INTRODUCTION

 The Balanced Scorecard is a management tool that provides

stakeholders with a comprehensive measure of how the
organization is progressing towards the achievement of its strategic
goals.

 The balanced scorecard is a strategic planning and management

system that is used extensively in business and industry,
government, and non-profit organizations worldwide

 It helps to align business activities to the vision and strategy of

the organization, improve internal and external communications,
and monitor organization performance against strategic goals.
INTRODUCTION
 It was originated by Dr. Robert Kaplan (Harvard Business School)
and David Norton as a performance measurement framework that
added strategic non-financial performance measures to traditional
financial metrics to give managers and executives a more 'balanced'
view of organizational performance.

 Typically managers used the financial accounts issued monthly or

even annually to see how their business or organisation had fared,
but this far too late to take any corrective action.

 The balanced scorecard moves away from this and looks back up
the process of generating the finances of the company to find vital
non financial measures.
PROBLEM WITH TRADITIONAL
METHODS OF BUSINESS ANALYSIS

 Past Focussed & No Hint of Future

 Lagging Indicators of Business & Need for Leading Indicators). e.g.

Presence of police in front of a house & Police Bandobast

 No Early Warnings

 Do not Measure Non Financial Parameters of Business

NEED FOR BALANCED SCORECARD
 “What you measure is what you get”. To cite an example, a
company with accurate time keeping system will have a better
record of timely attendance of employees than the company without
it.

 It is a future oriented management system. It helps organizations

to first formulate their vision and strategy and then to translate them
into action.

 It provides feedback around both the internal business processes

and external outcomes in order to continuously improve strategic
performance and results.
BALANCED SCORECARD (BSC)
 Kaplan and Norton describe the innovation of the balanced
scorecard as follows:

 "The balanced scorecard retains traditional financial measures. But

financial measures tell the story of past events, an adequate story for
industrial age companies for which investments in long-term
capabilities and customer relationships were not critical for success.

 These financial measures are inadequate, however, for guiding and

evaluating the journey that information age companies must make to
create future value through investment in customers, suppliers,
employees, processes, technology, and innovation."
BALANCED SCORECARD (BSC)
 The balanced scorecard suggests that we view the organization from
four perspectives, and to develop metrics, collect data and analyze it
relative to each of these perspectives:

1. Financial Perspective

2. Customer Perspective

3. Internal Business Process Perspective

4. Learning and Growth Perspective

BALANCED SCORECARD (BSC)
BALANCED SCORECARD (BSC)
BALANCED SCORECARD (BSC)
FINANCIAL PERSPECTIVE
 Measures which reflect financial performance, for example,
number of debtors, cash flow or return on investment. Financial
performance of an organization is fundamental to its success.
Financial figures suffer from two major drawbacks:

 (a) They are historical. Whilst they tell us what has happened to
the organization they may not tell us what is currently happening, or
be a good indicator of future performance.
FINANCIAL PERSPECTIVE
 (b) It is common for the current market value of an organization
to exceed the market value of its assets. The excess value can be
thought of as intangible assets. These figures are not measured by
normal financial reporting.

 Financial perspective becomes useful when our figures are

benchmarked against competitors’ and segment/industry leader’s
figures. Such comparison throws questions like, why is our credit
period higher than our competitors. It gives us a clue as to what we
are not doing as on date and what can be done in future.
CUSTOMER PERSPECTIVE
 Measures having a direct impact on customers, for example time
taken to process a phone call, results of customer surveys,
number of complaints or competitive rankings.

 There is an increasing realization of the importance of customer

focus and customer satisfaction in every business.

 These are leading indicators: if customers are not satisfied, they

will eventually find other suppliers who will meet their needs.
Poor performance from this perspective is thus a leading indicator of
future decline, even though the current financial picture may look
good.
CUSTOMER PERSPECTIVE
 In developing metrics for satisfaction, customers should be analyzed
in terms of kinds of customers. If percentage of repeat orders or
business from existing customer is declining, it is a sign of
dissatisfaction among the customers and a warning of business
moving downhill in near future.
INTERNAL BUSINESS PROCESS PERSPECTIVE
 Measures which reflect the performance of key business processes,
for example the time spent prospecting (searching, analysing),
number of units that required rework or process cost.

 In simple terms, it is analysis of the core business performance like

quality of product, cost, availability, etc.
LEARNING AND GROWTH PERSPECTIVE
 Measures describing the companies’ learning curve, for example
number of employee suggestions or total hours spent on staff
training, in-house process improvements, etc.

CONCLUSION
 The specific measures within each of the perspectives will be
chosen to reflect the drivers of the particular business. Ideally,
there should be about 3 goals/measures in each of the perspectives
for a single year.
 Even when there are 10 goals, only 3 should be chosen in a year.
Often there is a spill over effect of improvement in those three areas
on to other desired areas.
EXAMPLE:
XYZ LTD. , A SEMICONDUCTOR COMPANY
 Financial Perspective

GOALS MEASURES
Survive Cash flow
Quarterly sales
Succeed Growth
Operating income by division
Increase in market share
Prosper
Increase in Return on Equity
CUSTOMER PERSPECTIVE
GOALS MEASURES
% sales from new products
New products
% sales from proprietary products
On-time delivery
Responsive supply
(customer definition)
Share of key accounts’ purchases
Preferred suppliers
Ranking by key accounts
Customer
# of cooperative engineering efforts
partnerships
INTERNAL BUSINESS PERSPECTIVE
GOALS MEASURES
Technology Benchmark vs. competition
capability
Manufacturing Cycle time
excellence Unit cost
Yield
Design Silicon efficiency
productivity Engineering efficiency
New product Schedule: Actual vs. Planned
innovation
INNOVATION & LEARNING PERSPECTIVE
GOALS MEASURES
Technology
Time to develop next generation
leadership
Manufacturing
Process time to maturity
learning

Product focus % products equalling 80% of sales

Time to market New product introduction vs. competition

 THE INGREDIENTS OF HIGHLY SUCCESSFUL
BALANCED SCORECARD PROGRAMS
1. Leadership From the Top 4. Make Strategy a Continuous
 Create the Climate for Change Process
 Create a Common Focus for Change – Strategic Feedback That Encourages
Activities Learning
 Rationalize and Align the Organization Formulate – Executive Teams Manage Strategic
Themes
– Testing Hypotheses, Adapting, and
Learning

Communicate STRATEGY Navigate

3. Unlock and Focus Hidden Assets

2. Make Strategy Everyone’s Job – Reengineer Work Processes
– Comprehensive Communication to Execute – Create Knowledge Sharing Networks
Create Awareness
– Align Goals and Incentives
– Integrate Budgeting with Strategic
Planning
– Align Resources and Initiatives
STRATEGY MAPPING
 David Norton developed the strategy mapping concept while they
were working on their “balanced scorecard.”

 The strategy map is broken down into subtopics that all work
toward the business’ ultimate goal.

 A strategy map is a visual illustration of a business’ strategy for

turning its resources into accomplishments.

 Resources don’t include only concrete assets, but also refer to

knowledge and customs. These assets are applied in a way that will
help the company reach its objectives.
STRATEGY MAPPING
 Strategy mapping shows the relationship between the company’s
resources and objectives via a detailed picture.

 The top of the strategy map shows the business’ main objective,
which is the No. 1 reason why the business exists.

 Strategy mapping is used to help businesses and companies manage

their approach. With a strategy map, management can detect which
areas of the business need to be improved.

 A problem in the business plan is evident if the different areas of the

strategy map don’t logically and easily flow into the next one.
STRATEGY MAPPING
STRATEGY MAPPING Strategic Map.pdf
KEY PERFORMANCE INDICATORS (KPI)
 Key Performance Indicators are quantifiable measurements, agreed
to beforehand, that reflect the critical success factors of an
organization. They will differ depending on the organization.
DASHBOARDS
 Dashboards often provide at-a-glance views of KPIs (key performance
indicators) relevant to a particular objective or business process (e.g.
sales, marketing, human resources, or production).
PURPOSE OF BALANCED SCORECARD

a) Clarify and update strategy

b) Identify and align strategic initiatives

c) Link strategic objectives to long term targets and annual

budgets

d) Communicate strategy throughout the company

e) Align unit and individual goals with strategy

f) Conduct periodic performance reviews to learn about and

improve strategy
ADVANTAGES OF BSC

a) Focus from generalities to specifics

b) Focus on few critical parameters

c) It shifts focus from finance and accounts to entire operations

d) It guards against sub-optimisation

e) Looks at complete picture rather than parts of it in isolation.

f) It is not control oriented but goal oriented.

ADVANTAGES OF BSC

g) It assumes that what you measure is what you get.

h) It promotes cross functional management

i) It establishes partnership models

j) It is team oriented and not individual oriented

k) It helps understand interdependencies and intra-relations

THANK YOU !!
BCG Matrix
Model
BCG MATRIX MODEL

 The BCG matrix or also called BCG model relates to

marketing.
 The BCG model is a well-known portfolio management
tool used in product life cycle theory. BCG matrix is
often used to prioritize which products within company
product mix get more funding and attention.
 The BCG matrix model is a portfolio planning model
developed by Bruce Henderson of the Boston Consulting
Group in the early 1970's.
BCG MODEL
 The BCG model is based on classification of products
(and implicitly also company business units) into four
categories
 based on combinations of market growth and market
share relative to the largest competitor.
WHEN TO USE THE BCG MATRIX
MODEL?
 Each product has its product life cycle, and each stage in
product's life-cycle represents a different profile of risk
and return. In general, a company should maintain a
balanced portfolio of products.
 Having a balanced product portfolio includes both high-
growth products as well as low-growth products.
WHEN TO USE THE BCG MATRIX
MODEL?
 A high-growth product is for example a new one that we
are trying to get to some market.
 It takes some effort and resources to market it, to build
distribution channels, and to build sales infrastructure,
but it is a product that is expected to bring the gold in the
future.
 An example of this product would be an iPod or Iphone.
WHEN TO USE THE BCG MATRIX
MODEL?
 A low-growth product is for example an established
product known by the market. Characteristics of this
product do not change much, customers know what they
are getting, and the price does not change much either.
 This product has only limited budget for marketing. It is
the milking cow that brings in the constant flow of cash.
An example of this product would be a regular Colgate
toothpaste.
WHEN TO USE THE BCG MATRIX
MODEL?
 But the question is, how do we exactly find out what
phase our product is in, and how do we classify what we
sell? Furthermore, we also ask, where does each of our
products fit into our product mix? Should we promote
one product more than the other one? The BCG matrix
can help with this.

 The BCG matrix reaches further behind product mix.

Knowing what we are selling helps managers to make
decisions about what priorities to assign to not only
products but also company departments and business
units.
WHAT IS THE BCG MATRIX AND HOW
DOES THE BCG MODEL WORK?
 Placing products in the BCG matrix results in 4
categories in a portfolio of a company:

 BCG STARS (high growth, high market share)

 Stars are defined by having high market share in a

growing market.
 Stars are the leaders in the business but still need a lot of
support for promotion a placement.
 If market share is kept, Stars are likely to grow into cash
cows.
BCG QUESTION MARKS (HIGH
GROWTH, LOW MARKET SHARE)
 These products are in growing markets but have low
market share.
 Question marks are essentially new products where
buyers have yet to discover them.
 The marketing strategy is to get markets to adopt these
products.
 Question marks have high demands and low returns due
to low market share.
 These products need to increase their market share
quickly or they become dogs.
 The best way to handle Question marks is to either invest
heavily in them to gain market share or to sell them.
BCG CASH COWS (LOW GROWTH,
HIGH MARKET SHARE)
 Cash cows are in a position of high market share in a
mature market.
 If competitive advantage has been achieved, cash cows
have high profit margins and generate a lot of cash flow.
 Because of the low growth, promotion and placement
investments are low.
 Investments into supporting infrastructure can improve
efficiency and increase cash flow more.
 Cash cows are the products that businesses strive for.
BCG DOGS (LOW GROWTH, LOW
MARKET SHARE)
 Dogs are in low growth markets and have low market
share.
 Dogs should be avoided and minimized.

 Expensive turn-around plans usually do not help.

LIMITATIONS OF THE BCG MATRIX
MODEL
 The first problem can be how we define market and how
we get data about market share
 A high market share does not necessarily lead to
profitability at all times
 The model employs only two dimensions – market share
and product or service growth rate
LIMITATIONS OF THE BCG MATRIX
MODEL
 Low share or niche businesses can be profitable too
(some Dogs can be more profitable than cash Cows)
 The model does not reflect growth rates of the overall
market
 The model neglects the effects of synergy between
business units
 Market growth is not the only indicator for attractiveness
of a market