BALANCED SCORECARD FOR
STRATEGIC PLANNING AND
MEASUREMENT
Case Study, Concepts and Debatable Ideas
Kenny Ong
CNI Holdings Berhad
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Intro: CNI
1. 20 years old
2. Core Business: MLM
3. Others: Contract Manufacturing, F&B Retail,
Export/Trading, eCommerce, Shared Services
4. Malaysia, Singapore, Brunei, Indonesia, India,
China, Hong Kong, Philippines, Italy, Taiwan,
Oman, United States, Vietnam
5. Staff force: ± 500
6. Distributors: 200,000
7. Products: Consumer Goods and Services
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Introduction to Balanced Scorecard and
Strategy
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"The digital watch didn't come from
established watch companies, the calculator
didn't come from slide rule or adding
machine companies, video games didn't come
from board-game manufacturers Parker Bros
or Mattel, the ballpoint pen didn't come from
fountain pen manufacturers, and Google
didn't come from the Yellow Pages"
Bob Seidensticker, Futurehype
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What’s wrong with Strategic
Planning Today?
Long-term Plans
Objectives
Strategies
Enablers
Resources
Also known as L.O.S.E.R.
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What’s wrong with Strategic
Planning Today?
1. Biggest Threats often come from OUTSIDE your normal
industry
2. Planning from the base of an ‘Existing’ organization vs.
zero-based
3. Traditional Analysis (e.g. SWOT) based only on known
or existing assumptions or knowledge
4. Spending too much time in market research and
analysis
5. Defining the company from a Product/Service
perspective vs. Category vs. JTBD (e.g. Coca-cola)
6. Wrong Benchmark – already successful vs. what made
them successful
7. Implementing BSC and PMS to improve Business
Model and Strategy
8. New strategy, same people
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Why BSC?
• Reason 1: Balanced
• Reason 2: Cause-and-Effect
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Balanced Scorecard:
Corporate
Financial
Customer
“To satisfy our
stakeholders, what
Financial objectives
must we accomplish?”
“Who are our target
customers?
What is our value
proposition?”
Learning & Growth
Internal Process
“What capabilities and
tools do our employees
require to help them
execute our strategy?
“To satisfy our customers,
in which internal business
processes must we
excel?"
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Balanced Scorecard: NGOs,
Non-Profits, Governments
Internal Process
Mission
“To satisfy our targets,
in which internal
processes must we
excel?"
“Who are our targets?
What is our value
proposition?”
Financial
Learning & Growth
“To fulfill the Mission,
what Financial, how do
we fund Internal
Processes?”
“What capabilities and
tools do our staff require
to help them execute our
strategy?
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Side notes on BSC
1. BSC should be a Thought Process and a Tool
not a Religion (e.g. Excel™ vs. Budgeting)
2. BSC ≠ Appraisal
3. New BSC implementations should start linking
with Budgeting right from the beginning
4. The ‘proper’ BSC approach should rightly fully
be heavily customized to the organization
5. ‘Strategic Planning’ trainings should be
provided before ‘BSC’ trainings
6. Clear definitions for Accountability vs. Impact
vs. Influence vs. Assistance
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Today’s Agenda
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Summary: Today’s
presentation
1. Business Model + BSC =
Boundaries
2. Strategy + BSC = How
3. PMS + BSC = Execution
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What is the Business
Model?
•Google
•Air Asia
USP
•Tata Nano
Profit Model
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Market
Discipline
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What is the Business
Model?
USP
Profit Model
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Market
Discipline
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Business Model: Profit
Model
Revenue
Assets
Cash
Flow
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Cost
Margin
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Strategy + BSC
Financial
Revenue
Cost
Margin
Cash Flow
Asset
Customers
Internal
Process
Learning & Growth
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What is the Business
Model?
USP
Profit Model
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Market
Discipline
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Intro: Market Discipline
"They are the most innovative"
Product
Leadership
"Constantly renewing and creative"
"Always on the leading edge"
"A great deal!"
Operational
Excellence
Excellent/attractive price
Minimal acquisition cost and
hassle
Lowest overall cost of
ownership
"A no-hassles firm"
Convenience and speed
Reliable product and
service
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Customer
Intimacy
"Exactly what I need"
Customized products
Personalized communications
"They're very responsive"
Preferential service and
flexibility
Recommends what I need
"I'm very loyal to them"
Helps us to be a success
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Strategy: Value Disciplines
Product Leadership
(best product)
Operational Excellence
(low cost producer)
Ref:
The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
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Customer Intimacy
(best total solution)
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Strategy: Value Disciplines
Product Leadership
(best product)
Operational Excellence
(low cost producer)
Ref:
The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
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Customer Intimacy
(best total solution)
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Strategy: Value Disciplines
Product Leadership
(best product)
Operational Excellence
(low cost producer)
Ref:
The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
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Customer Intimacy
(best total solution)
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Strategy: Value Disciplines
Operational
Excellence
•
Competitive price
•
Error free, reliable
•
Fast (on demand)
•
Simple
•
Responsive
•
Consistent
information for all
•
Transactional
•
'Once and Done'
Product Leadership
Customer Intimacy
•
•
Management by
Fact
•
Easy to do
business with
•
Risk takers
•
Meet volatile
customer needs
•
Have it your way
(customization)
•
Fast concept-tocounter
•
Market segments
of one
•
Never satisfied obsolete own and
competitors'
products
•
Proactive, flexible
•
Relationship and
consultative
selling
Learning
organization
•
Cross selling
•
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New, state of the
art products or
services
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The McPlaybook*
Make it easy to eat
• 50% drive-thru
• Meals held in one
hand
Make it easy to prepare
• High Turnover
• Tasks simple to learn
& repeat
Make it quick
Make what customers want
• “Fast Food”
• Prowls market for new
products
• Tests new products
for Cooking Times • Monitored field tests
*Adapted from: Businessweek , Februrary 5th 2007
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Strategy: Disciplines
Product Leadership
(best product)
Operational Excellence
(low cost producer)
Ref:
The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
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Customer Intimacy
(best total solution)
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Strategy: Disciplines
Apple powerful Product Leadership
(best product)
products, premium
pricing, limited range
Acer super lean
cost structure,
aggressive pricing
Still
Doing
well in
2009
Operational Excellence
(low cost producer)
Ref:
The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
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HP well-balanced
portfolio, mass
customization
Customer Intimacy
(best total solution)
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What is the Business
Model?
•Google
•Air Asia
USP
•Tata Nano
Profit Model
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Market
Discipline
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Summary: Today’s
presentation
1. Business Model + BSC =

Done
Boundaries
2. Strategy + BSC = How
3. PMS + BSC = Execution
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2. Strategy + BSC = How
‘Hope’ is not a strategy
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What is your Goal?
1. Cost Reduction
2. Growth
3. Both?
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Growth Strategy
“Double-Digit Growth”, Michael Treacy
1.Base Retention
2.Share Gain
5.New Business
GROWTH
4.Adjacent Market
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3.Positioning
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Growth Strategy
•Increase switching cost
“Double-Digit Growth”, Michael Treacy
1. Base Retention
•Customize products
•Preempt Defections
•Brand
2. Share Gain
5. New Business
GROWTH
•Neutralize Competitor
advantages
•Superior Value
•Promising Market?
•Buy market share
•Make or Buy?
4. Adjacent Market
3. Positioning
•Spot growth opportunities
•Organized search
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How Markets determine
Growth Strategies (1)
• Growth Rate
Growth Strategy
Rate
Fast
1. Market
Positioning
2. Share Gain
3. Base
Retention
Flat
1. Base
Retention
2. Share Gain
(Acquisitions)
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Why?
•Maintain market share in strategic
segments
•Prepare for market decline
•Competitors focus too much on
getting new customers
•Lose customers slower than
competitors
•Create scale economics, squeeze
costs
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How Markets determine
Growth Strategies (2)
• Churn Rate
Churn
Rate
Low
Strategy
Why?
1. Share Gain
(Acquisitions)
2. Adjacent
Markets
•Buying customer base is
cheaper than own efforts
•New products, old customers
strategy
High
1. Base
Retention
2. Share Gain
3. Adjacent
Market
•Lose customers slower than
competitors
•Customers are always open to
the best value and offer
•Desperate to gain revenue
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How Markets determine
Growth Strategies (3)
•Example: XYZ Sector
Fast Growth, 1.Market Positioning
Low Churn
2.Share Gain
3.Base Retention
4.Adjacent Markets
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Side Notes on Cost
Reduction Strategy
30%
80%
Cost Reduction
5% 30%
Business
Model
Operational
•USP
•Finance, HR, IT
•Profit Model
•Supply Chain
•Market Discipline
•R&D
•Invest/Divest
•Sales & Marketing
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Strategy + BSC
Financial
Revenue
Cost
Customers
Base
Retention
Share Gain
Margin
Satisfactio
n
Positioning
Cash Flow
Adjacent
Market
Asset
New
Business
Internal
Process
Learning & Growth
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Strategy: Disciplines,
Priorities, and KPIs
Product Leadership
(best product)
Operational Excellence
(low cost producer)
Ref:
The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
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Customer Intimacy
(best total solution)
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Strategy: Disciplines,
Priorities, and KPIs
Operational
Excellence
•
Competitive price
•
Error free, reliable
•
Fast (on demand)
•
Simple
•
Responsive
•
Consistent
information for all
•
Transactional
•
'Once and Done'
Product Leadership
Customer Intimacy
•
•
Management by
Fact
•
Easy to do
business with
•
Risk takers
•
Meet volatile
customer needs
•
Have it your way
(customization)
•
Fast concept-tocounter
•
Market segments
of one
•
Never satisfied obsolete own and
competitors'
products
•
Proactive, flexible
•
Relationship and
consultative
selling
Learning
organization
•
Cross selling
•
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New, state of the
art products or
services
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Strategy: Value Disciplines
• Operational Excellence
• Move know-how from top performing
units to others
• Benchmark against best in class
• Ensure operations training for all
employees
• Use disciplines like TQM for continuous
learning to reduce costs and improve
quality
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Strategy: Value Disciplines
• Customer Intimacy
• Capture knowledge about customers
• Understand customer needs
• Empower front line employees
• Ensure that everyone knows the
customer
• Make company knowledge available to
customers
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Strategy: Value Disciplines
• Product Leadership
• Reduce time to market
• Commercialize new products fast
• Ensure that ideas flow
• Reuse what other parts of the company
have already learned
• Ensure there are multiple sources of
funding
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Strategy: Value Disciplines
Product Leadership
(best product)
Operational Excellence
(low cost producer)
Ref:
The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
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Customer Intimacy
(best total solution)
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Strategy: Value Disciplines
Product Leadership
(best product)
Operational Excellence
(low cost producer)
Ref:
The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
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Customer Intimacy
(best total solution)
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Strategy + BSC
Financial
Revenue
Cost
Customers
Base
Retention
Share Gain
Margin
Satisfactio
n
Positioning
Cash Flow
Adjacent
Market
Internal
Process
Operational
Excellence
Product
Leadership
Customer
Intimacy
Asset
New
Business
Investment
Strategy
Learning & Growth
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Alignment: 4-Wheels Model
Business
Person
Structure
Model
Strategic
Planning
Culture
Leadership
Resources
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Alignment: Framework
Culture
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•
•
•
•
•
•
•
•
Focus point
Alignment
Quality
Innovation & Differentiation
Risk taking
Performance Management
Corporate obsession
Decision making
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Alignment: Framework
Structure
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•
•
•
•
•
•
•
•
•
Org Structure
Job Design
C&B
Policies & procedures
Decision making
Job fit
Management Systems
BSC and KPIs
Decentralized & Empower
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Strategy: Framework
Leadership
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•
•
•
•
•
•
•
Role modeling
Vision/Mission/Philosophy
Leadership Style
Delegation & Empowerment
C&B, Promotions
Sense of Urgency
Speak regularly about Performance
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Strategy: Framework
Person
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•
•
•
•
•
•
•
•
•
•
•
Recognition
Recruitment
Training
Profit sharing
Values
Motivation
Self Efficacy
Awareness
Useful Competencies
Career aspirations
Attribution (control)
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Strategy: Framework
Enablers
Resources • Technology
• Equipment
• Materials
• Human
• Intellectual
Property
• Partners
• Property
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Funding
• CAPEX
• OPEX
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Alignment: 4-Wheels Model
Business
Person
Structure
Model
Strategic
Planning
Culture
Leadership
Resources
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Each Discipline Requires
Different Priorities & Resources
Organization, jobs,
skills
Culture, values,
norms
Information and
systems
Operational
Excellence
Product
Leadership
Customer
Intimacy
Management
systems
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Each Discipline Requires
Different Priorities & Resources
Operational Excellence
Organization,
jobs, skills
•Central authority, low level of empowerment
•High skills at the core of the organization
Culture, values,
norms
•Disciplined Teamwork
•Process, product- driven
•Conformance, 'one size fits all' mindset
Information and
systems
•Integrated, low cost transaction systems
•The system is the process
Management
systems
•Command and control
•Quality management
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Each Discipline Requires
Different Priorities & Resources
Product Leadership
Organization, jobs, •Ad hoc, organic and cellular
skills
•High skills abound in loose-knit structures
Culture, values,
norms
•Concept, future-driven
•Experimentation and 'out of the box' mindset
Information and
systems
•Person-to-person communications systems
•Technologies enabling cooperation
Management
systems
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•Rewarding individuals' innovative capacity
•Risk and exposure management
•Product Life Cycle profitability
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Each Discipline Requires
Different Priorities & Resources
Customer Intimacy
Organization, jobs, •Empowerment close to point of customer contact
skills
•High skills in the field and front-line
Culture, values,
norms
•Customer-driven
•Variation and 'have it your way' mindset
Information and
systems
•Strong customer databases, linking internal and
external information
•Strong analytical tools
Management
systems
•Customer equity measures like life time value
•Satisfaction and share management
•Focus on ‘Share of Wallet’
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Strategy + BSC
Financial
Revenue
Cost
Customers
Base
Retention
Share Gain
Margin
Satisfactio
n
Positioning
Cash Flow
Adjacent
Market
Internal
Process
Operational
Excellence
Product
Leadership
Customer
Intimacy
Asset
New
Business
Investment
Strategy
Learning & Growth
Competencies
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Information
Systems
Motivation,
empowerment,
alignment
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Summary: Today’s
presentation
1. Business Model + BSC =

Done
Boundaries
2. Strategy
+ BSC = How
 Done
3. PMS + BSC = Execution
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3. PMS + BSC = Execution
KPIs and PMS
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Reminder: Why BSC?
• Reason 1: Balanced
• Reason 2: Cause-and-Effect
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Before we start…
Which comes first?
1. Strategies -> KPI?
2. KPI -> Strategies?
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Before we start…
Which comes first?
1. Strategies -> KPI?
2. KPI -> Strategies?
•already know our priorities, aware of all
strategy options available
•creating something UNIQUE, INNOVATIVE
and DISRUPTIVE e.g. Air Asia
•conducting a business Turnaround e.g. MAS
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Before we start…
Which comes first?
1. Strategies -> KPI?
2. KPI -> Strategies?
•want to find out possible strategies,
•determine our priorities first thru selection of
important KPIs;
•growing through ‘normal’ business, not a
Turnaround.
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Example: Selection of KPIs
for BSC
•Customer satisfaction
Customer loyalty
Market share
Customer complaints
Complaints resolved on first contact
Return rates
Response time per customer
request
Price relative to competition
Total cost to customer
Average duration of customer
relationship
Customers lost
Customer retention
Customer acquisition rates
Percentage of revenue form new
customers
Number of customers
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Annual sales per turnover
•Win rate (sales closed/sales contact)
•Customer visits to the company
Hours spent with customers
Marketing cost as a percentage of sales
Number of ads placed
Number of proposals made
Brand recognition
Response rate
Number of trade shows attended
Sales volume
Share of target customer spending
Sales per channel
Average customer size
Customers per employee
Customer service expense per customer
Customer profitability
Frequency (number of sales transactions)
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Wrong KPIs
“What is the moral of
the story?”
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KPIs and Behavior
Before: “Handle Time” Per Call
• Motivated Call Centre staff to transfer callers,
getting rid of complainers, making them
someone else’s problem
• Callers at 45% chance of being transferred
• 7,000 customers each week suffered transfers 7
times or more
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KPIs and Behavior
After: “Minutes Per Resolution” of a
problem
• Resolution in ONE CALL become the core goal
• Reduced probability of call transfers from 45% to
18%
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Cause and Effect
Financial
Revenue
Cost
Customers
Base
Retention
Share Gain
Margin
Satisfactio
n
Positioning
Cash Flow
Adjacent
Market
Internal
Process
Operational
Excellence
Product
Leadership
Customer
Intimacy
Asset
New
Business
Investment
Strategy
Learning & Growth
Competencies
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Information
Systems
Motivation,
empowerment,
alignment
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Cause and Effect: An
Example
Financial
Market Value
Customers /
Distributors
Internal
Process
Learning &
Growth
Revenue
Growth
Products/
Services
Channel
Strategies
Supplier &
Alliances
Department
Operations
Productivity
Target
Markets
External
Involvement
Technology
Human
Resources
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Systems &
Processes
Information &
Intelligence
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Sample: Other 1st Level KPIs
across industries…
Financial Services
•Maximize ARPU
•Minimize Churn
•Mutichannel customer
service
Hospitality
•Personalized customer
experience
•Maximize share of wallet
•Player/customer loyalty
•Multichannel customer
service
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Retail
•Understand customer
behavior related to customer
conversion, acquisition, and
retention
•Single view of customer
•Multichannel customer
experience
•Personalized customer
experience
Telecommunications
•Anticipate and prevent churn
despite compensation
•Increase number of products
per customer
•Turn call center information
opportunity to up-sell and
cross-sell
•Increase customer
satisfaction and loyalty
Travel & Leisure
Manufacturing
•Increase customer loyalty
and preference
•Maximize customer revenue
•Improve service quality and
efficiency
•Capture and close sales
opportunities
•Single view of customers
across supply chain
•Zero-error order capture
•Streamline opportunity to
cash processes
•Leverage investment in ERP
and backoffice systems
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Sample KPIs for Each
Discipline
Operational
Excellence
Product
Leadership
Customer Intimacy
•
•
•
•
•
•
•
•
•
•
•
Price
Selection
Convenience
Zero Defects
Growth
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Marketing
Functionality
# of Successes
# of Failures
Learn from key
users
• Interdisciplinary
teams
• Pipeline
•
•
•
•
Customer
Knowledge
Solutions Offered
Penetration
Customer Data
Customer-success
focus
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B2B/B2G BSC Matching
Customer/Client/
Government BSC
Financial
Revenue
Cost
Customers
Margin
Cash Flow
Asset
Your BSC
Satisfaction
Base
Retention
Share Gain
Positioning
Adjacent
Market
New
Business
Financial
Revenue
Internal
Process
Operational
Excellence
Product
Leadership
Customer
Intimacy
Investment
Strategy
Cost
Customers
Margin
Cash Flow
Asset
Satisfaction
Base
Retention
Share Gain
Positioning
Adjacent
Market
New
Business
Learning & Growth
Competencies
Information
Systems
Motivation,
empowerment,
alignment
Internal
Process
Operational
Excellence
Product
Leadership
Customer
Intimacy
Investment
Strategy
Learning & Growth
1. Draw your ‘customer’s’ BSC
Competencies
Information
Systems
Motivation,
empowerment,
alignment
2. Match their CP/IP with your CP
3. Identify IPs that support/conflict
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Cascading
Customer Perspective
Goals
Base
Retention
Strategies
Targets
Direct
Mkt
Share Gain
Mkt
New
Business
BD
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Indirect
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E3 – Department BSC
Customer Perspective –
Marketing Department
Goals
Base
Retention
Strategies
Targets
CAPEX
OPEX
Share Gain
Budgeting
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Individual MBO
Employee A – Marketing Executive
KRAs
Action
Plans
Targets
Re: Base
Retention
Weight
(%)
Score
Class A
Customer
Retention
Class B
Customer
Retention
Competition
Crossovers
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What’s In Between Planning
and Execution?
Business Model
BSC
KPIs
Budgeting + Planning
Performance Management System
Differentiation
Talent Management
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Succession Planning (Business
Continuity)
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What’s In Between Planning
and Execution?
Business Model
BSC
KPIs
a.k.a. Strategy
Planning
Budgeting + Planning
Performance Management System
Differentiation
a.k.a. Strategy
Implementation
Talent Management
Succession Planning (Business
Continuity)
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Performance Execution
Clarity
A
Excellent
B
Good
C
Average
D
Poor
E
Useless
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Performance Execution
Clarity
A
Excellent
B
Good
C
Average
D
Poor
E
Useless
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Good
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Performance Execution
Clarity
A
Excellent
Excellent
B
Good
Very Good
C
Average
Good
D
Poor
Not Good
E
Useless
Commit Suicide
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Performance Execution
Clarity
Consistently achieved 4 for 3
quarters
A
Excellent
B
Very Good Higher than planned results
C
Good
Achieved Planned Results
D
Not Good
Did not fully meet planned
results
E
Commit
Suicide
Unacceptable performance
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Performance and Pay Clarity
•
•
•
•
Pay for Service
Pay for Job
Pay for Performance
Pay for Competency
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Performance and Pay Clarity
• Increment
• Bonus
• Promotion
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Compa Ratio Table
Use this if your company:
• Pays for Performance, and
• Pays for Job rates
Def:
Mid-Point = Mid Point of Pay Grade
Grade E2
Min
RM2,000
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MID
RM2,500
Max
RM3,000
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Performance and Pay Clarity
< 0.7
≥0.7 ≤0.9
>0.9 <1.1
≥1.1 ≤1.3
> 1.3
5
9
8
7
6
5
4
8
7
6
5
4
3
7
6
5%
4
3
2
6
5
4
3
2
1
5
4
3
2
1
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Performance and Pay Clarity
< 0.7
≥0.7 ≤0.9
>0.9 <1.1
≥1.1 ≤1.3
> 1.3
5
20
15
12
8
5
4
18
12
9
5
3
3
9
7
5%
4
3
2
1
1
1
0
0
1
0
0
0
0
0
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Curse of the Bell Curve
‘A’
Staff
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‘B’
Staff
‘C’
Staff
‘D’
Staff
‘E’
Staff
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End Notes
Tying it all up
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Review processes
1.
2.
3.
4.
5.
6.
7.
8.
9.
Result Planning schedule inc. BSC, Budget
Quarterly Performance Appraisals
Sales performance reviews
Non-sales performance reviews
Annual Appraisals
Specialized KPI committees
CAR, PAR, SCAR KPI improvements
Internal Audit & MSD – process problems
HRM & TND – people problems
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Problems, problems and
more problems…
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Alignment: 4-Wheels Model
Business
Person
Structure
Model
Strategic
Planning
Culture
Leadership
Resources
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Thank You.
soft copy of slides:
www.totallyunrelatedrandomanddebatable.
blogspot.com