.  Identify the key (balanced scorecard) objectives at the corporate level

2.  Define a number of corporate programs (large projects) to achieve these

3.  Create departmental objectives that have a 'line-of-sight' to these programs and hence the corporate objectives

4.  Cascade these to the individual employees' objectives

I have been fortunate to have worked for a company that adopted this high level approach. The end results that the business delivered were extraordinary and were helped enormously by a clear and concise process.

The 6 P's

Let us move on to the next step, analyse our current situation. One model often used by marketing is the six P's model. This evaluates how well each of our products is operating in each market segments and is an important analysis tool for any high level strategic discussion.

The six P's analysis is a marketing tool that starts by looking at:

1.  Place, in other words the market place where each product is targeted.

2.  Promotion - what is the best way to promote and sell the product (advertising, direct sales etc.)

3               'The art of Japanese Management,' Richard Tanner Pascale & Anthony Athos

4               'The Balanced Scorecard,' Robert Kaplan & David Norton

5               The Strategy-Focused Organization,' Robert Kaplan & David Norton

3.  Product features - what features are most valuable for which market

4.  Processes required for effective sales (e.g. sales, customer care etc.)

5.  People, their knowledge and skills

6.  Pricing - elasticity, discounting structures etc

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