Strategic Planning and Implementation - The Business Realist

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Strategic Planning and Implementation - The Business Realist Powered By Docstoc
					Current Thinking on Strategic
Planning and Implementation



Cap Gemini Ernst & Young
July 2001
We‘re trying to answer two questions

• How do global, multi-business line companies develop strategy?
   – Focused on the role of the corporate centre in helping companies make, communicate and
     implement strategies.

• What is the latest thinking on how these companies should develop strategy?
   – What does “good” look like?
   – Best practice?
   – Useful approaches?




            It is intended to foster discussion about how to address the key challenges.




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Document structure

• Corporate Strategic Planning?:
   – Why Do It?
   – How Does It Happen?
   – What Does It Look Like?
   – What Are Some of the Pitfalls?

• Evolving Ideas on What ―Good‖ Looks Like

• Implementing Strategic Intent

• Company Examples

• Implications for Global, Multi-business Companies




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Corporate Strategic Planning


• Why Do It?

• How Does It Happen?

• What Does It Look Like?

• What Are Some of the Pitfalls?
Why have a corporate strategic planning function?

• To be the custodian of the overall best interests of the corporation:
   – Maximise the overall performance of the business portfolio
   – Manage trade-offs across the business
   – Tee-up investment/resource-allocation choices and decisions

• To set the ―boundaries‖ of the company:
   – What’s in the portfolio
   – Manage merger and acquisition activity

• To steer and influence ―strategy making‖:
   – Influence managers in the business unit
   – Determine key mechanisms (planning procedures, hurdle rates, control processes,
     organisational processes)
   – Develop culture in which business units propose and implement strategy.



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How does it happen?



     Formal Strategic                                                                   Opportunistic
     Planning Process                   And/Or                                            Process




 •   Set calendar                                                           •     One-off event or process

 •   Links corporate and BU                                                 •     Possibly triggered by
     strategic plans                                                              internal or external changes

 •   Linked to planning and                                                 •     Could be managed
     budgeting cycle                                                              internally, or draw on
                                                                                  external help

                                                                            •     May or may not be linked to
                                                                                  planning and budgeting



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What does it look like?


                                   It’s very Varied


     Centre very involved
                                                                                       Centre very detached
     in BU strategies




     Elaborate planning
                                                                                       No planning systems
     systems



     Strategic discussions
                                                                                       Strategy discussions
     very structured and
                                                                                       ad hoc and informal
     formal



     Centre initiates and                                                              Centre reacts to BU
     executes acquisitions                                                             acquisition proposals

                                                      etc



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What are the pitfalls?
               Pitfall                                                                              Definition
           Habits of Mind                     • Tunnel vision, blindspots, or enthusiasms about the right strategy

                Barons                        • Senior group executives fight to build up their own territories with little regard for the
                                                  corporate interest

             Interference                     • Corporate influence over business unit strategies seen as arbitrary, unpredictable,
                                                  indiscriminate or uninformed

    Exercise in Cleverness                    • Fall into an adversarial mode in which corporate and business levels try to score
                                                  points off each other

            Bureaucracy                       • Seen as a planning exercise, a repetitive annual event that adds little value

           Hockey-sticks                      • Over-optimistic projections which reduce the value, and credibility of planning and
                                                  control

             Lip Service                      • Disconnect between strategic goals and what really influences promotion and
                                                  financial rewards—people pay lip-service to the strategy

          Control Games                       • Control objectives can become ends in themselves and gamesmanship to meet
                                                  defined targets can damage long term business health

     Moving the Goalposts                     • Shifting strategic objectives

         ―Yes, Chairman‖                      • Studies arrive at conclusions that already enjoyed wide support in the business

      Strategy and Inaction                   • Communication and consensus-building is not an integral part of the strategic
                                                  decision making process

Source: Michael Goold and Andrew Campbell, Strategies and Styles, 1987.
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Evolving Ideas on What ―Good‖
Looks Like
    This section is a ―potted history‖ of ideas about ―good‖
    strategic management

                                                                                                                       Hamel
                                                       Hax and Majluf                                                      Markides
    Goold & Campbell                                         Mintzberg                            Kaplan & Norton
                                                                                                                                  Gratton


         1987   1988   1989   1990   1991     1992       1993       1994          1995    1996        1997   1998   1999   2000   2001


T
                                                                A ―looser‖                                                 Be creative.
                                 Formalised                                                      How to
H      Structure
       and roles.
                                  planning
                                                                  role for
                                                                 strategic
                                                                                              operationalise
                                                                                                                           Be different.
                                                                                                                            ―People‖
                                  process.                                                      strategy.
                                                                planning.                                                    focus.
E
M
E
S




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GOOLD & CAMPBELL

Goold and Campbell tried to describe the best role for the
corporate centre

• How the centre should add value to the businesses.

• What sort of relationship it should have with business unit managers.

• How it should manage the process for making strategic decisions.




                           But they found no “ right answer”—no single, universal to good strategic
                           management.



Source: Michael Goold and Andrew Campbell, Strategies and Styles, 1987. Goold & Campbell identified 8 strategic management s tyles, of which the above 3 were the most commonly used.
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GOOLD & CAMPBELL

Instead they found different—but valid—strategic
management styles

                               Framework to Describe Strategic Management Styles

                                                                                                                                         High
                                                                  Centralised

                                                                                                                                                    Planning Influence

                                                                                                                                             • Degree to which centre
                                                   Strategic                    Strategic                                                        shapes strategies
      8 different                                  planning                   programming                                                    • Measure of top-down
      strategic                                                                                                                                  involvement
     management                                                                                                                              • About input to decision
        styles                                     Strategic                     Strategic                    Financial
                                                   venturing                      control                   programming



                                                    Holding                                                    Financial
                                                   company                                                      control
                                                                                                                                          Low

                                            Flexible Strategic              Tight Strategic              Tight Financial


                                                                          Control Influence

                                                                    • Targets the centre agrees with BUs
                                                                    • How centre reacts to results
                                                                    • About outputs of decisions

Source: Michael Goold and Andrew Campbell, Strategies and Styles, 1987. Goold & Campbell identified 8 strategic management s tyles, of which the above 3 were the most commonly used.
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GOOLD & CAMPBELL

The three most common styles were ―strategic planning‖,
―strategic control‖ and ―financial control‖

   Strategic
  Management                            Strategic Planning                                     Strategic Control                               Financial Control
     Style
                                •     The centre:                                   •       A variation on the Strategic               •     Centre‘s influence
                                         – Establishes extensive planning                   Planning style.                                  exercised mainly through
                                           process.                                                                                          budgeting process.
                                                                                    •       Centre prefers to leave
                                         – Makes major contributions to                     initiative in development of               •     Broad strategic direction
                                           strategic thinking.                              plans to BU managers.                            left to the business units.
                                         – May have a corporate strategy
    Management                             guiding BUs.                             •       Centre ―checks quality‖ of
     Approach                                                                               plans, rather than provides
                                •     Less attention devoted to                             direction.
                                      control targets.
                                                                                    •       Targets set for strategic
                                                                                            objectives (e.g. market
                                                                                            share) as well as financial
                                                                                            performance.

                 •                    BOC                                           •       Courtaulds                                 •     BTR
Company Examples •                    BP                                            •       ICI                                        •     GEC
                 •                    Cadbury Schweppes                                                                                •     Hanson Trust




Source: Michael Goold and Andrew Campbell, Strategies and Styles, 1987. Goold & Campbell identified 8 strategic management s tyles, of which the above 3 were the most commonly used.

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GOOLD & CAMPBELL

Successful companies matched their strategic management style
to the business circumstances



       Characteristics of Companies with                                                           Diagnostic to help making strategic
         successful decision-making                                                                  management style to business
                    process                                                                                  circumstances
      •     Match strategic management style to                                                    •     Nature of the business:
            the business circumstances                                                                     – Diversity of the business portfolio, and
      •     Central managers close enough to                                                                 linkages between business units
            each business to be able to add                                                                – Size and payback of investments
            value                                                                                          – Stability of the competitive battle facing
                                                                                                             the business
      •     A free and open exchange of
            information and views between the                                                      •     Resources in the organisation:
            centre and business units                                                                      – Personality of the Chief Executive
      •     Shared commitment, energy and                                                                  – Skills and experience of senior managers
            purpose between all levels of                                                                  – Degree of financial stress on the
            management.                                                                                      organisation.




Source: Michael Goold and Andrew Campbell, Strategies and Styles, 1987. Goold & Campbell identified 8 strategic management s tyles, of which the above 3 were the most commonly used.
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HAX AND MAJLUF

Hax and Majluf focused on the process to develop a
strategic plan


             They outlined two Major Cycles in the Strategic Planning Process


                                                                                                                         Strategic & Operational
             Strategic Formulation
                                                                                                                         Budgeting




                     Corporate                                                                                                 Corporate



                      Business                                                                                                  Business


                    Functional                                                                                                 Functional




Source: A.C. Hax, N.S. Majluf: “The Strategy Concept and Process, A Pragmatic Approach,” 1996.
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HAX AND MAJLUF

They prescribed the whole strategic planning process
through to detailed budgets


      Planning                                                                                                                                 Strategic and
                                                                      Strategy Formulation
    Perspectives                                                                                                                           Operational Budgeting

                                        Internal            Environmental
                                        Scrutiny                Scan                                  •   Horizontal Strategy and
                                                                                                          Vertical Integration Revisited            Budgeting
      Corporate                                                                                       •   Resource Allocation and                Consolidation and
       Strategy                                                                                           Portfolio Management                      Approval
                                       Corporate Strategic Thrusts and                                •   Budgeting guidelines
                                          Performance Objectives




                                                                                    Mission


       Business                            Internal Scrutiny                                                   Environmental Scan                 Business
                                                                                                                                                  Budgeting
       Strategy
                                                                             Proposed Strategy,
                                                                               Programs, and
                                                                                  Budgets




      Functional                           Internal Scrutiny                                                   Environmental Scan                 Functional
                                                                                                                                                  Budgeting
       Strategy
                                                                             Proposed Strategy,
                                                                               Programs, and
                                                                                  Budgets



Source: A.C. Hax, N.S. Majluf: “The Strategy Concept and Process, A Pragmatic Approach”, 1996.
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HAX & MAJLUF

In this view, ―good‖ strategic management involves
following a disciplined process

• Same process regardless of the company‘s business circumstances

• Strong focus on rational dimension, and data-driven approach

• Although prescriptive, probably reflects key elements of many strategic
     management processes:
        – Strategy cycle feeding in to planning and budgeting cycle
        – Top-down and bottom-up iterations
        – Corporate, business and functional dimension to strategy making and planning and
          budgeting.




Source: Michael Goold and Andrew Campbell, “Strategies and Styles,” 1987.
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MINTZBERG

Mintzberg puts forward a very different view about ―good‖
strategy making and ―good‖ strategic planning



                          Deliberate                                                                                                  Emergent
                           Strategy                                                                                                    Strategy



        • Realisation of the strategy                                                                                    • The strategy is identified from
            matches the intended course of                                                                                 patterns of consistencies
            action                                                                                                         deserved in past behaviour -
        •   Planned strategy                                                                                               despite, or in the absence of,
        •   Strategy developed in a                                                                                        intention
            formalised process                                                                                           • Strategy develops inadvertently:
                                                                                                                             –Without conscious intention of senior
        •   Essence of strategy formulation =                                                                                 management
            analysis
                                                                                                                             –Of ten through a process of learning
        •   Provides the organisation with a
                                                                                                                         • Synthesis of past and current
            sense of purposeful direction.
                                                                                                                           behaviour
                                                                                                                         • Essence of strategy formulation =
                                                                                                                           creative act of synthesising
                                                                                                                           experiences into a novel strategy.




Source: Henry Mintzberg, “The Fall and Rise of Strategic Planning”, Harvard Business Review, Jan–Feb.1994.
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MINTZBERG

For Mintzberg, successful strategy making is looser,
messier, and more creative than ―conventional‖ planning

                                                                                            • Strategy making needs to function
                                                                                                  beyond the boxes:
                                                                                                      – Understand the difference between strategic
                                                                                                        planning and thinking

                 Search all those strategic                                                           – Strategic thinking involves intuition and
               planning diagrams, all those                                                             creativity.
                interconnected boxes that
                   supposedly give you                                                      • Strategies often cannot be developed on
               strategies, and nowhere will                                                       schedule and immaculately conceived:
                 you find a single one that                                                           – Must be free to appear at any time and at any
                explains the creative act of                                                            place in the organisation
                synthesising experiences                                                              – Typically through messy processes at informal
                   into novel strategies                                                                learning
                                                                                                      – By people at various levels who are deeply
                                                                                                        involved with the specific issues at large.




Source: Henry Mintzberg, “The Fall and Rise of Strategic Planning”, Harvard Business Review, Jan–Feb.1994.
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MINTZBERG




He saw five roles for strategic planners
                         Role                                                                                Specifics
                                                              • Codify - clarify and express - the strategies in terms sufficiently clear to
                                                                make them fully operational.
 Strategic Planning                                           • Elaborate them into sub-strategies, ad hoc programmes, and action
                                                                plans.
                                                              • Convert them - e.g. consider their effects on budgets and performance
                                                                controls.
                                                              • Communicate strategic intentions - via programmes, schedules, budgets
 Communication & Control                                      • Control pursuit of them
                                                              • Gain support of influential outsiders

                                                              • Help managers find fledgling strategies:
 Finding Strategy                                             • Find patterns
                                                              • Discover new ways of doing or perceiving things

                                                              • Analyse specific issues
 Analysis                                                     • Provide simple, alternative conceptual interpretations of the world


                                                              • Encourage managers to think about the future in creative ways
 Catalyst                                                     • Get others to question conventional wisdom, and help people out of
                                                                  conceptual ruts.



Source: Henry Mintzberg, “The Fall and Rise of Strategic Planning”, Harvard Business Review, Jan–Feb.1994.
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KAPLAN & NORTON

Kaplan and Norton—in the 90s—shifted the focus to
operationalising the strategy

• Kaplan and Norton, like others, linked shareholder value creation to strategy
     to tangible measurable performance at a grass roots level

• Their unique insight was to balance the financial perspective against a
     customer perspective, an internal business perspective, and an innovation
     and growth perspective

• Power of approach is in integration:
        – Links strategy to shareholder value creation through an integrated set of specific
          objectives with clearly-defined measures
        – Enables strategic goals to be translated into achievable, measurable objectives throughout
          an organisation.




Source: Robert S Kaplan and David P Norton, “The Balanced Scorecard, Translating Strategy Into Action”, 1996.
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KAPLAN & NORTON

In 2001, Kaplan and Norton broadened the role of the
Scorecard to encompass mobilising and engaging people
• The new scorecard has a stronger mobilisation focus:
        – Provides a mechanism for integrating the efforts of the whole organisation, involving all
          employees in the strategy discussion
        – Provides continuous feedback or the effectiveness of the strategy
        – Mobilises change through executive leadership
• The most important broadening of the role is in the concept of the strategy
     map:
        – Provides the primary basis for conceptionalising how the strategy works
        – Maps all the underlying dynamics through which strategy drives performance
• The strategy map is a visual tool to link the scorecard‘s financial perspective
     with new, broader customer, internal and learning and growth perspectives:
• Customer perspective - defines the customer value proposition that will
     deliver the financial performance
        – Internal perspective - outlines how internal operations and innovation will create customer
          value
        – Learning and growth perspectives show how to develop internal capabilities that the
          internal processes need.

Source: Robert S Kaplan and David P Norton, “The Strategy-Focused Organisation: How Balanced Scorecard companies thrive in the new business environment.”
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HAMEL

Hamel‘s most recent view is ―good‖ strategy making is
about ―information‖ and ―revolution‖

Key themes:

• Today‘s business environment is in an ‗age of revolution‘

• The status quo is doomed - the only chance for survival is innovation:
        – Business concept innovation
        – Innovation that changes the bases of competition in an industry

• Call to create permanent revolution:
        – Continually challenge, refresh and overturn prevailing mindsets in an industry.




                                                      Too influenced by the dot.com bubble?


Source: Gary Hamel, “Leading the Revolution”, 2000.
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MARKIDES

Markides‘ view is also about innovation—―good‖ strategy
making is about thinking and being different

Key themes:

• Companies need to continually explore new opportunities for strategic
     innovation

• Strategy innovation is about exploiting unique strategic positions. To do this
     companies need to answer some basic questions:
        – What business are we in?
        – Who are our customers? What will we offer them?
        – How will we do this efficiently?
        – What kind of organisation do we need to support our choices?

• Unusual success in business derives from doing unusual things

• The essence of strategy and competitive advantage is not doing the same
     things as your successful competitors, but doing it differently.

Source: Constantinos Markides. “All the Right Moves”, 2000.
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GRATTON

And Gratton‘s perspective is that ―good‖ strategy making is
about capturing the emotional commitment of people

Key themes:

• A company‘s capacity to perform is dependent on its ability to:
        – Capture the emotional commitment of its members, and
        – Integrate this commitment into complex modem of co-operation and collaboration

• Gratton proposes humanistic and action-orientated view of organisations:
        – Humanistic : corporations are social entities that provide meaning and purpose for people
        – Action-orientated : Companies exist not for the development of their employees, but to
          perform business tasks and deliver on business goals
        – Companies that successfully bridge those two ideas can enhance organisational
          performance

• Gratton provides a six-step management process to link the nature and
      aspiration of human beings with the performance of the organisation.


Source: Lynda Gratin, “Living Strategies: Putting People at the Heart of Corporate Purpose”, 2000
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So, ―good‖ strategy making (from corporate view) is about . . .

                                                                                             Emerging Themes
     . . . horses for courses (specific to each                                               Situational Strategic
           company)                                                                           Management Styles

     . . . following a disciplined, formal process
                                                                                               A Formal Process
     . . . ―between the boxes‖ stuff (creativity,
           learning)                                                                             Fresh Creative
                                                                                                 Thinking/Ideas
     . . . operationalising the strategy
                                                                                              Operationalising the
     . . . mobilisation                                                                            Strategy


     . . . innovation                                                                            Being Different


     . . . revolution                                                                        Buy-in and Mobilisation

     . . . being different, being unusual

     . . . capturing the emotional commitment of
           people

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Implementing Strategic Intent


• Mintzberg‘s Three Step Operation

• Balanced Scorecard

• Business Management Process
STRATEGIC IMPLEMENTATION

Having decided one‘s strategy, implementing strategic
intent is essential for operational reality to follow
•    The tools to develop an appropriate organisational                                                                           Turning Vision into Reality
     strategy for change are well proven
                                                                                                                                  A powerful business strategy needs to be matched
•    However many businesses fail to deliver the strategy                                                                         by a powerful delivery mechanism in order to turn
     they develop                                                                                                                 vision into reality
                                                                                                         High
•    Usually the fundamental business management process
     is at fault – the bridge between strategy and operation is
     not functioning
                                                                                                                                    Unfulfilled vision         Challenging
                                                                                                                                                                 vision




                                                                                                              Power of Strategy
                                                                         Operational
             Strategy
                                                                          Engine


•    Various models exist to ensure the machinery between
     strategy and operational engine are effective:                                                                                         No                   Pedestrian
        – Mintzberg’s three step operation                                                                                                vision                   vision
        – Balanced scorecard
        – Business management process.
                                                                                                           Low
                                                                                                                                  Low        Power of Delivery Method          High
                         To exploit an organisation’s capability and potential, the power of its strategy
                         needs to be matched by the power of its delivery mechanism and pace of
                         implementation.
Source: Alan Meeking, Business Strategy Review, Winter 1994.
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STRATEGIC IMPLEMENTATION: MINTZBERG‘S THREE STEP OPERATION

Strategic planning must be differentiated from strategic
thinking
                                                                 Strategic Planning Overview

            What is Strategic Planning?                                                                            Strategic Planning Issues
   •      Strategic planning is defined as ―the                                                             •   Many companies have a problem with
          process by which an organisation                                                                      the actual planning system. It often
          envisions its future and develops the                                                                 breaks down because of faulty
          necessary procedures and operations to                                                                preparation and implementation
          achieve the future… it requires the clear                                                              – Line managers not involved
          setting of goals and objectives which
          provide the organisation with its core                                                                 – Business units not designed correctly
          priorities and a set of guidelines for                                                                 – Action steps not defined in detail
          virtually all day-to-day managerial                                                                    – Strategic plans not integrated with other
          decisions‖                                                                                               organisational controls like budgeting
                                                                                                                 – Objectives not defined properly by top
   •      It is a structured process that organises                                                                management
          and co-ordinates activities of managers
          who do the planning.                                                                              •   However, the ―how to do it‖ in practice
                                                                                                                varies significantly between companies –
                                                                                                                there is no one ―right‖ solution.
            What is Strategic Thinking?
    •     This is the creation of new business
          strategies in either a formal or informal
          setting.

Source: “The Fall and Rise of Strategic Planning”, Henry Mintzberg, HBR, Jan-Feb 1994.
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STRATEGIC IMPLEMENTATION: MINTZBERG‘S THREE STEP OPERATION

Strategic planning can be used to programme and
operationalise a company‘s strategies in three steps

               Codification                                                     Elaboration                                          Conversion
•     Strategies must be clarified and                           •     Codified strategies need to be broken              •   Consider the effects of changes on the
      expressed in terms sufficiently clear to                         down into substrategies and adhoc                      organisation‘s operations e.g effects on
      render them formally operational, so                             programs as well as overall action                     budgets and performance controls
      their consequences can be worked out                             plans specifying what must be done to
      in detail                                                        realise each strategy                              •   Objectives need to be restated and
                                                                                                                              budgets reworked, policies and
•     Care and attention to detail is essential                  •     E.g. Build four new factories and hire                 standard operating procedures
      so as not to lose nuance and subtlety                            200 new workers.                                       reconsidered to take into account the
                                                                                                                              consequences of the specific changes.
•     E.g. A broad vision like ―capturing the
      market for a new technology‖ is very
      different from a specific plan to
      ―increase market share to 35%,
      focusing on the high end‖.




                                                                 •     Co-ordination of strategy and
                                                                       formalisation into an operational
                                                                       plan.



                              Programing of strategy in this way will also gain the tangible as well as
                              moral support of influential outsiders such as financiers, suppliers and
                              governmental agencies.

Source: “The Fall and Rise of Strategic Planning”, Henry Mintzberg, HBR, Jan-Feb 1994.
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STRATEGIC IMPLEMENTATION: BALANCED SCORECARD

The balanced scorecard facilitates the development of
strategic planning through to an operational plan

• The four management processes on the scorecard separately, and in
     combination, contribute to the linking of long-term strategic objectives with
     short-term actions.

                                               Managing Strategy: Four Processes
                                                                   Translating the vision
                                                                   • Clarifying the vision
                                                                   • Gaining consensus

         Communicating and linking
         • Communicating and                                                                                     Feedback and learning
           educating                                                            Balanced                         • Articulating the shared vision
         • Setting goals                                                        Scorecard                        • Supplying strategic feedback
         • Linking rewards to                                                                                    • Facilitating strategy review and learning
           performance measures

                                                              Business planning
                                                              • Setting targets
                                                              • Aligning strategic initiatives
                                                              • Allocating resources
                                                              • Establishing milestones

Source: “Using the Balanced Scorecard as a Strategic Management System”, Kaplan and Norton, HBR, Jan-Feb 1996.
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STRATEGIC IMPLEMENTATION: BALANCED SCORECARD

The balanced scorecard facilitates the development of
strategic planning through to an operational plan


                                                  Communicating and
    Translating the Vision                                                                         Business Planning                    Feedback and Learning
                                                      Linking
•     Helps managers build a                  •     Lets managers communicate               •      Almost all organisations are     •     Existing feedback and review
      consensus around the                          their strategy up and down                     implementing a variety of              tends to focus on whether
      organisation‘s vision and                     the organisation and links it to               change programs. Managers              company/department/
      strategy, in order for people to              departmental and individual                    have difficulty integrating            employees have met their
      act on becoming ―best in                      objectives                                     diverse initiatives to achieve         budgeted goals
      class‖, ―number one                             – E.g An oil company uses the
                                                                                                   their strategic goals, leading
      supplier‖. Statements must                        scorecard as the basis of                  to frequent disappointment       •     With balanced scorecard a
      then be translated into                           calculating incentive                                                             company can monitor short
      operational terms that provide                    compensation.                       •      When managers use the                  term results from three
      useful guides to action at the                                                               ambitious goals for balanced           additional perspectives –
      local level.                            •     Traditionally departments are                  scorecard measures as the              customers, internal business
                                                    evaluated by their financial                   basis for allocating resources         processes and learning and
                                                    performance and individual                     and setting priorities, they           growth – and evaluate
                                                    incentives are tied to short                   undertake only the initiatives         strategy
                                                    term financial goals                           that help achieve their long
                                                                                                   term strategies.                 •     Strategies can therefore be
                                              •     The scorecard gives                                                                   modified to reflect real-time
                                                    managers a way of ensuring                                                            learning.
                                                    that all levels of the
                                                    organisation understand the
                                                    long term strategy.




Source: “Using the Balanced Scorecard as a Strategic Management System”, Kaplan and Norton, HBR, Jan-Feb 1996.
                                                             Cap Gemini Ernst & Young • Proprietary and Confidential                                              - 32 -
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STRATEGIC IMPLEMENTATION: THE BUSINESS MANAGEMENT PROCESS

The business management process is dynamic and is built
up in stages
                           The Business Management Process (BMP) Framework
                                                                                                       2
                                                                                                        Key Performance
                                                                                                           Indicators

                                                                                                       3
     Customer and                               1                                                              Performance                6
                                                        Strategic
      Shareholder                                                                                                Targets
                                                                                                                                                 Structured
                                                         Business
         Needs                                                                                                                                     Review
                                                        Objectives                                     4
                                                                                                               Gap Analysis


                                                                                                       5
                                                                                                               Improvement
                                                                                                                Initiatives



                                                                                                           7
                                                                                                               Linkage


•     The business management process is a framework to facilitate operationalisation of an organisation‘s strategy

•     Its elements do not have to be implemented concurrently or in full to start producing an operational benefit and
      organisational learning

•     The framework is founded on the premise of Plan-Do-Review – new strategic objectives are set in the light of
      achievement and experience hence, institutionalising continuous improvement.

Source: “Implementing Strategic Intent: The Power of an Effective Business Management Process”, Alan Meeking, Business Strategy Review, Vol. 5 No. 4.
                                                                Cap Gemini Ernst & Young • Proprietary and Confidential                                       - 33 -
                                                                                      LSLab6.07.01ab
STRATEGIC IMPLEMENTATION: THE BUSINESS MANAGEMENT PROCESS

The seven elements of the business management process
allow incremental progress to be achieved and reviewed
    Business Management                              1. Strategic Business                              2. Key Performance
                                                                                                                                                   3. Performance Targets
     Process Framework                                     Objectives                                        Indicators
                                               •     Setting objectives based on needs of      •       Introducing a balanced set of KPIs     •         Setting challenging targets against
                                                     organisation‘s primary stakeholders               related directly to the strategic                the KPIs as a spur to achievement
                                                     (customers and shareholders)                      business objectives linked top-to-               and as a foundation for systematic
                            2                                                                          bottom throughout the organisation               progress review
                            3                  •     Translating these needs into a limited            and derived from the root causes and
                1                      6             number of strategic business                      key drivers of operational and         •         Targets must be cascaded
                            4                        objectives to be achieved in a given              financial performance.                           throughout the organisation, broken
                            5                        time period.                                                                                       down into sub-targets for shorter
                                                                                                                                                        time windows and communicated
                            7                                                                                                                           visually.



          4. Gap Analysis                          5. Improvement Initiatives                          6. Structured Review                                     7. Linkage

•    Identifying the performance or            •     Developing a limited set of properly      •       Implementing structured,               •         Replicating the basic BMP framework
     capability gaps that must be closed             planned resources and managed                     simultaneous and interactive review              at each review level and connecting
     in order to deliver the targeted                improvement programs to close the                 of progress against both KPI targets             the organisation top-to-bottom
     performance levels, based on the                gaps in performance or capability                 and improvement initiatives                      through cascaded KPIs and
     premise that you cannot have a                                                                                                                     structured review.
     performance target without some           •     Identifying, prioritising merging and     •       KPIs are reviewed at an appropriate
     concept of the means for its delivery.          rationalising the large number of                 frequency
                                                     existing initiatives thereby releasing
                                                     energy, resources and goodwill            •       Performance information is factual
                                                     across the organisation.                          and is simply presented
                                                                                               •       Focus is an action not on excuses
                                                                                               •       Follow up is well planned and
                                                                                                       conspicuous.




                         The critical elements of this system are structured review and top-to-bottom
                         linkage.

Source: “Implementing Strategic Intent: The Power of an Effective Business Management Process”, Alan Meeking, Business Strategy Review, Vol. 5 No. 4.
                                                                Cap Gemini Ernst & Young • Proprietary and Confidential                                                              - 34 -
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STRATEGIC IMPLEMENTATION: THE BUSINESS MANAGEMENT PROCESS

Improved performance using the business management
process
      Reasons for BMPs
                                                                 Potential Pitfalls                             The Pull-Through Effect of KPIs and BMP
          Success
•     Top-to-bottom attention is                         •     Barriers to change
      directed on achieving the
                                                                 – Managerial frustration
      organisation‘s key objectives                                                                                                                     Business
                                                                 – Staff cynicism
•     Shortfalls in performance are                              – Lack of resources                                                                     Need
      promptly and systematically
      addressed                                          •     Lack of support from the top.                                                            Effective
                                                                                                                                                        Leadership
•     A continuous cycle of
      planning, objective-setting,
      achievement and review                             Critical Success Factors
      drives organisational learning
      and continuous improvement
                                                         •     Support from the top
•     Activities not contributing to
      key business objectives are                        •     Target the enthusiastic first
      quickly identified and
      eliminated, releasing                              •     External help in
      resources for more productive                            implementation to start the
      use.                                                     process off and move it to the
                                                               point where improvement is
                                                               self-sustaining.



                                                       “The whole process gives a substantial boost to
                                                       managerial productivity. Anything up to a 10-
                                                          fold cut in unproductive meeting time is
                                                              common place” Alan Meekings




Source: “Implementing Strategic Intent: The Power of an Effective Business Management Process”, Alan Meeking, Business Strategy Review, Vol. 5 No. 4.
                                                                Cap Gemini Ernst & Young • Proprietary and Confidential                                         - 35 -
                                                                                      LSLab6.07.01ab