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April, 2004

Making Scorecards Actionable Newsletter # 8/2004

Balanced Scorecards are increasingly used to develop strategies – not just to monitor weather they are realized or not. In particular, Strategy maps have proven to serve as an effective tool to visualize an organization’s intentions. Among other benefits, the effort to summarize the “map” on one single piece of paper, forces the strategy developers to be precise about what they want the organization to aim for, and about the hypotheses they believe will create the desired future state.

In our book – Making Scorecards Actionable – we talk about these hypotheses as “strategic bets”, indicating that we do not believe they are inevitable truths. On the contrary! No human (or even group of humans – regardless how talented they might be) can see into the future. Still, Strategy maps have sometimes been accused of trying to predict what is actually going to happen in the future. Nothing could be more wrong. We regard strategy maps as a vehicle to illustrate – and then debate – what future we, the members of the organization, want to create. Of course, we can never be certain to arrive at precisely this future, but by talking about and describing “the strategy” in this way, we can at least be certain that we aim for the same future.

To draw Strategy maps, most companies use PowerPoint or any other presentation platform, rather than a more dedicated systems environment. There are, however, some disadvantages following from the use of PowerPoint to produce strategy maps. One obvious problem is that it is difficult to link the content of the strategy map to the other parts of the scorecard: to the critical success factors and the metrics. This makes it difficult to backtrack from the metric, through the success factors to the hypotheses in the strategy map.

Another functionality that is typically missing in an ordinary presentation slide is the ability to embed dynamics in the map. The links that are drawn in the PowerPoint map are “dumb” in the sense that they do not embed the logic they represent. The dynamics (the “if this increases… that decreases” et cetera) must hence be imagined by the viewer. If the map, instead, is drawn in a simulation software, the links could be logically tested. In addition to visualizing the relationships, the effects of the links in the map can be validated. The simulation engine allows the user to test what happens if some of the key assumptions are changed. The business model can thus be logically validated while it is still on “the drawing table”.

In the book we describe Skandia’s internally developed BSC-solution, which offers a rudimentary functionality to link vision, success factors, activities and indicators; creating a chain of cause- and effect linkages. A built-in function, named Process Model Relations, allows the users to connect the vision to the success factors, and then to activities and indicators.

Working with the Process Model and thereby linking the vision to a success factor, to an activity and then finally to an indicator has been an effort to create a language that tells the story of the links in the strategy.

Even if Skandia claims to have a strategy mapping module in their BSC-system, we have not yet seen any IT-solution that addresses strategy mapping systematically. Either the system does not offer any mapping functionality or the functionality is so basic and inflexible that it does not invite the strategy developers to use it. The domain where we, thus far, have seen most promising mapping tools is within the field of computer based simulations. Typically these tools both have a drawing functionality that makes it easy to create patterns of cause-and-effect linkages, and then to run sessions according to these hypotheses to see what happens with the outcomes when the values for drivers are changed. In the future we hope to see a closer cooperating between BSC-software developers and simulation software developers – maybe not to the extent that the average user can master the simulation software, but at least become so simple that a “super user” can create the maps while listening to the discussion in the strategy development work group.

Regarding the Swedish translation of Making Scorecards Actionable (“Framgångsrikt Styrkortsarbete”, Liber 2003), we are happy to see that it still attracts some interest in the press. In April, CIO Sweden wrote (in translation): “The book presents a credible and critical examination of both the method and various experiences of implementing and using it”. These are certainly nice word to read; especially that the reviewer has caught our critical effort, even though we have a basic positive attitude towards the concept.

Before the summer we aim to start a multi-client project, focusing on implementation and use of balanced management control in the industrial sector. The project is initiated by a Swedish federation of companies in the sector and the project group will consist of member companies as well as representatives from the federation. In connection with this project we also hope to strike some relationships with other European companies in the industrial sector that has implemented balanced scorecards to improve their internal management control systems to assure that their strategies are realized. By mentioning this in this Newsletter we invite any interested parties to participate in the project. Please contact carl-johan.petri@makingscorecardsactionable.com if you want to receive more information about the project.





MAKING SCORECARDS ACTIONABLE NEWSLETTER is a bi-monthly update on our experiences and opinions on how scorecards and strategy maps can be made actionable – to help organizations realize their intended business strategies. The newsletter is compiled and distributed for free by the authors of the book “Making Scorecards Actionable – Balancing Strategy and Control”. Also make sure to check out www.makingscorecardsactionable.com to get up to date information about our seminars, to evaluate your organization’s BSC skills according to our computerized BSC Analyser and to download presentations from the document archive.
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