Using Balanced Scorecard for Strategic Agility RallyON 2015

#RallyON15 #RallyON15


Dan Montgomery Using Balanced Scorecard for Strategic Agility [email protected] 720-641-3048

3 | © 2015 Agile Strategies | www.agile-strategies.com

•  Clear understanding of intent •  Flexible adaptation to emerging

circumstances •  People

•  Elements •  Landscape

•  Disciplined avoidance of “fixation”

Sun Tzu ��The Art of War


Topics

•  Minimum Viable Strategy •  Overview of Balanced Scorecard •  Using the Scorecard to Achieve Agile at Scale •  Lean Metrics


Why Strategy Has to Be Agile

Intended Strategy

Realized Strategy Unrealized

Strategy

Emergent Strategy

Source: Henry Mintzberg The Rise and Fall of Strategic Planning

The PLAN


Top Down Approach

Predictive Hubris

Overplanning

1

2

3

Get employees and customers engaged in the planning process

Regard strategy as a hypothesis, not a prediction

Solution

Adopt an agile approach to implementation

Problem

The Trouble with Strategic Planning


• Vision • Values • Value Prop • Themes • Success Metrics

Minimum Viable Strategy


What is the Balanced Scorecard?

•  A strategy management discipline that translates business vision, values and CVP into actionable measures

•  A measurement framework that balances: –  Internal drivers (learning and productive outputs) –  External results (customer value and financial performance)

•  #4 on the “Top 10” list of corporate management tools compiled by Bain & Company


Perspectives


Learning & Growth: What are we learning? Process: In order to better build what? Customer: To create what customer value? Finance: For what financial results?


Themes chunk the Vision down into specific results areas

•  Goal areas •  Market segments •  Planning horizons •  Cost and Revenue •  Geographic •  Business units

Themes can take many forms….


A Measureable Vision Statement

“I believe this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the Earth.” - John F. Kennedy, May 1961

•  Inspiring •  Measurable target •  Clear timeframe •  Customer-focused


An Inspiring Vision Statement


Apollo Mission Themes

Propulsion Get the vehicle from Earth to the Moon and back

Life Support Keep astronauts alive and able to perform mission duties

Public Relations Maintain public support for a lengthy and expensive project


BSC Integrates Perspectives and Themes Keep the Lights on Grow the Business Breakthrough Products

Finance For what financial results?

Customer To create what kind of customer value, experience or behavior?

Process In order to execute effectively?

Learning & Growth What people, skills, culture do we need? Outcome

Outcome

Outcome

Outcome Outcome

Outcome

Outcome

Outcome

Outcome

Outcome Outcome

Outcome

Outcome

Outcome Outcome

Outcome

Outcome Outcome

Outcome

Outcome Outcome Outcome


Scaling is really tough work


Vs. Starting with The Big Picture


Business Purpose, Vision and Values

Strategic Themes

Strategic Metrics


Authentic hospitality complemented by a

high level of elegance and intimate spaces

that allow couples to reconnect with each

other

Five Star Service

We build and develop products and services

that celebrate and enhance our indigenous

environment

Nature

We seek to maximize revenue by balancing

marketing spend among our key markets and increasing occupancy during the low season

Revenue

By 2019, Sybaris will be recognized as THE adult vacation that meets the needs of the busy executive couple for relaxation, celebration, discovery and intimacy in a

Five Star setting.

Example Vision and Themes


The Strategy Map shows the Cause and Effect Chain to Create Customer Value and Financial Results

What people, skills, tools and infrastructure do we need?

In order to execute the right activities?

To create the desired customer value, experience and behavior?

For what financial results? Ex

tern

al

Inte

rnal


Strategy Map

Finance

Customer

Process

Learning & Growth

Validated Learning

Adaptive Culture

Productivity Quality

Customer Experience

Customer Stickiness

Cost of Sales Revenue per Customer

Time to Market

Employee Engagement


Scorecard

Perspective Outcome Measure

Finance Revenue Average Quarterly Revenue by Customer

Cost of Sales Quarterly COS as % of Revenue by Customer

Customer

Customer Stickiness Customer Retention Rate

Customer Experience Net Promoter Score

Time to Market Concept to Cash in Days

Process Productivity Average Throughput across Teams

Quality Defect Density (Defects/Person Days)

Learning & Growth

Validated Learning Formal Completion of After Action Reviews

Adaptive Culture Percentile Score on Culture Survey

Employee Engagement Engagement Survey Score


Cascading the Strategy Map – Human Resources

Finance (Focus on Cost)

Customer (Internal)

Process

Learning & Growth

Adaptive HR Culture

Understanding of Technical Disciplines

Recruiting Process

Candidate Evaluation Process

Employee Retention

Recruiting Costs

Right Employees

Competitive Awareness


A Tale of Two Metrics #1: Moneyball


#2: Chicken Efficiency A Tale of Two Metrics


Managing by Measures Improves Alignment and Innovation

26

Measurement-Managed Organizations

Non Measurement-Managed

Clear agreement on strategy among senior management 93% 37% Good cooperation and teamwork among management 85% 38% Information within the organization is shared openly and candidly 71% 30%

Effective communication of strategy to organization 60% 8% Willingness by employees to take risks 52% 22% High levels of self-monitoring of performance by employees 42% 16%

o

Source: Adapted from Crea%ng the Measurement-‐Managed Organiza%on, W. A. Schiemann, Metrus Group/KPMG, 2002.


AND Market Leadership & Profitability

Of the organizations that WERE Measurement-Managed

Of the organizations that were NOT Measurement-Managed

74% fit the categorization Industry Leader

80% had an above average three-year ROI

Source: Adapted from Crea%ng the Measurement-‐Managed Organiza%on, W. A. Schiemann, Metrus Group/KPMG, 2002.

44% fit the categorization Industry Leader

45% had an above average three-year ROI


Characteristics of Good Performance Measures

•  STRATEGIC: Point to customer and financial outcomes •  USEFUL: Provides a clear description of what success is, and

provides actionable information that better informs decision making

•  ECONOMICAL: Doesn’t take too much effort to collect the data

•  BEHAVIOR: Doesn’t create undesirable unintended consequences

28


The Lean Metrics Canvas


High-Level Strategy

Theme 1 Theme 3 Theme 2

Integrated Operational Planning and Budgeting

Assumptions, Facts and Hypotheses

about the Market & Customers

Agile Execution

Feedback & Learning

Purpose

Vision

Value Prop(s)

Metric(s)


Thank you

My next three challenges / or three big open questions: 1. 2. 3.

Dan Montgomery Text me at 720-641-3048

Can we show that Agile improves customer value? Which agile team practices work at executive level? What elements of BSC support minimum viable strategy?

Using Balanced Scorecard for Strategic Agility RallyON 2015

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