Balanced Scorecard For Strategic Planning and Measurement

BALANCED SCORECARD FOR
STRATEGIC PLANNING AND

MEASUREMENT
Case Study, Concepts and Debatable Ideas
Kenny Ong
CNI Holdings Berhad
www.myCNI.com.my www.OOBEY.com
Intro: CNI
1. 20 years old
2. Core Business: MLM
3. Others: Contract Manufacturing, F&B Retail,
Export/Trading, eCommerce, Shared Services
4. Malaysia, Singapore, Brunei, Indonesia, India,
China, Hong Kong, Philippines, Italy, Taiwan,
Oman, United States, Vietnam
5. Staff force: ± 500
6. Distributors: 200,000
7. Products: Consumer Goods and Services
Introduction to Balanced Scorecard and
Strategy
"The digital watch didn't come from
established watch companies, the calculator
didn't come from slide rule or adding
machine companies, video games didn't come
from board-game manufacturers Parker Bros
or Mattel, the ballpoint pen didn't come from
fountain pen manufacturers, and Google
didn't come from the Yellow Pages"
Bob Seidensticker, Futurehype
What’s wrong with Strategic
Planning Today?
Long-term Plans
Objectives
Strategies
Enablers
Resources
Also known as L.O.S.E.R.
What’s wrong with Strategic
Planning Today?
1. Biggest Threats often come from OUTSIDE your normal
industry
2. Planning from the base of an ‘Existing’ organization vs.
zero-based
3. Traditional Analysis (e.g. SWOT) based only on known
or existing assumptions or knowledge
4. Spending too much time in market research and
analysis
5. Defining the company from a Product/Service
perspective vs. Category vs. JTBD (e.g. Coca-cola)
6. Wrong Benchmark – already successful vs. what made
them successful
7. Implementing BSC and PMS to improve Business
Model and Strategy
8. New strategy, same people
Why BSC?
• Reason 1: Balanced
• Reason 2: Cause-and-Effect
Balanced Scorecard:
Corporate
Financial Customer
“To satisfy our “Who are our target
stakeholders, what customers?
Financial objectives
What is our value
must we accomplish?”
proposition?”
Learning & Growth Internal Process

“What capabilities and “To satisfy our customers,
tools do our employees in which internal business
require to help them processes must we
execute our strategy? excel?"
Balanced Scorecard: NGOs,
Non-Profits, Governments
Internal Process Mission
“To satisfy our targets, “Who are our targets?

in which internal What is our value
processes must we proposition?”
excel?"
Financial Learning & Growth
“To fulfill the Mission, “What capabilities and

what Financial, how do tools do our staff require
we fund Internal to help them execute our
Processes?” strategy?
Side notes on BSC
1. BSC should be a Thought Process and a Tool

not a Religion (e.g. Excel™ vs. Budgeting)
2. BSC ≠ Appraisal
3. New BSC implementations should start linking
with Budgeting right from the beginning
4. The ‘proper’ BSC approach should rightly fully
be heavily customized to the organization
5. ‘Strategic Planning’ trainings should be
provided before ‘BSC’ trainings
6. Clear definitions for Accountability vs. Impact
vs. Influence vs. Assistance
Today’s Agenda
Summary: Today’s
presentation
1. Business Model + BSC =

Boundaries
2. Strategy + BSC = How
3. PMS + BSC = Execution
What is the Business
Model?
•Google
•Air Asia USP
•Tata Nano
Market
Profit Model
Discipline
Model?
USP
Market
Profit Model
Discipline
Business Model: Profit
Model
Revenue
Assets Cost
Cash
Margin
Flow
Strategy + BSC
Financial
Revenue Cost Margin Cash Flow Asset
Customers
Internal
Process
Learning & Growth
Model?
USP
Market
Profit Model
Discipline
Intro: Market Discipline
Product "They are the most innovative"

Leadership "Constantly renewing and creative"
"Always on the leading edge"
Customer
Operational Intimacy
Excellence "Exactly what I need"
"A great deal!"
Customized products
Excellent/attractive price
Personalized communications
Minimal acquisition cost and "They're very responsive"
hassle
Preferential service and
Lowest overall cost of flexibility
ownership Recommends what I need
"A no-hassles firm" "I'm very loyal to them"
Convenience and speed Helps us to be a success
Reliable product and
service
Strategy: Value Disciplines
Product Leadership
(best product)
Operational Excellence Customer Intimacy

(low cost producer) (best total solution)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership
(best product)

Product Leadership
(best product)

Operational
Operational Product
ProductLeadership
Leadership Customer
CustomerIntimacy
Intimacy
Excellence
Excellence •• New,
New,state
stateof
ofthe
the •• Management
Managementbyby
•• Competitive
Competitiveprice
price art products or
art products or Fact
Fact
•• Error services
services
Errorfree,
free,reliable
reliable •• Easy
Easyto
todo do
•• Risk
Risktakers
takers business
businesswith
with
•• Fast
Fast(on
(ondemand)
demand)
•• Meet
Meetvolatile
volatile •• Have
Haveitityour
yourway
way
•• Simple
Simple customer
customerneeds
needs (customization)
(customization)
•• Responsive
Responsive •• Fast
Fastconcept-to-
concept-to- •• Market
Marketsegments
segments
•• Consistent
Consistent counter
counter of
ofone
one
information
informationfor
forall
all •• Never
Neversatisfied
satisfied-- •• Proactive,
Proactive,flexible
flexible
•• Transactional
Transactional obsolete
obsoleteown
ownand
and •• Relationship
Relationshipandand
competitors'
competitors'
•• 'Once
'Onceand
andDone'
Done' consultative
consultative
products
products selling
selling
•• Learning
Learning •• Cross
Crossselling
selling
organization
organization
The McPlaybook*
Make it easy to eat Make it easy to prepare

• 50% drive-thru • High Turnover
• Meals held in one • Tasks simple to learn
hand & repeat
Make it quick Make what customers want

• “Fast Food” • Prowls market for new
• Tests new products products
for Cooking Times • Monitored field tests
*Adapted from: Businessweek , Februrary 5th 2007
Strategy: Disciplines
Product Leadership
(best product)

Strategy: Disciplines
Apple powerful Product Leadership

products, premium (best product)
pricing, limited range
Still
Doing
Acer super lean well in HP well-balanced
cost structure, 2009 portfolio, mass
aggressive pricing customization

Model?
•Google
•Air Asia USP
•Tata Nano
Market
Profit Model
Discipline
Summary: Today’s
presentation

 Done
Boundaries
‘Hope’ is not a strategy
What is your Goal?
1. Cost Reduction
2. Growth
3. Both?
Growth Strategy
“Double-Digit Growth”, Michael Treacy
1.Base Retention
5.New Business 2.Share Gain
GROWTH
4.Adjacent Market 3.Positioning
Growth Strategy
“Double-Digit Growth”, Michael Treacy •Increase switching cost

•Customize products
1. Base Retention •Preempt Defections
•Brand
5. New Business 2. Share Gain

•Neutralize Competitor
GROWTH advantages
•Superior Value
•Promising Market? •Buy market share
•Make or Buy?
4. Adjacent Market 3. Positioning

•Spot growth opportunities
•Organized search
How Markets determine
Growth Strategies (1)
• Growth Rate
Growth Strategy Why?
Rate
Fast 1. Market •Maintain market share in strategic
Positioning segments
2. Share Gain •Prepare for market decline
3. Base •Competitors focus too much on
Retention getting new customers
Flat 1. Base •Lose customers slower than
Retention competitors
2. Share Gain •Create scale economics, squeeze
(Acquisitions) costs
• Churn Rate
Churn Strategy Why?
Rate
Low 1. Share Gain •Buying customer base is
(Acquisitions) cheaper than own efforts
2. Adjacent •New products, old customers
Markets strategy
High 1. Base •Lose customers slower than

Retention competitors
2. Share Gain •Customers are always open to
3. Adjacent the best value and offer
Market •Desperate to gain revenue
•Example: XYZ Sector
Fast Growth, 1.Market Positioning

Low Churn 2.Share Gain
3.Base Retention
4.Adjacent Markets
Side Notes on Cost
Reduction Strategy
Cost Reduction
30% 5% -
- 30%
80% Business Operational
Model
•USP •Finance, HR, IT
•Profit Model •Supply Chain
•Market Discipline •R&D
•Invest/Divest •Sales & Marketing
Strategy + BSC
Financial
Customers
Satisfactio
n
Base Share Gain Positioning Adjacent New
Retention Market Business
Internal
Process
Learning & Growth
Strategy: Disciplines,
Priorities, and KPIs
Product Leadership
(best product)

Strategy: Disciplines,
Priorities, and KPIs
Operational
Operational Product
ProductLeadership
Leadership Customer
CustomerIntimacy
Intimacy
Excellence
Excellence •• New,
New,state
stateof
ofthe
the •• Management
Managementbyby
•• Competitive
Competitiveprice
price art products or
art products or Fact
Fact
•• Error services
services
Errorfree,
free,reliable
reliable •• Easy
Easyto
todo do
•• Risk
Risktakers
takers business
businesswith
with
•• Fast
Fast(on
(ondemand)
demand)
•• Meet
Meetvolatile
volatile •• Have
Haveitityour
yourway
way
•• Simple
Simple customer
customerneeds
needs (customization)
(customization)
•• Responsive
Responsive •• Fast
Fastconcept-to-
concept-to- •• Market
Marketsegments
segments
•• Consistent
Consistent counter
counter of
ofone
one
information
informationfor
forall
all •• Never
Neversatisfied
satisfied-- •• Proactive,
Proactive,flexible
flexible
•• Transactional
Transactional obsolete
obsoleteown
ownand
and •• Relationship
Relationshipandand
competitors'
competitors'
•• 'Once
'Onceand
andDone'
Done' consultative
consultative
products
products selling
selling
•• Learning
Learning •• Cross
Crossselling
selling
organization
organization
• Operational Excellence
• Move know-how from top performing
units to others
• Benchmark against best in class
• Ensure operations training for all
employees
• Use disciplines like TQM for continuous
learning to reduce costs and improve
quality
• Customer Intimacy
• Capture knowledge about customers
• Understand customer needs
• Empower front line employees
• Ensure that everyone knows the
customer
• Make company knowledge available to
customers
• Product Leadership
• Reduce time to market
• Commercialize new products fast
• Ensure that ideas flow
• Reuse what other parts of the company
have already learned
• Ensure there are multiple sources of
funding
Product Leadership
(best product)

Product Leadership
(best product)

Strategy + BSC
Financial
Customers
Satisfactio
n
Internal
Process
Operational Product Customer Investment
Excellence Leadership Intimacy Strategy
Learning & Growth
Alignment: 4-Wheels Model
Business
Person
Structure Model
Strategic
Planning
Culture
Leadership
Resources
Alignment: Framework
Culture • Focus point

• Alignment
• Quality
• Innovation & Differentiation
• Risk taking
• Performance Management
• Corporate obsession
• Decision making
Alignment: Framework
Structure • Org Structure

• Job Design
• C&B
• Policies & procedures
• Decision making
• Job fit
• Management Systems
• BSC and KPIs
• Decentralized & Empower
Strategy: Framework
Leadership • Role modeling

• Vision/Mission/Philosophy
• Leadership Style
• Delegation & Empowerment
• C&B, Promotions
• Sense of Urgency
• Speak regularly about Performance
Strategy: Framework
• Recognition
Person • Recruitment
• Training
• Profit sharing
• Values
• Motivation
• Self Efficacy
• Awareness
• Useful Competencies
• Career aspirations
• Attribution (control)
Strategy: Framework
Enablers
Resources • Technology
• Equipment
Funding
• Materials • CAPEX
• Human • OPEX
• Intellectual
Property
• Partners
• Property
Business
Person
Structure Model
Strategic
Planning
Culture
Leadership
Resources
Each Discipline Requires
Different Priorities & Resources
Organization, jobs,
skills
Culture, values,
norms Operational
Operational Product
Product Customer
Customer
Excellence
Excellence Leadership Intimacy
Information and Leadership Intimacy
systems
Management
systems
Operational
Operational Excellence
Excellence
Organization, ••Central
Centralauthority,
authority,low
lowlevel
levelof
ofempowerment
empowerment
jobs, skills ••High
Highskills
skillsat
atthe
thecore
coreof
ofthe
theorganization
organization
Culture, values, ••Disciplined

DisciplinedTeamwork
Teamwork
norms ••Process,
Process,product-
product-driven
driven
••Conformance,
Conformance,'one
'onesize
sizefits
fitsall'
all'mindset
mindset
Information and ••Integrated,

Integrated,low
lowcost
costtransaction
transactionsystems
systems
systems ••The
Thesystem
systemis isthe
theprocess
process
Management ••Command
Commandandandcontrol
control
systems ••Quality
Qualitymanagement
management
Product
Product Leadership
Leadership
Organization, jobs, ••Ad
skills Adhoc,
hoc,organic
organicand
andcellular
cellular
••High
Highskills
skillsabound
aboundin
inloose-knit
loose-knitstructures
structures
Culture, values, ••Concept,

Concept,future-driven
future-driven
norms ••Experimentation
Experimentationand
and'out
'outof
ofthe
thebox'
box'mindset
mindset
Information and ••Person-to-person

systems Person-to-personcommunications
communicationssystems
systems
••Technologies
Technologiesenabling
enablingcooperation
cooperation
Management
systems ••Rewarding
Rewardingindividuals'
individuals'innovative
innovativecapacity
capacity
••Risk
Riskand
andexposure
exposuremanagement
management
••Product Life Cycle profitability
Product Life Cycle profitability
Customer
Customer Intimacy
Intimacy
Organization, jobs, ••Empowerment
Empowermentclose closetotopoint
pointof
ofcustomer
customercontact
contact
skills ••High
Highskills
skillsin
inthe
thefield
fieldand
andfront-line
front-line
Culture, values, ••Customer-driven

Customer-driven
norms ••Variation
Variationand
and'have
'haveitityour
yourway'
way'mindset
mindset
Information and ••Strong

Strongcustomer
customerdatabases,
databases,linking
linkinginternal
internaland
and
systems external
externalinformation
information
••Strong
Stronganalytical
analyticaltools
tools
Management ••Customer
Customerequity
equitymeasures
measureslike
likelife
lifetime
timevalue
value
systems ••Satisfaction
Satisfactionand
andshare
sharemanagement
management
••Focus
Focusonon‘Share
‘Shareof
ofWallet’
Wallet’
Strategy + BSC
Financial
Customers
Satisfactio
n
Internal
Process
Learning & Growth
Competencies Information Motivation,

Systems empowerment,
alignment
Summary: Today’s
presentation

 Done
Boundaries
 Done
KPIs and PMS
Reminder: Why BSC?
• Reason 1: Balanced
• Reason 2: Cause-and-Effect
Before we start…
Which comes first?

1. Strategies -> KPI?
2. KPI -> Strategies?
Before we start…
Which comes first?

•already know our priorities, aware of all
strategy options available
•creating something UNIQUE, INNOVATIVE
and DISRUPTIVE e.g. Air Asia
•conducting a business Turnaround e.g. MAS
Before we start…
Which comes first?

•want to find out possible strategies,
•determine our priorities first thru selection of
important KPIs;
•growing through ‘normal’ business, not a
Turnaround.
Example: Selection of KPIs
for BSC
•Customer satisfaction •Win rate (sales closed/sales contact)
Customer loyalty •Customer visits to the company
Market share Hours spent with customers
Customer complaints Marketing cost as a percentage of sales
Complaints resolved on first contact Number of ads placed
Return rates Number of proposals made
Response time per customer Brand recognition
request Response rate
Price relative to competition Number of trade shows attended
Total cost to customer Sales volume
Average duration of customer Share of target customer spending
relationship Sales per channel
Customers lost Average customer size
Customer retention Customers per employee
Customer acquisition rates Customer service expense per customer
Percentage of revenue form new Customer profitability
customers Frequency (number of sales
Number of customers transactions)
Annual sales per turnover
Wrong KPIs
“What is the moral of

the story?”
KPIs and Behavior
Before: “Handle Time” Per Call

• Motivated Call Centre staff to transfer callers,
getting rid of complainers, making them
someone else’s problem
• Callers at 45% chance of being transferred
• 7,000 customers each week suffered transfers 7
times or more
KPIs and Behavior
After: “Minutes Per Resolution” of a

problem
• Resolution in ONE CALL become the core goal
• Reduced probability of call transfers from 45% to
18%
Cause and Effect
Financial
Customers
Satisfactio
n
Internal
Process
Learning & Growth
Competencies Information Motivation,

Systems empowerment,
alignment
Cause and Effect: An
Example
Financial Revenue
Market Value Productivity
Growth
Customers /
Distributors Products/ Channel Target
Services Strategies Markets
Internal Supplier & Department External

Process Alliances Operations Involvement
Learning & Technology

Growth Human Information &
Resources Systems & Intelligence
Processes
Sample: Other 1st Level KPIs
across industries…
Financial Services Retail Telecommunications
•Maximize ARPU •Understand customer •Anticipate and prevent churn

•Minimize Churn behavior related to customer despite compensation
•Mutichannel customer conversion, acquisition, and •Increase number of products
retention per customer
service
•Single view of customer •Turn call center information
•Multichannel customer opportunity to up-sell and
experience cross-sell
•Personalized customer •Increase customer
experience satisfaction and loyalty
Hospitality Travel & Leisure Manufacturing
•Personalized customer •Increase customer loyalty •Single view of customers
experience and preference across supply chain
•Maximize share of wallet •Maximize customer revenue •Zero-error order capture
•Player/customer loyalty •Improve service quality and •Streamline opportunity to
•Multichannel customer efficiency cash processes
service •Capture and close sales •Leverage investment in ERP
opportunities and backoffice systems
Sample KPIs for Each
Discipline
Operational
Operational Product
Product Customer
CustomerIntimacy
Intimacy
Excellence
Excellence Leadership
Leadership
•• Price
Price •• Marketing •• Customer
Customer
•• Selection Marketing
Selection Knowledge
Knowledge
•• Functionality
Functionality
•• Convenience •• Solutions
Convenience
•• ##of SolutionsOffered
Offered
•• Zero
ZeroDefects
Defects ofSuccesses
Successes •• Penetration
Penetration
•• Growth •• ##of
ofFailures
Failures •• Customer
Growth CustomerData
Data
•• Learn
Learnfrom
fromkey
key •• Customer-success
Customer-success
users
users focus
focus
•• Interdisciplinary
Interdisciplinary
teams
teams
•• Pipeline
Pipeline
B2B/B2G BSC Matching
Customer/Client/
Government BSC
Financial
Customers Satisfaction
Your BSC
Financial
Internal
Process Customers Satisfaction
Investment
Operational Product Customer
Strategy
Excellence Leadership Intimacy Base Share Gain Positioning Adjacent New
Learning & Growth
Competencies Information Motivation, Internal

Systems empowerment, Process
Investment
alignment Operational Product Customer
Strategy
Excellence Leadership Intimacy
Learning & Growth
1. Draw your ‘customer’s’ BSC Competencies Information

Systems
Motivation,
empowerment,
alignment
2. Match their CP/IP with your CP

3. Identify IPs that support/conflict
Cascading
Customer Perspective
Goals Strategies Targets Direct Indirect

Base Mkt
Retention
Share Gain Mkt
New BD
Business
E3 – Department BSC
Customer Perspective –
Marketing Department
Goals Strategies Targets CAPEX OPEX
Base
Retention
Share Gain
Budgeting
Individual MBO
Re: Base
Employee A – Marketing Executive Retention
KRAs Action Targets Weight Score
Plans (%)
Class A
Customer
Retention
Class B
Customer
Retention
Competition
Crossovers
What’s In Between Planning
and Execution?
Business Model
BSC
KPIs
Budgeting + Planning
Performance Management System

Differentiation
Talent Management
Succession Planning (Business

www.myCNI.com.my Continuity) www.OOBEY.com
What’s In Between Planning
and Execution?
Business Model
BSC
a.k.a. Strategy
KPIs Planning
Budgeting + Planning
Performance Management System

Differentiation
a.k.a. Strategy Talent Management

Implementation
Succession Planning (Business
Continuity)
Performance Execution
Clarity
A Excellent
B Good
C Average
D Poor
E Useless
Clarity
A Excellent
B Good
C Average Good
D Poor
E Useless
Clarity
A Excellent Excellent
B Good Very Good
C Average Good
D Poor Not Good
E Useless Commit Suicide
Clarity
A Excellent Consistently achieved 4 for 3
quarters
B Very Good Higher than planned results
C Good Achieved Planned Results
D Not Good Did not fully meet planned

results
E Commit Unacceptable performance

Suicide
Performance and Pay Clarity
• Pay for Service

• Pay for Job
• Pay for Performance
• Pay for Competency
• Increment
• Bonus
• Promotion
Compa Ratio Table
Use this if your company:

• Pays for Performance, and
• Pays for Job rates
Def:
Mid-Point = Mid Point of Pay Grade
Grade E2
Min MID Max
RM2,000 RM2,500 RM3,000
< 0.7 ≥0.7 - >0.9 - ≥1.1 - > 1.3

≤0.9 <1.1 ≤1.3
5 9 8 7 6 5
4 8 7 6 5 4
3 7 6 5% 4 3
2 6 5 4 3 2
1 5 4 3 2 1
< 0.7 ≥0.7 - >0.9 - ≥1.1 - > 1.3

≤0.9 <1.1 ≤1.3
5 20 15 12 8 5
4 18 12 9 5 3
3 9 7 5% 4 3
2 1 1 1 0 0
1 0 0 0 0 0
Curse of the Bell Curve
‘A’ ‘B’ ‘C’ ‘D’ ‘E’

Staff Staff Staff Staff Staff
End Notes
Tying it all up
Review processes
1. Result Planning schedule inc. BSC, Budget

2. Quarterly Performance Appraisals
3. Sales performance reviews
4. Non-sales performance reviews
5. Annual Appraisals
6. Specialized KPI committees
7. CAR, PAR, SCAR KPI improvements
8. Internal Audit & MSD – process problems
9. HRM & TND – people problems
Problems, problems and
more problems…
Business
Person
Structure Model
Strategic
Planning
Culture
Leadership
Resources
Thank You.
soft copy of slides:

www.totallyunrelatedrandomanddebatable.
blogspot.com

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Balanced Scorecard For Strategic Planning and Measurement

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BALANCED SCORECARD FOR

STRATEGIC PLANNING AND

Also known as L.O.S.E.R.

Learning & Growth Internal Process

“To satisfy our targets, “Who are our targets?

Financial Learning & Growth

“To fulfill the Mission, “What capabilities and

1. BSC should be a Thought Process and a Tool

1. Business Model + BSC =

3. PMS + BSC = Execution

Learning & Growth

Product "They are the most innovative"

Operational Excellence Customer Intimacy

Operational Excellence Customer Intimacy

Operational Excellence Customer Intimacy

Make it easy to eat Make it easy to prepare

Make it quick Make what customers want

Operational Excellence Customer Intimacy

Apple powerful Product Leadership

Operational Excellence Customer Intimacy

1. Business Model + BSC =

3. PMS + BSC = Execution

‘Hope’ is not a strategy

“Double-Digit Growth”, Michael Treacy

5.New Business 2.Share Gain

4.Adjacent Market 3.Positioning

“Double-Digit Growth”, Michael Treacy •Increase switching cost

5. New Business 2. Share Gain

4. Adjacent Market 3. Positioning

High 1. Base •Lose customers slower than

•Example: XYZ Sector

Fast Growth, 1.Market Positioning

Learning & Growth

Operational Excellence Customer Intimacy

Operational Excellence Customer Intimacy

Operational Excellence Customer Intimacy

Learning & Growth

Culture • Focus point

Structure • Org Structure

Leadership • Role modeling

Culture, values, ••Disciplined

Information and ••Integrated,

Culture, values, ••Concept,

Information and ••Person-to-person

Culture, values, ••Customer-driven

Information and ••Strong

Learning & Growth

Competencies Information Motivation,

1. Business Model + BSC =

3. PMS + BSC = Execution

KPIs and PMS

Which comes first?

Which comes first?

Which comes first?

“What is the moral of

Before: “Handle Time” Per Call

After: “Minutes Per Resolution” of a

Learning & Growth

Competencies Information Motivation,

Internal Supplier & Department External

Learning & Technology

•Maximize ARPU •Understand customer •Anticipate and prevent churn

Competencies Information Motivation, Internal