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Porter's Six Principles and Sun Tzu
Balance Score Card and Strategy Maps
SPIN Selling and Front-Line Strategy
Miller-Heiman and Classical Strategy
SPI's Solution Selling
The Balanced Score Card and
Strategy Maps
The Balanced Scorecard (BSC) and Strategy Maps are performance planning
and measurement systems developed by Robert S. Kaplan and David P.
Norton in a series of articles and books, built around the general idea of
Management by Objectives. These systems work to measure whether the
smaller-scale activities of an organization work in terms of its
larger-scale strategy.
While traditional measures within most organizations are solely financial,
the BSC system includes additional measurable objectives from customer, process
and employee perspectives. These measure are designed to identify both past and
future performance. The initial labels for these four perspective with
"Financial", "Customer", "Internal Business Processes", and "Learning & Growth"
but over the years and number of other titles have been proposed and used.
In the mid 1990s, the "strategy map" method evolved where measures were selected
from a set of "strategic objectives" and linked into a map, often across
the initial four categories but allowing the freedom for different maps to be
drawn. Balanced Scorecards have been implemented by government agencies,
military units, business units and corporations as a whole, non-profit
organizations, and schools.
Classical front-line strategy might be considered the complementary opposite
of the Balanced Score Card, touching all the little decisions that it cannot
measured and, like the BSC, aligning them with the vision and mission of the
company. While BSC provides a set of metrics that many organizations find
valuable, classical front-line strategy provides a set of tools that individuals
can use to analyze situations, discover opportunities, and make the right
decisions. the BSC changes behavior from the top-down and the inside out, by
changing what is watched and measured internally. Classical front-line strategy
changes behavior from the bottom up and from the outside in, but teaching people
how to respond to external events in a way the conforms to the company mission.
The Financial Perspective
According to the principles of BSC, the financial perspective determines if
execution is contributing to the bottom-line improvement of the company. As
taught by classical strategy, good economics is a necessary level for meeting
any mission. Kaplan and Norton describes three business stages:
rapid growth, sustain and harvest. Each has its own measurement profile. For
example, the growth stage might measure increased sales volumes, while the
sustain stage can focus more on costs control and ROI, while the harvest stage
might focus revenue volumes. Other typical BSC financial measures include cash
flow, return on capital employed, and return on equity .
The practice of classical strategy feed these various financial
measures, especially those front-line people working it sales. The
classical perspective views organizations as competitive entities where
financial performance is dictated by the competitive realities of the larger
market. Having people on the front-line that understand this dynamic is
critical. Front-line strategy spreads the understanding of those competitive
realities as broadly as possible within the organization. Classical strategy
defines the financial goals of an organization as the broadest and shallowest
aspect of its mission. It involves everyone in one way or another, but it is the
result of their activity, not the goal. This level of mission is necessary for
competitive viability, but higher level of mission are what create competitive
vibrancy.
On the front-line, individuals do not have to concern themselves with
determining the correct stage of a company's development. The front-line
competitive issues are simpler: defending a position or advancing it. The
strategic tools for minimizing risk in an advancing a position also have the
additional effect of reducing cost. The skills of aiming and moving a position
to beyond competitive reach is what creates higher and higher profit levels.
Financial success is certainly promoted by having the right measures, but it is
created by the rapid strategic cognition of front-line people making good
decisions quickly.
The Customer Perspective
In BSC, the customer perspective tries to measure the organization's value
proposition for its customers. These measures can include ideas such as basic
ideas such as customer satisfaction and market share and more sophisticate
measures such as delivery performance to customer by date, delivery performance
to customer by quality, and customer retention.
A company employing BSC looks at three different areas of customer
interaction: operational excellence, customer intimacy, or product leadership.
It tries to develop a clear advantage in one of these areas while maintaining
basic competence in the other two. The goals of customer perspective measures
are to satisfy customers, create more sales, identify the most profitable
customer groups, and similar customer oriented goals.
This is the area where the tools of classical front-line strategy deliver the
most value. Customer relationships are created one person, one interaction at a
time. These customer interactions, by definition, all take place on the
front-line of the organization. People with front-line strategic skills
create better customers relationships through their more comprehensive
understanding of the competitive situation. They are trained specifically to
appreciate the perspective of the customer and how the customers sees their
alternatives.
While BSC measures like customer satisfaction increase everyone's desire to
make customers happy, rapid strategic cognition quickly identifies the
fleeting opportunities for creating that satisfaction on the front-lines. In the
fast-paced environments where your people interact with customers, they need to
develop the instincts to understand what is important and why. They need
listening tools to develop their individual customer perspective. They need
aiming tools to see the highest value opportunities. They need moving tools to
surmount obstacles. And they need claiming tools to establish the value that
they have deliver.
The Internal Process Perspective
This perspective concerns itself with the processes that produces and
delivers the organization's product or service, what BSC calls, its value
proposition. These measures track all the organization's productive, with the
idea of conducting those activities as efficiently as possible. Including in
this process as also those activities that improve this processes that we
normally associate with the quality movement and continuous improvement.
Measurements in this category include tracking items such as the number of
activities, opportunity success rate , accident ratios , and equipment
utilization.
BSC uses clusters similar processes into groups. This groups include 1)
operations management processes that measure asset utilization, supply chain
organization, and so on, 2) customer management processes that develop customer
relationships, 3) innovation processes to improve product and services,
(by new products and services), and regulatory and social processes that
maintain elations with external entities.
Except for the specific clusters of "customer management processes," and
"innovation processes," this is an general area least impacted by the
introduction classical front-line strategy. Internal production processes exist
in controlled environments. These environment are simple enough that people are
not overwhelmed by information. The detailed information required for top-down
planning is generally available so the individual decision of people are not as
important.
However, both customer management and innovation exist outside of the
deterministic framework of normal planning. Customer management engages the
creative intelligence of individuals working on the front-line and classical
strategy orients that intelligence toward the organization's mission. Innovation
also offer a similar opportunity for people in the organization to contribute to
the system instead of merely operate it and again, the strategic toolkits for
identifying opportunities and overcoming obstacles become valuable.
The Learning and Growth Perspective
One of the great insights of BSC is that the skills of capabilities of the
people and systems within the organization that form its critical intangible
assets. Without these skills, the organization would not have the skills to
create values through its processes. This perspective is easily overlooked
because these assets are less well understood than other types of assets.
BSC divides the assets in this category into jobs, which is the way human
capital is deployed, the systems that deploy information capital, and the
general climate that is called the organizational capital of the enterprise.
These three factors create the infrastructure that allows an organization to
meet is other measures. This perspective require that investment are made,
balancing short-term financial gains against long-term success in all
dimensions. Measures here include training investment, illness rate,
internal promotion rate, employee turnover, and gender/racial ratios.
BSC defines training in classical front-line strategy as an investment that
an organization makes in its human capital. The levels of strategic skill
in the organization as a whole and the percentage of front-line employee
certified as strategy professions are important measures determining the
competitive health of an organization.
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