Strategy-Focused Organization, The: How Balanced Scorecard Companies Thrive in the New Business Environment (Hardcover)

This book is an interim report on the application of the authors' concept, the Balanced Scorecard (introduced in 1992 and described in the book of the same name, published in 1996). The purpose of the book is to provide "a roadmap for those who wish to create their own Strategy-Focused Organization . . . [by employing the Balanced Scorecard]."

If you don't know what the Balanced Scorecard is, let me briefly describe it for you. A Balanced Scorecard adds several important measures to the ones normally found in the accounting system, designed to measure those areas where performance most directly and powerfully affects strategic position. Such areas include innovation, organizational learning, effectiveness in key tasks, and performance with key audiences like customers. The measures are chosen to reflect the systematic effects of how the organization's overall value and performance are improved, and are displayed in a Strategy Map that communicates those ideas to one and all. In doing so, the Balanced Scorecard is the applied solution to many of the issues raised about how to establish a learning organization in Peter Senge's The Fifth Discipline.

Most new business concepts do not last long enough to warrant a study on their effectiveness. The ones that do, like reengineering a few years ago, usually display more problems than successes. The Balanced Scorecard concept is the exception. The results have been very positive for almost all those who have employed it.

The key seems to lie in having everyone in the organization have a more complete understanding of what the organization is trying to accomplish. As such, the authors have actually uncovered something much more significant than a strategy communications process. Harvard Business School Professor and accounting guru (Activity-Based Costing) Bob Kaplan and consultant David Norton have uncovered a best practice in how to communicate any important message in an organization. Although the book does not address that latter point, discerning readers will quickly spot it. Presumably the authors will too at some point, and a future book will begin to address this important application.

The focus of this book is on how Balanced Scorecard "adopting companies used [it] . . . to implement new strategies." The finding is that with "their new focus, alignment, and learning, the organizations enjoyed nonlinear performance breakthroughs." This is quite remarkable because organizations have reported in the past that implementing new strategies is one of the most difficult tasks they ever take on. Studies cited by the authors point to one problem being that most people in the organization are never clear on what the new strategy is. So if careful coordination and purposeful change are required, the speeding relay team may instead drop the baton along the way.

The Balanced Scorecard provides for a fundamental strategic control mechanism in the same way that the budget provides an operational control. The Balanced Scorecard is at the center of the organization's business planning, getting feedback to improve learning about how to proceed and then translating the organization's vision for each employee. This feedback is critical because most initial concepts for strategy are flawed in fundamental ways. As the authors point out, strategies should be treated as hypotheses, rather than as commandments written permanently in stone. Only by uncovering those flaws and correcting them does a new strategy have a good chance of succeeding.

The book features a lot of case histories that explain what the most successful organizations have done to apply the Balanced Scorecard. These are particularly valuable for making the key elements of the Balanced Scorecard clearer. For example, the book contains many pages of Strategy Maps for different organizations. These maps connect financial, customer, internal process, and learning objectives in an explicit description of how improvement in each area is connected to each other one, and to the organization's overall objectives. Without these detailed examples, it would be very hard to grasp the heart of the communications process involved here.

These financial and nonfinancial metrics can then be used to create personal objectives for each person in the organization for contributing to the ultimate success. Management by objectives measures and compensation systems can be connected to the new strategy in this way.

The research emphasizes several important themes:

(1) Translate the strategy into operational terms

(2) Align the organization to create necessary synergies

(3) Make strategic initiatives everyone's everyday job

(4) Make strategy a continuing process

(5) Mobilize change through executive leadership

I especially found the surveys helpful for describing what was different about the effectiveness of organizations using the Balanced Scorecard. They outperform the other companies by about 100 percent in having everyone in the organization understand what the organization's strategy is.

The book also contains a very helpful section of frequently asked questions about the Balanced Scorecard.

Let me be sure that you understand what the limitation of the Balanced Scorecard is. If you conceptualize a strategy that is not as good as one that your competitor develops, you will still be vulnerable to losing ground until such time as you reconceptualize your strategy. The Balanced Scorecard can help you realize that that task is needed and provide some clues, but this process will be most helpful to those who excel at conceiving of pre-emptive strategies that their organizations have advantages in implementing.

After you have finished reading, sharing and applying these lessons, I suggest you think about where else people need better communications processes. Then abstract the elements of this model to apply in those circumstances as well.

Get where you want to go more rapidly!

This book is an interim report on the application of the authors' concept, the Balanced Scorecard (introduced in 1992 and described in the book of the same name, published in 1996). The purpose of the book is to provide "a roadmap for those who wish to create their own Strategy-Focused Organization . . . [by employing the Balanced Scorecard]."

If you don't know what the Balanced Scorecard is, let me briefly describe it for you. A Balanced Scorecard adds several important measures to the ones normally found in the accounting system, designed to measure those areas where performance most directly and powerfully affects strategic position. Such areas include innovation, organizational learning, effectiveness in key tasks, and performance with key audiences like customers. The measures are chosen to reflect the systematic effects of how the organization's overall value and performance are improved, and are displayed in a Strategy Map that communicates those ideas to one and all. In doing so, the Balanced Scorecard is the applied solution to many of the issues raised about how to establish a learning organization in Peter Senge's The Fifth Discipline.

Most new business concepts do not last long enough to warrant a study on their effectiveness. The ones that do, like reengineering a few years ago, usually display more problems than successes. The Balanced Scorecard concept is the exception. The results have been very positive for almost all those who have employed it.

The key seems to lie in having everyone in the organization have a more complete understanding of what the organization is trying to accomplish. As such, the authors have actually uncovered something much more significant than a strategy communications process. Harvard Business School Professor and accounting guru (Activity-Based Costing) Bob Kaplan and consultant David Norton have uncovered a best practice in how to communicate any important message in an organization. Although the book does not address that latter point, discerning readers will quickly spot it.
Presumably the authors will too at some point, and a future book will begin to address this important application.

The focus of this book is on how Balanced Scorecard companies used that resource to implement new strategies. The finding is that with the Balanced Scorecard, nonlinear success usually followed. This is quite remarkable because organizations have reported in the past that implementing new strategies is one of the most difficult tasks they ever take on. Studies cited by the authors point to one problem being that most people in the organization are never clear on what the new strategy is. So if careful coordination and purposeful change are required, the speeding relay team may instead drop the baton along the way.

The Balanced Scorecard provides for a fundamental strategic control mechanism in the same way that the budget provides an operational control. The Balanced Scorecard is at the center of the organization's business planning, getting feedback to improve learning about how to proceed and then translating the organization's vision for each employee. This feedback is critical because most initial concepts for strategy are flawed in fundamental ways. As the authors point out, strategies should be treated as hypotheses, rather than as commandments written permanently in stone. Only by uncovering those flaws and correcting them does a new strategy have a good chance of succeeding.

The book features a lot of case histories that explain what the most successful organizations have done to apply the Balanced Scorecard. These are particularly valuable for making the key elements of the Balanced Scorecard clearer. For example, the book contains many pages of Strategy Maps for different organizations. These maps connect financial, customer, internal process, and learning objectives in an explicit description of how improvement in each area is connected to each other one, and to the organization's overall objectives. Without these detailed examples, it would be very hard to grasp the heart of the communications process involved here.

These financial and nonfinancial metrics can then be used to create personal objectives for each person in the organization for contributing to the ultimate success. Management by objectives measures and compensation systems can be connected to the new strategy in this way.

The research emphasizes several important themes: (1) Translate the strategy into operational terms (2) Align the organization to create necessary synergies (3) Make strategic initiatives everyone's everyday job (4) Make strategy a continuing process (5) Mobilize change through executive leadership.

I especially found the surveys helpful for describing what was different about the effectiveness of organizations using the Balanced Scorecard. They outperform the other companies by about 100 percent in having everyone in the organization understand what the organization's strategy is.

The book also contains a very helpful section of frequently asked questions about the Balanced Scorecard.

Let me be sure that you understand what the limitation of the Balanced Scorecard is. If you conceptualize a strategy that is not as good as one that your competitor develops, you will still be vulnerable to losing ground until such time as you reconceptualize your strategy. The Balanced Scorecard can help you realize that that task is needed and provide some clues, but this process will be most helpful to those who excel at conceiving of pre-emptive strategies that their organizations have advantages in implementing.

After you have finished reading, sharing and applying these lessons, I suggest you think about where else people need better communications processes. Then abstract the elements of this model to apply in those circumstances as well.

Get where you want to go more rapidly!