Database Reference
In-Depth Information
Customer loyalty is dependent on the organization's product quality and responsiveness (in the
internal business processes perspective), which in turn is dependent on the minimization of prod-
uct defects, knowledge of the customer's prior transaction history, recorded preferences, and so on
(learning and growth perspective). It is due to this that the multiple objectives and measures of
BSC do not entail complex trade-offs but can easily be integrated into a consistent framework of
20-25 value drivers that can help navigate the strategy of the company successfully through the
turbulent market space.
The strategic management of enterprises using BSC involves the following stages:
◾
Mapping the company's strategy into the BSC framework in terms of the strategic objectives
and drivers for BSC. This may also involve reconciling or prioritizing among various objec-
tives or defining differing objectives and drivers for different divisions. This stage identifies
all processes that are critical to the strategic performance of the enterprise. It must be noted
that the BSC is a methodology for implementing a company's strategy and not for formulat-
ing one.
◾
Communicating the link between the strategic objectives and measures throughout the
organization at all levels. This may also involve operationalizing the defined set of measures
to the specifics of the local circumstances for the various departmental and functional units
of the company. BSCs are usually defined at the level of strategic business units (SBUs),
but for a multidivisional company, the defined BSC may incline more toward the financial
perspective.
◾
Setting targets, devising aligned strategic initiatives, and planning/scheduling initiatives to
achieve a breakthrough performance. This may also include financial planning and bud-
geting as an integrated part of the BSC. From the customer's perspective, this step should
include requirements of both existing and potential customers.
◾
Enhancing performance through feedback and learning based on operational data and
reviews. This may entail reprioritizing or changing the performance thresholds or even the
value drivers themselves. The latter may become necessary either because of the changes in
the marketplace or because the selected set of value drivers may be ineffectual.
Figure 15.4 shows the BSC approach to create a strategy-focused organization.
In the BSC framework, the financial perspective enables a reality check of the strategic man-
agement activity of the enterprise. This is because all strategic initiatives meant for improving the
quality, flexibility, and customer satisfaction may not necessarily translate into improved financial
results. If the improved operational outcome as seen from the other three perspectives defined by
the company does not end in improved financial results, it may be a powerful indicator of the need
for reformulation of the strategy itself. All cause-and-effect relationships that knit a BSC program
must eventually link to financial objectives. Therefore, the financial perspective is preeminent
among all perspectives of the BSC framework.
The standard BSC framework talks of only four perspectives, but, if required, the frame-
work can be supplemented with additional perspectives of stakeholders discussed in the Section
15.1 “Enterprise Stakeholders.” In view of the increased importance of supply-chain management
(SCM) for the extended collaborative enterprises of today, a prime candidate for addition would
be the suppliers/vendors of the company. As we will discuss in the inal chapter of this topic, the
suppliers will play as critical a role in the success of the enterprise as any of its constituent SBUs for
the extended collaborative enterprises. In the remaining part of this section, we briefly look at the
various perspectives of the standard BSC framework.
