business process management and the balanced scorecard

Business Process Management and theBalanced Scorecard

Using Processes as Strategic Drivers

Ralph F Smith

01_047461 ffirsqxp 10406 1159 AM Page iii

File Attachment
C1jpg

01_047461 ffirsqxp 10406 1159 AM Page ii

Business ProcessManagement and theBalanced Scorecard

01_047461 ffirsqxp 10406 1159 AM Page i




Ralph F Smith


This book is printed on acid-free paper

Copyright copy 2007 by John Wiley amp Sons Inc All rights reserved

Published by John Wiley amp Sons Inc Hoboken New Jersey

Published simultaneously in Canada

No part of this publication may be reproduced stored in a retrieval system ortransmitted in any form or by any means electronic mechanical photocopyingrecording scanning or otherwise except as permitted under Section 107 or 108 ofthe 1976 United States Copyright Act without either the prior written permission ofthe Publisher or authorization through payment of the appropriate per-copy fee tothe Copyright Clearance Center Inc 222 Rosewood Drive Danvers MA 01923978-750-8400 fax 978-646-8600 or on the web at wwwcopyrightcom Requests tothe Publisher for permission should be addressed to the Permissions Department JohnWiley amp Sons Inc 111 River Street Hoboken NJ 07030 201-748-6011 fax201-748-6008 or online at httpwwwwileycomgopermissions

Limit of LiabilityDisclaimer of Warranty While the publisher and author have usedtheir best efforts in preparing this book they make no representations or warrantieswith respect to the accuracy or completeness of the contents of this book andspecifically disclaim any implied warranties of merchantability or fitness for aparticular purpose No warranty may be created or extended by sales representativesor written sales materials The advice and strategies contained herein may not besuitable for your situation You should consult with a professional whereappropriate Neither the publisher nor author shall be liable for any loss of profit orany other commercial damages including but not limited to special incidentalconsequential or other damages

For general information on our other products and services or technical supportplease contact our Customer Care Department within the United States at800-762-2974 outside the United States at 317-572-3993 or fax 317-572-4002

Wiley also publishes its books in a variety of electronic formats Some content thatappears in print may not be available in electronic books

For more information about Wiley products visit our Web site athttpwwwwileycom

Library of Congress Cataloging-in-Publication Data

Smith Ralph F 1963-Business Process Management and the Balanced Scorecard using processes as

strategic drivers Ralph F Smithp cm

Includes indexISBN-13 978-0-470-04746-0 (cloth)ISBN-10 0-470-04746-1 (cloth)1 Workflow--Management 2 Benchmarking (Management) 3 Performance--Management 4 Strategic planning I Title HD6217S65 20076585rsquo1--dc22

2006020850

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

01_047461 ffirsqxp 10406 1159 AM Page iv

To my loving wife Janet

whose patience and support make everything possible

01_047461 ffirsqxp 10406 1159 AM Page v

01_047461 ffirsqxp 10406 1159 AM Page vi

vii

CONTENTS

Preface ix

CHAPTER 1A World of Change 1

CHAPTER 2How Process Can Drive Strategy 13

CHAPTER 3The Strategic Process 26

CHAPTER 4Strategy Maps 127

CHAPTER 5Balanced Scorecard and Strategic Initiatives 166

CHAPTER 6Conclusions 219

Index 221

02_047461 ftocqxp 10406 1159 AM Page vii

02_047461 ftocqxp 10406 1159 AM Page viii

ix

PREFACE

Why write a business book Arenrsquot there enough of them out there al-ready Itrsquos a great question There are so many books methodologiesand competing theories on how to be successful in todayrsquos business worldthat there doesnrsquot seem to be a crying need for another one I mulled thisover for many an evening before committing the time and effort to pro-duce this text The factor that convinced me to proceed was recalling thatmost of the business books I have read tend to be theoretical conceptualand difficult to put into practice My first thought when reading many ofthese texts is ldquosounds goodmdashbut how do I do itrdquo

My career has been spent helping organizations implement these big-picture ideas I have been very successful over the years in translatingtheory into common sense terms so others can be comfortable with thehow-to of implementation I think creative ideas are wonderful butthey are even better when properly implemented So this book has beenwritten to provide some common sense thoughts and implementationtips for process management and the balanced scorecard In my opinionthe single biggest opportunity for many companies in todayrsquos world is tounderstand and leverage this synergy between strategy and process

I have spent the last 16 years in the consulting business My careerstarted as an internal consultant in the heyday of total quality manage-ment (TQM) and through the years that followed I have been involvedwith such methodologies as reengineering self-directed work teams

03_047461 flastqxp 10406 1159 AM Page ix

benchmarking facilitating high-performance teams Hoshin planningstrategy mapping and the balanced scorecard Irsquove been around longenough now to watch fads come and go and Irsquove worked with enoughcompanies to understand what makes them successful (and what doesnrsquot)Hopefully this text will provide useful insights to managers who are inter-ested in improving their organizations by focusing on the link betweenprocesses and strategy

Irsquod like to thank the talented and creative managers at (among manyothers) XL Capital Texas Childrenrsquos Hospital the Michigan Depart-ment of the Treasury and Department of Management and BudgetAlcoa and Brownrsquos Hill Farm I have learned at least as much fromthem through the years as they have learned from me Irsquod also like tothank original thinkers like Dr Robert Kaplan Dr David Norton andMichael Hammer for their contributions to the business world Theirgrasp of the big picture is extraordinary And last but not least Irsquod liketo thank my partners at the Orion Development Group Paul King BobBoehringer Susan Williams and Mandy Dietz are all extraordinarypeople and their drive and intelligence has always spurred me on togreater heights than I ever thought possible

Enjoy the book I hope you have as much fun reading it as I did in ac-quiring the experience to write it

x Preface

03_047461 flastqxp 10406 1159 AM Page x

1

c h a p t e r 1

A WORLD OF CHANGE

What is the most important ingredient for the success of an orga-nization

If a typical executive is asked what makes hisher company great thelikely response will be one of the following

ldquoWe are more profitable than our competitorsrdquo

ldquoWe have strong relationships with our customersrdquo

ldquoOur people are the best in the industryrdquo

Very rarely will an executive lead off the discussion of greatness bydescribing process performance Yet ironically process performancehas become perhaps the most critical driver of organizational success inthe 2000rsquos A high-performing organization in todayrsquos marketplacemust not only understand how to identify and correct its process weak-nesses (an age old practice) but it must also be able to leverage processstrengths and opportunities for strategic advantage

The fact that processes are so crucial to future success is an interest-ing phenomenon analyzing and improving processes is definitely not arevolutionary concept In fact many of the tools and techniques (egflowcharts control charts) used for process improvement have beenaround for decades Why then is the emphasis on process gettingstronger and stronger It is due to a combination of factors that have

04_047461 ch01qxp 10406 1200 PM

impacted the business world over the last several years A basic changemanagement principle holds that ldquothings are the way they are becausethey got that wayrdquo This statement implies that it is critical to under-stand how a current situation developed and evolved if you truly wantto be effective in changing the status quo By taking a few snapshots ofthe business climate of the past and describing how certain trends haveemerged it will be possible to illustrate how and why process focus is socritical today The comparisons will be of the business world in threetime frames 1970 1985 and present day

1970

Take a moment to think about the United States circa 1970 The medianhousehold income was around $8700 Richard Nixon was PresidentKansas City topped Minnesota 23ndash7 in Super Bowl IV The Beatlesbroke up Four students at Kent State University were killed by NationalGuardsmen In the business world the Big Three automobile manufac-turers dominated the American market posting a combined marketshare of over 90 Gas was around 30 cents per gallon IBM intro-duced the first floppy disk and a newly formed company named Intelintroduced a new generation of computer chips that quickly elevated thecompany to a market leader ATampT held a monopoly in the telephoneindustry And you could buy a hamburger french fries and drink atMcDonaldrsquos for around $1

The business environment was completely different than what we arefamiliar with today For example consider the nature and compositionof the workforce In 1970 employees werenrsquot nearly as mobile entire ca-reers were often spent with the same company (In fact the perceptionof someone who moved from company to company as a chosen careerpath was very negative) Because changing jobs was so rare it followsthat the 1970s was an environment of heavy seniority Process knowl-edge was carried around in the heads of employees and when people re-tired they passed their knowledge on to their successors Employeeswere expected to be able to rely on their extensive experience within the

2 A W o r l d o f C h a n g e

04_047461 ch01qxp 10406 1200 PM Page 2

organization to work around process difficulties as they emerged Man-agers were typically selected from within and promoted up through thechain of command so by the time an employee reached executive levelhe or she had a firm grasp of the process complexities of the organiza-tion (Of course this was only effective if the employee in question wasrotated around the organization as he or she was promoted over thecourse of time Managers who had always been part of the sales chain-of-command for example were sometimes crowned CEO or COO andhad no real experience with any of the nonsales aspects of the organi-zation In this case the advantage of having years of experience with thecompany was somewhat minimized)

Processes were different in this era as well It was still the age of spe-cialization The majority of organizations had the vertical type of orga-nizational structure depicted in Exhibit 11

The basis for this type of structure was rooted in the division of laborconcepts dating back to Adam Smith in the 1700s Each person on thelower levels was responsible for one specific task the job of the first-linemanager was to make sure these tasks were performed properly thenext-level managers made sure that the first-line managers performedtheir tasks properly and so on up the ranks

A World of Change 3

EXHIBIT 11 Vertical Organizational Structure

04_047461 ch01qxp 10406 1200 PM Page 3

Some degree of specialization is undoubtedly necessary in any orga-nization to ensure needed expertise is present but this type of organi-zational structure can have profoundly negative effects on processesAny process that requires even a moderate degree of cross-functional cooperation is bound to be handicapped by this type of structure Atthe lowest levels each link in the chain will only be looking out forand trying to optimize a portion of the process as opposed to the entire

process Because many companies during this era rewarded their employees based on how well they performed with regard to their ownspecific area this created some very interesting behavior

For example a major aluminum manufacturer once paid its employeesby the pound of material produced per hour This reinforced the behav-ior that the heavier the job the more important it must be It also rein-forced the behavior that changeovers and new setups were bad so big jobsmust be more important than small jobs The employees in this departmenttherefore paid little attention to customer needs job due dates or specialrequests from other departments In fact they often ran material thatwasnrsquot even needed and stored it in inventory in order to artificially inflatetheir pounds-per-hour number Because inventory management was some-one elsersquos worry these employees saw no negatives to this type of behav-ior The paint line in this same company was paid by how many piecesthey painted There were instances when no material was ready to bepainted so they retrieved material out of the scrap heap painted it andthrew it back on the scrap heap just to make their numbers look goodThis type of behavior obviously came at a cost to the company but in theenvironment of 1970 it was possible to simply pass the added cost on tothe customer with minimal effect on the organization

In addition to reinforcing counterproductive behaviors this specializedand hierarchical organizational structure made internal communicationextremely difficult Creating silos within the company hampered cross-functional information sharing When Chrysler wanted to develop a newmodel car its process cycle time (measured from idea-to-showroom-floor)was five years This obviously implied enormous risk since the marketand consumer preferences could change so much over a five-year period


04_047461 ch01qxp 10406 1200 PM Page 4

that by the time the new model was ready it could be obsolete The year1970 was actually a prime example of this most automobiles of this erawere gas-guzzling behemoths with V8 engines Any new vehicle beginningdevelopment in 1970 faced serious sales challenges in light of the im-pending energy crises of the early 1970s that shifted the focus to smallerlighter cars (offered by the Japanese) that got better gas mileage

And why did the process take five years Because the practice was foreach department to work on their portion of the process and then passit on to the next department There would then typically be a (some-times large) time lag before the next department began processing itsportion of the work adding to the cycle time And when the next de-partment did begin its portion of the process they often had to sendthings back to the first department requesting changes explanationsmodifications and so on This would inject enormous amounts of lagtime and rework into the process to no purpose (Note Chrysler recog-nized these shortcomings upon its purchase of American Motors Corporation and was able to reduce the idea-to-showroom-floor cycletime down to two years This case will be examined in greater detail insubsequent chapters) Because the US economy had been so strong forso long it was obvious that this type of process inefficiency had beencamouflaged with no real repercussions

Another reason for process and internal communication difficultieswas the lack of communication technology There were no cell phonese-mail systems wireless networks or Internet in 1970 making commu-nication much more difficult than it is today This phenomenon not onlyslowed down internal processes and knowledge sharing but it had a sig-nificant effect on the marketplace in general as well Lack of communi-cation technology meant that in many cases the competition a typicalcompany faced was more local in nature versus the global competitionseen today Therefore the customer didnrsquot have as many choices andmany companies didnrsquot have the sense of urgency to improve The localcompanies typically werenrsquot capitalized like global companies of todayare limiting their ability to employ different pricing and promotionalstrategies

A World of Change 5

04_047461 ch01qxp 10406 1200 PM Page 5

It was only possible for companies to thrive in this environment be-cause customer expectations were also very different in 1970 It wascommon for an automobile manufacturer to sell a new car to a cus-tomer and say ldquoMake a list of all the problems you find and bring thevehicle back in a month and wersquoll fix all of themrdquo The customer didnrsquoteven have a ldquotake it or leave itrdquo option the situation was ldquotake it ortake itrdquo In this environment all manner of process problems could bemasked by price increases and the ldquofind it and fix itrdquo mentality Processand the resultant product quality were low and prices were relativelyhigh but demand for products and services made everything appearall right The auto industry is referenced throughout this text simply be-cause for many decades it served as the backbone of the American econ-omy and was the first to face extended and intense competition fromglobal sources which began shortly after the 1970 reference date (Hondaintroduced the first Civic to the United States in 1972 ushering in thenew age of global competition)

1985

Flash forward to 1985 The median household income was around$23618 more than double what it was in 1970 although the cost of living more than kept pace with a 277 increase Ronald Reagan wasPresident and Mikhail Gorbachev took over as leader of the SovietUnion Madonna toured for the first time Joe Montana and the SanFrancisco 49errsquos pounded Miami 38ndash16 in the Super Bowl Scientists dis-covered a huge hole in the ozone over Antarctica In the business worldCoca-Cola introduced New Coke and then quickly reintroduced ClassicCoke Relatively inexpensive laser printers and computers made desktoppublishing commonplace The first mobile phone call was made in GreatBritain Microsoft introduced the first version of Windows appropri-ately numbered 10 Global competition was transforming many indus-tries headed by the Big Three losing their stranglehold on the automarket (GM lost nearly one-third of its market share to overseas com-petitors between 1970 and 1985)


04_047461 ch01qxp 10406 1200 PM Page 6

Practically every factor mentioned in the 1970 discussion was subjectto significant change by 1985 The intensity and quality of foreign com-petition forced American companies to reevaluate the way business wasconducted and sparked an interest in total quality management (TQM)If applied properly the basic tenets of TQM (eg good processes reduce

cost versus adding cost customer focus measurement worker involve-ment in improving their own jobs) addressed most of the problems exposed in the 1970s way of doing business For example consider theprinciple that worker input was important to both improving processperformance and making the employee feel like a valued part of the or-ganization This became critical in the 1980s in light of the fact that theworkforce was becoming more mobile Many US manufacturingjobs were being lost to international competition and being replaced byservice industry jobs The nature of the work required was more cere-bral than physical and the employees filling the positions saw no needto be loyal to a company that didnrsquot value them or their ideas Chang-ing jobs no longer carried a negative stigma which forced organizationsto reevaluate their hiring practices promotion policy and factors lead-ing to turnover of key employees

Process analysis and improvement also underwent significant change inthe mid-1980s TQM begat cross-functional teams designed to improvecommunication and process performance across departmental lines Thiswas a major step forward because it was the first attempt in many orga-nizations to break free of the functional straightjacket in which theirprocesses had been imprisoned for so many years Flowcharts and processmaps which were not new tools even then regained their importance Anexecutive with the aforementioned aluminum company commented thatldquoWe found flowcharts that documented all of our processes and howthey should work and they were all dated from the late 1960s It wasnrsquotthat we didnrsquot know how to do this stuff The problem was that thingswere going so well we felt we didnrsquot need to pay close attention to processperformance and documentation so we fell asleeprdquo The first wave ofprocess improvement activities focused mainly on patching the holes inprocesses that had gradually become more and more broken over the

A World of Change 7

04_047461 ch01qxp 10406 1200 PM Page 7

years This type of improvement strategy was known as continuous im-

provement and can be compared to taking a wrinkled shirt and ironing itso it is usable again In other words take the process and iron out therough spots so it runs the way it was originally designed to run

Technology also played a major role in the transformation of businessin the mid-1980s and this went hand-in-hand with process performanceAutomation of sound processes enabled an organization to make majorgains in operational performance but automation of bad processes simplygave companies the capability to make bad products and deliver bad ser-vice faster This was a painful lesson for one of the Big Three as it spentliterally tens of billions of dollars on automation in the decade leading upto 1985 and didnrsquot get anywhere near the projected return on investment

Customer needs and expectations also underwent dramatic changeduring this time frame Customers were now inundated with productsand services from a bigger range of competitors In fact internationalcompetition began to dominate entire industries Many long-standingpractices were eliminated practically overnight Quality was higher andprice was relatively lower than what customers were used to and it waseasy for them to adjust Customers expected products to work right thefirst time there was no interest in taking cars back to the dealer to getproblems fixed or returning clothing to the store to get buttons sewnback on Companies in many industries were forced to become more fo-cused on maintaining strong customer relationships as customers hadmore options to select from

MID-2000S

The world in the mid-2000s has again undergone radical transforma-tion Global competition is now the norm The Big Three automakersrsquomarket share has dropped below 60 with over 30 now being heldby Asian companies Gas costs more than $2 per gallon Mergers andacquisitions have been the order of the day in many industries creatingfewer larger and better capitalized companies The Internet has


04_047461 ch01qxp 10406 1200 PM Page 8

completely changed the way business is transacted because companiescan access customers globally with minimal cost The workforce has be-come even more mobile in terms of company-to-company movementThe heavy seniority lifetime career approach of the 1970s has beenturned upside down in todayrsquos business environment it seems that stay-ing with a company too long could even be seen as a sign of stagnationCustomers are ever more demanding the product and service featuresthat were considered extravagant yesterday are standard expectationstoday Advances in technology make the speed of conducting businessincrease faster and faster The Big Blue of IBM has been challenged bythe Big Green of Microsoft The technology theme in the 1980s wasabout how much power could be brought to the desktop while in the2000s the theme has shifted to mobility and access to information fromanywhere Versatility of products is the order of the day For exampleit is now commonplace to have telephones that can send e-mails takepictures serve as stopwatches and more

HISTORICAL TREND IMPACT ON PROCESSES

All of these trends have a profound effect on the importance of hav-ing good processes For example consider the ever-increasing mobil-ity of the workforce In the 1970s companies could get away withletting their experienced employees carry all of the process knowledgearound in their heads without a lot of documentation After all peo-ple were in the same position for 30 years All that was needed was tobring in a replacement a few months before the stalwartrsquos impendingretirement have them teach the new person the ropes and have thenew person do the job for the next 30 years This practice cannot befollowed if positions turn over every few years as is so commontoday If an organization lets its process knowledge leave every 18months it is constantly putting itself in a position of starting fromscratch Well-documented processes are a must to keep the organiza-tion running smoothly

A World of Change 9

04_047461 ch01qxp 10406 1200 PM Page 9

Consider the example of McDonaldrsquos Certainly they experienceheavy turnover as many of their employees are school-age people work-ing for a short time by design and preference Yet few organizations doa better job of ensuring process consistency The french fries made bythe McDonaldrsquos in New York or London or Tokyo or Sydney will bemade using a consistent process and will taste basically the same Thecustomer never has any question what to expect when placing an orderand the resultant food quality will always meet the customersrsquo preset expectations While many organizations have processes that are morecross-functional and complicated than preparing hamburgers the criticalprinciple remains processes must be documented and followed to ensureconsistency in the face of a constantly changing workforce

Mobility of the management team can also be a significant process in-hibitor in todayrsquos business culture In the 1970s a senior executive likelyhad many years of experience with the organization before assumingcommand With all the job-hopping and external hiring done in the2000s it is common for executives to be unfamiliar with the customersworkers and processes of the organization they have been hired to runThere is no doubt that learning about the customers and the employeestakes a certain amount of time but the technical details and experiencerequired to truly understand organizational processes can take yearsWhile it isnrsquot necessary for executives to understand the complexities ofevery process they do need to be familiar enough with the inner work-ings of the company to make proper resource allocation and strategicdecisions Many executives donrsquot have the time expertise or interest toacquire the needed process knowledge putting their company at a(sometimes significant) competitive disadvantage

Telecommuting can present significant challenges to process perfor-mance as well The concept of process improvement has always in-volved teams of people involved in analyzing and agreeing on how tochange their process for the better The whole sense of teamwork andcamaraderie is more difficult to generate when parties are working remotely It also increases the degree of difficulty of ensuring process


04_047461 ch01qxp 10406 1200 PM Page 10

consistency when it is more difficult to access measure and monitorprocess participants In this environment it is essential to have well-documented processes and to train people in how to use them as theyare introduced to their responsibilities

Process excellence is also a key to leveraging the possibilities broughton by new distribution mechanisms Pick pack and ship efficiencycan drive significant profits through Internet sales Cooperation withsuppliers can also yield distribution efficiencies through technologyConsider the example of Wal-Mart The merchandising giant has rela-tionships with key suppliers in which they guarantee a certain amountof shelf space under the condition that the supplier keeps the shelves fullof merchandise This could not work efficiently without cooperationfrom both partiesmdashand some slick technology Like most stores Wal-Mart electronically scans products at the checkout stand to deter-mine how much to charge What differentiates Wal-Mart from manyother chains is that this information is instantly transmitted to its sup-pliers to inform them that product has been purchased In this mannerthe supplier can keep a running total of inventory in each one of thestores and knows when it is time for replenishment This is truly a win-win-win situation The supplier wins because it gets premium shelf spaceand doesnrsquot have to stock lots of excess inventory at each one of thestores Wal-Mart wins because it avoids millions of dollars in inventorycarrying costs And the customer wins because some of the savings canbe passed on in the form of lower prices

The final trend referenced throughout this chapter that reinforces theimportance of process is ever-increasing customer expectations There isa constant drive in todayrsquos world to do it faster better and cheaperProcess excellence is often the only option available to meet customerneeds Because customer expectations are not likely to stop increasing inthe future process performance will be even more critical to meetingcustomer needs as time passes

A summary of the evolution of business trends is presented in Ex-hibit 12

A World of Change 11

04_047461 ch01qxp 10406 1200 PM Page 11


EXHIBIT 12 Business Trends Over Time

1970

LocalregionalSmallercompetitors

Take whateveryou give themLimited choicesPrefer ldquomade inthe USArdquo

1985

Nationalbecoming global

StandardsincreasingDemand higherquality productsand services

2005

GlobalLargercompetitors

Very demandingLoyal towhoever iscurrently the best

Impact onProcesses

Must have pro-cesses capable ofstanding up tothe best well-capitalized com-panies in theworld

Processes mustbe able to deliverexcellent qualityat efficient qualityat efficient pricesjust to meetcustomer needs

Customers

FunctionalfocusHeavily manual

Recognizingneed to integrateautomationTQM generatesfocus on processimprovement

Processes seenas enablersCross-functional focusTechnology-driven

Companiesrecognize thereare many problemsthat cannot besolved functionally

Processes

MainframesFocus on power

DesktopsFocus on speed

MobilityFocus on access

An enabler onlyif processes areflowing smoothlyto begin with

Technology

Stable with longterm employeesExperts on narrow range oftasks

DynamicIncreasingdiversityIncreasingbreadth of know-ledge needed

Mobile anddiversePremium onthinking versussimply doingTelecommutingworking remotely

Processes mustbe well-documented toavoid losinginstitutional know-ledge whenever anemployee leaves

Workforce

Topic

Competition

Companies that want to succeed in the business world of today must beprepared to face the new realities Customers want results the workforcewants a challenging and rewarding job experience competition is tougherthan ever before and technology is providing unprecedented opportuni-ties to explode forward There is no question that success in this environ-ment is possible only if an organization is ready to focus on using theirprocesses as a strategic weapon to deliver world-class performance

04_047461 ch01qxp 10406 1200 PM Page 12

13

c h a p t e r 2

HOW PROCESS CANDRIVE STRATEGY

As the need for organizations to focus on processes has grown sohas the level of integration of process with the planning side of the

organization (both strategic and operational planning) The manner inwhich organizations have improved and leveraged process performancehas evolved through four stages over the years These are shown in Ex-hibit 21

THE FIRST WAVE TOTAL QUALITY MANAGEMENT

As referenced in Chapter 1 total quality management (TQM) was aterm that became popular in the mid-1980s It was generally thoughtthat the term originated with the Department of the Navy when it wastrying to spread successful application of a set of principles in one loca-tion to multiple locations A formal definition of the term comes fromthe Japanese Union of Scientists and Engineers (JUSE) They state that

TQM is a set of systematic activities carried out by the entire orga-nization to effectively and efficiently achieve company objectives soas to provide products and services with a level of quality that sat-isfies customers at the appropriate time and price

copy 1998 The Deming Prize Application

05_047461 ch02qxp 10406 1200 PM Page 13

There are several key parts of this definition The first is that TQM wassystematic It involved applying the concepts of continuous improvement

(referenced in Chapter 1) throughout the organization The tools andtechniques of TQM were both qualitative and quantitative The statisticalmethods for evaluating data (statistical process control or SPC) were akey component of the system as were the process mapping and analysistools such as flowcharts cause-and-effect diagrams and so on The toolswere used in the context of PDCA (Plan-Do-Check-Act sometimes alsoreferred to as PDSA or Plan-Do-Study-Act) The planning portion of themethodology held that analysis of certain processes should be performeddata collected and theories advanced regarding what needed to bechanged to deliver improved process performance The do involved actu-ally implementing the identified process change The check or study com-ponent required evaluation of the change to determine whether it wassuccessful and should be continued modified or rejected and based on

14 H o w P r o c e s s C a n D r i v e S t r a t e g y

Total Quality Management

Business Process Reengineering

Process-Oriented Organization Design

Four Wavesof ProcessManagement

Process-Based Competition

EXHIBIT 21 The Four Waves of Business Process Management

05_047461 ch02qxp 10406 1200 PM Page 14

this analysis the team or company would act Instilling the PDCA mind-set in the workforce led to more efficient and effective processes teamswould constantly discover the problems in the processes within their func-tional area and find ways to solve them

Successfully instilling this mindset into the workforce however couldnot be done without serious support from the management team This iswhy the TQM definition stated that the entire organization had to be in-volved and that the goal was to achieve company objectives Assigningemployees the task of improving their processes required the cooperationand support of management because process improvement does notcome cheap Management had to be willing not only to allocate resourcesto support process improvement ideas but also to carve time out of thework schedule for employees and teams to focus on improvement Thiswas almost countercultural at the time at least in the United States Theprior focus of ldquoget it done and out the door as fast as you canrdquo was re-placed by ldquoget it done properly so we donrsquot have to do it again laterrdquo

A third key component of the definition was the customer satisfactionpiece TQM forced companies to think about customers instead of get-ting too absorbed with meeting internal targets And the final statementregarding delivering at the appropriate time and price reinforces the notion that the definition of quality was total and process-focused Itwould be impossible to deliver quickly cheaply and up to customerstandards without strong process performance

A typical TQM team would be assigned a problem such as how toimprove the yield on a certain production line They would analyze theprocess and determine that the old machine routinely leaked oil on thepieces as they went by and this was causing a 6 loss in productivityThe team would investigate the causes of the oil leak and further recog-nize that it wasnrsquot the machine but rather the faulty maintenance prac-tices regarding the machinersquos upkeep They would alter the practicesteach the maintenance people the new methods and then collect data tosubstantiate that the 6 productivity gain was in fact realized Theywould then put in place whatever safeguards were necessary to ensurethat the new level would be maintained and then they would disband

How Process Can Drive Strategy 15

05_047461 ch02qxp 10406 1200 PM Page 15

This process was typically very formal at first In other words teamshad to be approved by a management group their progress carefullymonitored by a facilitator and their results documented for all to see Ifthe organization continued with TQM implementation over a numberof years the structure would gradually become unnecessary Employeesand teams would naturally be expected to think about process and solveproblems using the methodology without the need for so much formalsupervision

TQM was a popular methodology for several years but unfortunatelyit was not always successful There were multiple reasons for this in-cluding but not limited to the following (1) the initial structure neededto support the methodology was often too expensive and complicated tojustify (2) application of the statistical tools to non-manufacturing applications wasnrsquot properly implemented (3) lack of process knowledgecontributed to selecting inappropriate topics for teams and (4) poor re-lationships between management and nonmanagement stifled interest inteam participation The list is long but the most relevant issue to theprocess wave was this TQM wasnrsquot set up to deliver order-of-magnitudetypes of improvement To borrow a baseball analogy the focus was onhitting singles versus hitting a home run Changes that patched holes inexisting processes were nice but the speed of business was acceleratingso rapidly that it became clear that a more aggressive type of process im-provement would be needed

THE SECOND WAVE BUSINESS PROCESSREENGINEERING

Reengineering burst onto the scene in the early 1990s popularized in thebook Reengineering the Corporation by Michael Hammer and JamesChampy The focus of reengineering was dramatic and radical processredesign It was the home run methodology many organizations withlegacy process problems were looking for To continue the analogy fromthe first chapter continuous improvement meant ironing the wrinklesout of the shirt Reengineering said the shirt is still four sizes too small


05_047461 ch02qxp 10406 1200 PM Page 16

so ironing the wrinkles out wonrsquot helpmdashyou need to get a new oneReengineering was therefore a much more aggressive approach reason-ing that the process wouldnrsquot perform at an acceptable level even if all thewrinkles were gone So reengineering was about starting with a blanksheet of paper and drawing up the perfect process without regard to in-cumbent organizational barriers This was a very exciting prospect tomanagement team members who were charged with making significantstrides quickly so interest in the methodology blossomed rapidly

Reengineering was a higher-risk higher-reward proposition thanTQM The processes in question were typically larger cross-functionaland of higher visibility within the organization This meant that success-ful dramatic redesign would be of immense value to the company but theobstacles to successfully doing it were also immense The cross-functionalnature of the process to be redesigned almost always meant that some de-partments would be seen as winners when a process was redesigned andothers would be seen as losers Managing the perceived losers representeda large behavioral challenge for the management team The skills neededby the workforce to be successful in a reengineered process were oftenquite different than what the existing workforce was good at This meantthat success would not be possible without managing the workforcersquosfear of change and preparing them to succeed in their new roles

While these were certainly not the only barriers it is significant thatthe issues referenced previously were all behavioral in nature It becameapparent early in the reengineering years that technical solutions to tech-nical problems were relatively easy to develop and implement It was thechallenge of dealing with change that often caused reengineering to failIt has been estimated that 80 of the reengineering efforts that failedwere caused by the inability to address the social issues

A typical reengineering team would be formed to analyze not only aprocess but the surrounding stakeholders as well If the process to bereengineered was product development the team might include repre-sentatives from the departments responsible for current execution as wellas IT HR customers suppliersmdashanyone with a stake in the process mightbe eligible The thought process of quantifying the current situation


05_047461 ch02qxp 10406 1200 PM Page 17

making changes and measuring improvement was similar to TQM butthe development of solutions followed a much different path Instead ofmapping out the existing process and looking for trouble spots the teammight take out a blank flipchart page and simply map out what the nec-essary functions of the process were Product development might be sum-marized as shown in Exhibit 22

This flow does not take the current process into account there is nomention of who does what nor how they do it The purpose of this dia-gram is to note the essential tasks and then determine potential newmethods for performing them For example the research process mightcurrently be done by the person who generated the idea This could bechanged in many ways A formal research and development departmentcould be formed research could be outsourced research for certainproducts could be deemed unnecessary and so on Everything is fairgame when trying to find a reengineering type of solution After propos-ing the new methods the preferred option is selected and implementa-tion begins

Reengineering unfairly became a euphemism for downsizing in manyorganizations The word was trendy so whenever a company had layoffsit would claim it was because they had become more efficient and label itreengineering Because of this there was often a negative stigma attachedto the word but many organizations were able to produce dramatic re-sults by applying the concepts For example IBM Credit had a processthat involved roughly a half-dozen departments and took over a weekmdashsimply to tell a customer whether they would approve financing for themainframe computer they had already decided to buy1 A quick overview


IdeaGeneration Research Commer-

cializationInternal

Preparation

EXHIBIT 22 Product Development Process Main Steps

1 Reengineering the Corporation Michael Hammer and James Champy Harper Collins 1993

05_047461 ch02qxp 10406 1200 PM Page 18

of the process revealed that only about two hours of work was actuallybeing performed throughout the entire process and the rest of the timethe multiple departments were simply passing the application back andforth

The cross-functional solution was to break down the departmentalwalls and train everybody how to execute the entire process Instead ofhaving many people perform small and separate individual tasks oneperson would work the application all the way through The cycle timeshrank from over a week down to just a few hours delivering the order-of-magnitude reengineering-style improvement Note that this problemcould not have been resolved by a functional TQM team The focus ofthe functional team would have been on the processing time of two hoursnot the cycle time of over a week Even cutting the processing time in halfwould not have had a significant impact on the overall cycle time Andthe new process did not necessarily require fewer people because thetasks being performed were virtually identical to what had been donepreviously The difference was that most of the delay time for handoffshad been removed from the process

Solutions like this one were widespread enough that many organiza-tions realized there were huge gains to be made through focusing onprocess But sometimes the cross-functional nature of reengineering improvements caused stress on the current functionally oriented orga-nizational structure In many organizations this caused a barrier thatwould force them to rethink how they were set up

THE THIRD WAVE PROCESS-ORIENTEDORGANIZATIONAL DESIGN

The IBM Credit example is an excellent illustration of the complexitiesthat large-scale process redesign can impose on an organization The so-lution sounds simple just train everyone in six different departments toexecute the entire process from beginning to end Great idea but whatare the job descriptions for the new roles who do the people report toshould a new department be createdmdashthe list of organizational issues


05_047461 ch02qxp 10406 1200 PM Page 19

is long This type of problem was the genesis for the third wave ofprocess management known as process-oriented organizational designThe purpose of the third wave is to set up an organizational structure thatenhances the focus on process This enables the key business processeswithin the organization to operate at maximum efficiency deliveringvalue both internally and to customers

The trick when designing an organizational structure around processesis not to lose the functional benefits completely there needs to be a bal-ance between the two Just like a heavily functional organization can suf-fer from process inefficiency a totally process-oriented organization cansuffer from lack of functional expertise An interesting example of aprocess-oriented design comes from the State of Michigan Office of Re-tirement Services (ORS)

ORS was faced with significant challenges in the late 1990s and early2000s Impending retirement of the baby boomers threatened to over-load processes that were already being stressed to their breaking pointBecause the organization didnrsquot expect to have the opportunity to in-crease staff to handle the additional workload its only real option wasto improve process efficiency Several reengineering projects got thingsoff to a good start and then they redesigned the organization to fit themodel in Exhibit 23

The top of the diagram lists the Executive Director and his direct re-ports just like any other traditional organizational structure In this casethe reporting functions were HR and Finance Operations Customer Service and ITReengineering Each of these functional areas had a direc-tor middle management front-line management and employees Re-porting relationships were verticaltraditional so ORS retained itsemphasis on functional expertise

What makes this example nontraditional is the process component illustrated on the left-hand side of the diagram There were severalgroups of cross-functional processes shown in the diagram as flowingfrom left to right The organization created the titles of Business ProcessExecutive (BPE) and Business Process Owner (BPO) to ensure that thecore processes got the attention they needed as well A BPO was someone


05_047461 ch02qxp 10406 1200 PM Page 20

with broad subject matter expertise who was responsible for deliveringprocess results A BPE was a member of the executive team who did nothave a direct link to the process In other words their function was notpart of process execution The BPErsquos responsibilities were to ensure thatnecessary cooperation and collaboration between functions happened sothe overall process performance would not suffer

For example processes 11 Employee Reporting and 12 EmployerPayments were closely related Each is a core process rooted in opera-tions Therefore the BPO title is listed under the Operations func-tional area to note that the role is seated here On the far left-hand sideof the structure are the letters CS This is to illustrate that the Director


ExecutiveDirector

11 Employer reporting

12 Employer payments

21 Maintain member info

22 Service credit purchase

25 Respond to inquiries

23 Benefit applications

24 Refund applications

32 Adjust term benefits

31 Benefit payments

51 Manager information

41 Manage communication

Fin HRSupport

OperationsCustomerService

IT Reeng -ineering

CS

OP

FI

IT

OP

BPO

BPO

BPO

BPO

BPO

EXHIBIT 23 Office of Retirement Services Process-OrientedOrganizational Design

05_047461 ch02qxp 10406 1200 PM Page 21

of Customer Service is the BPE for this group of processes Because em-ployee reporting and employer payments do not touch customer servicethis manager will not be tempted to play favorites when overseeingprocess performance the BPE can look out for the good of the processas opposed to worry about the impact on his or her own function Thissetup also forces the management team to learn about processes fromother parts of the organization contributing to their ability to make bet-ter management decisions for the organization overall

The end result of the ORS redesign was properly aligned leadershipand employees clear accountability for meeting customer needs anddramatic process improvements such as those shown in Exhibit 24

The challenge of the third wave was documenting the benefits of theredefined organizational structure In the ORS example processes werebeing reengineered as the structure was redesigned and implementedSkeptics could claim that the impressive results were generated by


Measure 1997 May 2005

1st pension payment on Up to 6 months 983 in 60 dayseffective date

Health insurance initiated Up to 3 months 9639 of the timeon effective date

Telephone response ratemdash Inconsistent 932 of the timeresolution on first contact

Customer Satisfaction No records available 775 bull Active 4 of 4 100bull Retired

Written response rate Inconsistent Correspondence 995(Up to a year) in 10 days

Employee Satisfaction No records available 926

EXHIBIT 24 ORS Process Structure Redesign Results

05_047461 ch02qxp 10406 1200 PM Page 22

process redesign and would have occurred regardless of organizationalstructure changes Because the challenges of changing a structure wereso formidable many management teams determined that it wasnrsquotworth the risk While this reluctance to modify the structure to fit newprocesses surely caused some reengineering efforts to fail the precise

number of efforts failing because of ill-matched structure and process isunknown and unknowable

The significance of the third wave however was that more and morecompanies started to realize that process performance was a key factorin their high-level decision making Gone were the days when an exec-utive team could simply look at financial reports to determine how theorganization was performing Process thinking had to be integrated intoall management decisions up to and including the structure of the or-ganization The final frontier was planning for the future of the organi-zation by proactively leveraging process performance

THE FOURTH WAVE PROCESS-BASEDCOMPETITION

The fourth wave is where process performance is integrated into strat-egy This means not only identifying the process weaknesses that havethe most strategic significance and fixing them but also understandinghow process strengths can be better leveraged The traditional strategicprocess in many organizations followed the thought process illustratedin Exhibit 25

The links described in the diagram illustrate the traditional view ofstrategy It was customary for the leaders of the organization to developa strategic plan that would include a host of improvement initiativesSome of these would inevitably be process improvementndashtype projectswhether of a continuous improvement or reengineering nature Processimprovement teams would then analyze the situation and develop newprocess innovations to help the organization run better and these inno-vations would be integrated into the processes But the fourth-wave pic-ture is a bit different It adds the link shown in Exhibit 26


05_047461 ch02qxp 10406 1200 PM Page 23

The dark arrow illustrates that in the fourth wave process can beused to drive strategy In other words superior process performancecould drive the future of the organization helping capture new cus-tomers and markets establishing additional profit centers enabling theorganization to provide more complete solutions by controlling morelinks in the value chain and so forth Fourth-wave companies areuniquely positioned to control their own destiny


Strategy Process Innovation

EXHIBIT 25 The Strategy-Process Link


EXHIBIT 26 The Process-Strategy Link

05_047461 ch02qxp 10406 1200 PM Page 24

The next chapter introduces the strategic assessment process Thequestions asked and techniques described within the process-focusedassessment are designed to promote fourth-wave thinking Examples ofcompanies that have flourished will be provided in the context of illus-trating how the assessment tools can work


05_047461 ch02qxp 10406 1200 PM Page 25

26

c h a p t e r 3

THE STRATEGICPROCESS

Chapter 2 presented the premise that organizations can leverageprocess performance for strategic gain This chapter provides an

overview and explanation of the strategic process building a bridge tothe discussion of how to develop a proper strategy that leverages processperformance

THE STRATEGIC PROCESS FLOWCHART

There are dozens of ways to approach the development of strategyWhile on a detail level there can be significant differences most meth-ods focus on a flow of steps as shown in Exhibit 31

Each step will be examined and a brief explanation of what it isabout and why it is part of the process will be provided

VISION AND MISSION

The vision and mission step is one of the most important and least un-derstood Referencing five different books on strategic planning cancommonly yield five different explanations of what mission and visionstatements are and what they are supposed to accomplish (A scaryproposition since it implies that the writers who are supposedly experts

06_047461 ch03qxp 10406 1200 PM Page 26

on the subject cannot even agree) Simple user-friendly definitions areas follows

bull A vision statement should articulate the ideal future state of the or-ganization In other words if you are successful in driving the organization in the desired direction what will it look like whenyou get there

bull A mission statement describes what the organization is in businessto do

The purpose and value of the vision statement is literally to ensurethat everyone (particularly the leaders) in an organization has the sameview of what they want the future to look like In the movie Forrest

Gump the lead character said ldquoIf you donrsquot know where you are goingyoursquore probably not gonna get thererdquo This is a perfect and straightfor-ward way to think about why an organization needs a vision

The Strategic Process 27

EXHIBIT 31 The Strategic Process

Vision and Mission

Strategic Assessment

Strategy Map

Monitor and Adjust

Execution

Balanced Scorecard Strategic Initiatives

06_047461 ch03qxp 10406 1200 PM Page 27

The purpose of the mission is simply to provide focus for current de-cision making and the resulting resource allocation In other words ifan opportunity requires capital and supports what the organization is inbusiness to do it should be strongly considered But if an opportunityrequires capital and doesnrsquot support the mission it should be weighedaccordingly The value of the mission is therefore to keep the organiza-tion focused and prevent it from trying to be all things to all peopleMany organizations lose this focus and wind up with multiple number-one priorities that constantly compete with each other

Because there is so much disagreement over what these statements arefor the whole concept of developing a vision and mission is often metwith eye-rolling and skepticism Compounding the problem is thatmany vision and mission statements are so vague and global that theyall tend to sound the same (In fact Dilbert cartoonist Scott Adams hasa mission statement generator on his website It provides the readerwith a generic-sounding mission full of todayrsquos buzzwords and thengives the option of selecting ldquoregeneraterdquo When this button is clickedall of the buzzwords rearrange but the message stays basically thesame) A standard example of a generic vision goes something like this

ldquoWe will be the premier provider of value-added customer-focusedsolutions in strategically chosen marketsrdquo

Sounds great but what does it mean It really doesnrsquot shed any lighton what the organization is about what it is trying to achieve or whatwill happen if it is successful A CEO of a large health plan unveiled anew vision statement that claimed the organization would become ldquothepremier health planrdquo in the area When questioned about what the ldquopre-mierrdquo health plan meant he commented that premier had to do withmembership numbers and that their plan membership would growfrom 8 million to 15 million members within the next 5 years Uponhearing this statement half of the senior management team nearlypassed out It was their belief that ldquopremierrdquo meant a focus on refiningand expanding the product line and the way service was delivered butthat growth may only increase from 8 million to 82 million or so in the

28 The Strategic Process

06_047461 ch03qxp 10406 1200 PM Page 28

process Bottom line It was clear that the management team that craftedthe vision statement in this instance had completely different interpre-tations of its meaning and the implications of this disagreement wouldbe dramatic It would obviously require a very different set of initiativesto move an organization from 8 million members to 15 million mem-bers versus the activities needed to firm up the product offering andmove to 82 million members

This is unfortunately not an isolated occurrence Asking each mem-ber of an executive team individually about his or her vision of what thefuture will or should look like for the organization can be very instruc-tive Even a question as basic as ldquoWhat do you think our companyrsquosoverall sales volume should be next yearrdquo can be met with huge differ-ences in interpretation One insurance company executive team wasquestioned on the subject of projected premium to be written in the up-coming year and they gave answers ranging from $75 million to $425million Some members of the senior team were hesitant to even give anumber for fear of being embarrassed by their lack of knowledge Itwould obviously be difficult for this company to mount any cohesive ef-fort to achieve its goals

How does an organization get in a situation where the leaders donrsquotunderstand their vision Admittedly it sounds too fantastic to be trueBut many organizations fall into the trap of planning in isolation eachfunctional part of the organization plans for its own department with-out regard to the whole In these cases it is common for a human re-sources (HR) executive for example to know a great deal about HRand what the department is trying to accomplish but be disconnectedfrom what the business is trying to accomplish Would the executiveteam members in charge of the support functions (eg HR informationtechnology (IT) finance) in your organization know the projections forthe future and how they were determined Would they understand theneeds of your external customers Many times the leaders of the supportfunctions are unable to answer these questions In fact on occasion themanagers even become hostile when asked about these issues statingthat ldquoexternal customer needs have nothing to do with me because all


06_047461 ch03qxp 10406 1200 PM Page 29

my customers are internalrdquo This view leads to the mentality that theyhave a separate mission and vision to be a top-flight HR department orIT department or whatever The harm in this is that a world-class IT de-partment for example may have all the latest techno-toys and won-derful expertise but this capability doesnrsquot get properly translated toand utilized by the business In other words technology isnrsquot leverageddoesnrsquot become a driver of organizational success and operates in anisolated fashion Thus the IT department comes to be viewed as a groupthat is distant not focused on its internal customers difficult to under-stand not appreciative of the realities of the business and so on the listof common pitfalls is long

The moral of the story is that the vision and mission shouldnrsquot beglobal statements that donrsquot do anything but satisfy the requirement thatan organization should have a vision and mission A good vision state-ment is a starting point to help the organization articulate ldquowhat it wantsto be when it grows uprdquo In other words if the organization typically uti-lizes a five-year planning horizon when developing a strategy the visionand mission should form a framework for the company to describe inbroad terms what it will look like five years hence if it is successful

After starting with the global statement it is critical to nail down thespecific parameters of what success looks like The leadership develop-ment organization fraternity Alpha Phi Omega is a good example ofhow a global vision can be translated into precise and measurable char-acteristics Their mission statement is a rather all-encompassing ldquoTo be

recognized as the premier service-based leadership development organi-

zationrdquo But viewing their goals gives a much more precise descriptionof what this actually means to them It means (among other things) amembership retention rate of over 90 386 active chapters with18000 members over 2000 donors contributing a total of at least$175000 a 25 increase in the volunteer base the addition of fivenew international chapters and more The great thing about the list ofgoals is that it provides evidence that the organizational leadership hasa clear view of what it wants the ldquopremierrdquo organization to look like inthe future


06_047461 ch03qxp 10406 1200 PM Page 30

Microsoft had a vision statement many years ago that claimed that ifit was successful there would be ldquoa computer on every desktoprdquo It wasa great vision because it was short easy to remember and articulatedprecisely where they wanted to go They modified their vision in recentyears to incorporate the trends toward access and mobility versus beingchained to the desktop but retained the principles of keeping the visionshort precise and easy to understand The company also has a missionstatement that states the reason it is in business is to ldquohelp people andbusinesses throughout the world realize their full potentialrdquo This cer-tainly can aid in resource allocation decisions the opportunities thatwill better enable them to achieve this mission would get priority

Implementation Creating the Statements

The execution of the strategic process depends on getting a good startthe view of the future must be understood and agreed on by the seniorteam before moving on to the next step Developing the actual visionstatement is an inexact science but the following tips should make theprocess easier

bull The five common elements to consider when developing a vision are

finance customer process technology and people The purposefor considering these issues is to frame your view of what the idealfuture would look like It may help to structure discussion amongthe leadership team around some or all of the following questionsHow would you define success financially Who are your key cus-tomers who should they be and how are their needs changingWhy do they buy from you What processes differentiate you fromyour competition (both positively and negatively) What advancesin technology will impact your industry in the future and are youwell-positioned to take advantage of them What about your work-force gives you a competitive edge or disadvantage

bull The conversation about these elements shouldnrsquot be an all-day

meeting Discuss each item for a reasonably short period of time to


06_047461 ch03qxp 10406 1200 PM Page 31

ensure the entire team has the same general view of what the key is-sues are Then select one person in the group to write a trial visionstatement in two minutes or less Donrsquot try to write the perfect state-ment the first time Groups often obsess about getting it exactlyright resulting in long-winded debates over each word or phraseInstead after a bit of discussion about key points have somebodywrite something It is generally much easier to critique and modifyan existing statement than to create the perfect version from scratchThe group should rework and modify the statement until they allfeel comfortable with it

bull Sleep on it It is common for a statement to sound great at the endof a long meeting but after rest and reflection the statement couldprompt a reaction of ldquowhat were we thinkingrdquo A review a day ortwo after the development session is advised

bull Get feedback on the modified statement from stakeholders who

were not part of the development process This can be midlevelmanagers nonmanagement employees trusted customers suppli-ers and so on It is important to see if the message the leaders aretrying to send is being picked up by those who were not a part ofthe discussion

While it is great and important to have the actual statement the morecritical issue is to understand the parameters the organization is shoot-ing for to define successful achievement As previously stated the visiontypically will be global in nature and open to multiple interpretations Auseful technique to make it more tangible is as follows

bull Write the ending year of the planning horizon on a flipchart (egif the year is 2007 and the company is thinking through a five-yearstrategic plan then write 2012 on the flipchart)

bull Keep the vision in plain view and ask the question ldquoIf we are suc-cessful in reaching this vision by the designated year what will theorganization look like when we get thererdquo In other words describethe main characteristics of the organization if you drive it the wayyou are trying to drive it Common topics include the total sales


06_047461 ch03qxp 10406 1200 PM Page 32

dollars number of customers projected geographic spread of loca-tions and customers large internal process deployments number ofemployees projected and the like (Note Public sector and other notfor-profit organizations should follow the same process steps It maybe necessary to modify the question of total sales dollars to be bud-get focused but many of the rest of the questions will remain thesame) It is very important to keep this discussion high-level the objective is not to split hairs and get everything correct to the thirddecimal place Rather the objective is to make sure there is broadagreement on the parameters For example suppose an organizationcurrently does $100 million in sales with 500 employees Some ofthe executive team members may project sales five years out to be$140 million If others feel that $137 million is the proper numberyou are close enough pick one figure and move on However ifsome members feel this will be accomplished by growing the work-force to 750 employees while others feel the workforce must remainat 500 then that is a difference worth some discussion

bull This step should also not be an all-day discussion and the result-ing list of parameters should not be viewed as exhaustive or un-changeable As long as the leadership team feels it has a consistentbroad-stroke view of where it wishes the organization to go thendiscussions have been successful Record the final list of parametersto provide the framework for the rest of the process and move on

Generally speaking the development of a mission statement is not asinvolved or difficult as the vision because it is usually much easier toanswer ldquowhy are we hererdquo as opposed to ldquowhere are we goingrdquo Theprinciples of writing something down quickly and then critiquing itapply to missions as well as visions and the rest is straightforward

STRATEGIC ASSESSMENT

The strategic assessment step is designed to identify the critical issuesthat will impact your ability to get from your current state to the state


06_047461 ch03qxp 10406 1200 PM Page 33

outlined in the vision and mission The assessment can be done in a variety of ways ranging from the use of simple brainstorming to utiliz-ing a variety of complex analytical tools

Whatever methods are employed the output of this step should be alist of strengths weaknesses opportunities and threats (hereafter referred to as SWOTs) Strengths are those internal things that the organization is proficient in they will better enable the organization toachieve the vision Conversely weaknesses are internal issues that willprevent the organization from achieving the mission and vision Oppor-

tunities can be viewed in multiple ways They typically involve ldquodoingsomething the organization is not currently doingrdquo that will help move ittoward achieving the vision This can be anything from acquiring a newbusiness to providing management training to developing new productsThis is a critical part of the assessment because it gives the leadershipteam the chance to be creative Finally threats are those things beyondthe control of the organization that could negatively impact its ability toachieve the vision Threats are typically viewed as external things such aspotential new governmental legislation economic downturn weather-related catastrophes and so on But keep in mind that if a plan is beingdeveloped for a business unit within a larger organization it is importantto also consider threats such as hiring or budget freezes imposed by corporate imposed pay scales that practically guarantee turnover andthe like These issues are not external to the organization but they areexternal to the business unit and can definitely make achievement of theplan more difficult

Most strategic planning processes involve the identification ofSWOTs but for whatever reason these valuable pieces of informationarenrsquot fully utilized It is common to develop a list of key issues and stickthem in an appendix to the plan without really doing anything with thembut SWOTs are invaluable to the remainder of the process They areused for the development of the strategic objectives the identificationand prioritization of strategic measures and the finalization of the strate-gic initiatives Determination of key SWOTs can be done formally orinformally Both approaches are presented in the following sections


06_047461 ch03qxp 10406 1200 PM Page 34

Implementation Informal Assessment

Informal assessment is often done in small organizations business unitswithin a larger organization or companies engaging in the strategicprocess for the first time Small organizations or business units typicallyhave a leadership team that wears many hats and is close to both cus-tomers and rank-and-file employees These organizations are not as likelyto have the need for (or resources to fund) more formal approaches Com-panies engaging in the process for the first time are typically attempting tolearn about strategy in addition to developing a plan so the informal ap-proach fits nicely

Informal assessment identifies SWOTs through a structured brain-storming session with the leadership team A facilitator will break thesession into the four SWOT components and ask for ideas for eachIn other words the first step is to conduct a brainstorming session forstrengths The vision and associated parameters should be posted in theroom and the session should begin with the question ldquoWhat internalthings are we good at that will better enable us to achieve the vision el-ements describedrdquo The leadership team members should begin callingout ideas and the facilitator should appoint a few scribes to write downthe strengths as they are suggested

It is important to use the proper technique when transcribingSWOTs It is recommended that each issue be written on a separatesticky note and that each note contain two components the fact and theimplications of the fact For example it is common to ask leaders tobrainstorm strengths and to hear someone say

ldquoPeoplerdquo

It is not advisable to proceed without digging beneath the surface todetermine what about the people is consider to be a strength and what this strength is expected to do for the organization A good facili-tator should ask ldquoWhat about your people makes this a strengthrdquo Apossible result could be ldquoOur sales force has lots of experiencerdquo Whilethis is better than simply writing ldquopeoplerdquo it still doesnrsquot adequatelyclarify the benefit to be derived Asking ldquoWhat do we expect to get from


06_047461 ch03qxp 10406 1200 PM Page 35

an experienced workforcerdquo may yield the following properly writtenSWOT

Depth of sales force experience gives us credibility in the market-place making us more likely to win new accounts

Note that this version contains both the fact (depth of experience) andthe implications (makes us more likely to win new accounts) The as-sessment process even when conducted informally could easily yieldmore than 150 SWOTs Imagine 150 to 200 statements on stickynotes without sufficient detail the lack of clarity would make any typeof further analysis extremely difficult Experience has shown that confu-sion over issues later in the process is an almost certain result So insteadof settling for a list of strengths such as

bull ldquoProduct developmentrdquobull ldquoLeadershiprdquobull ldquoTechnologyrdquo

The facilitator should press for details until properly written issuessuch as the following are developed

bull ldquoWe develop products faster than competitors creating a windowof opportunity for salesrdquo

bull ldquoOur leadership team is full of excellent communicators leading tocommon understanding of our vision and increasing the probabil-ity we will achieve itrdquo

bull ldquoInternet distribution capabilities have opened markets to us thatare closed to our competitionrdquo

Generally speaking the determination of strengths takes between 30 to 60 minutes and results in a list of 50 to 60 issues From a techniqueperspective it is important to do strengths first This gets everyone in apositive frame of mind If you begin with weaknesses it can put people onthe defensive and limit creativity later in the process Also from a tech-nique perspective the facilitator shouldnrsquot be anxious to move on to thenext phase whenever there is a moment of silence Think about the main


06_047461 ch03qxp 10406 1200 PM Page 36

components of strategy while brainstorming financial customer processpeople and technology If the facilitator notices that very few strengthsare listed that are technology-oriented for example it is useful to questionthe group specifically on what the technology strengths might be

When the time comes to transition to weaknesses the facilitator shouldagain reference the vision and resulting parameters and ask the questionldquoWhat internal things are we not good at that could prevent us fromachieving our visionrdquo It is again critical to make sure each issue is listedin a consistent fact plus implications of the fact format Sample weak-nesses include the following

bull ldquoSystems changes make it impossible to get accurate and reliablehistorical data negatively impacting our decision-making abilityrdquo

bull ldquoDecentralized structure results in clients having multiple contactpoints within our organization causing inconsistent communica-tion of account statusrdquo

bull ldquoPoor communication between HR and operating areas results inhiring delays and candidates who are mismatched for the positionsfor which they are interviewingrdquo

Once again it is common to spend around 30 to 60 minutes on weak-ness generation and the resulting list could easily be 60 items or morelong One cautionary tip for the facilitator When it comes to weak-nesses the group sometimes has a tendency to want to either (1) debatewhether an issue is really true or (2) try to discuss and fix the problemon the spot Either tendency can be counterproductive to the generationefforts and should be discouraged In the former case debating the ve-racity of an issue often happens because someone gets defensive It is im-portant that a facilitator defuse this tension by pointing out that thepurpose of identifying weaknesses is not to fix blame but rather to doc-ument all the issues in the system it may have nothing to do with thepeople or manager involved For example consider the system changeweakness noted previously This shouldnrsquot necessarily be seen as an in-dictment of the CIO Business conditions acquisitions mergers and ahost of other things could have contributed to the need to change and


06_047461 ch03qxp 10406 1200 PM Page 37

modify systems in the past So the CIO should not go on the defensiveand feel the need to justify why changes have occurred If differences ofopinion persist on whether a certain issue is truly a weakness or notsimple data collection is an option that could resolve things

Trying to fix all problems on the spot is another common tendencythat can easily quadruple (or more) the amount of time an organizationspends on weaknesses during the informal assessment phase The facil-itator must constantly reinforce that the purpose of this session is sim-ply to document all of the issues not to fix them If the group followsthe path of trying to fix everything as they go two things will happen(1) an inordinate amount of time will be wasted on the few issues thatare identified and (2) creativity in issue identification will be diverted toissue resolution resulting in a far less comprehensive list of weaknessesSo the objective should be documentation not resolution

The opportunities portion of the brainstorming is usually the most in-teresting Viewing the vision and parameters of success and askingldquoWhat can we do to help us move toward our visionrdquo is a good firststep A common mistake is to limit your thinking to only those thingsthat are easily doable practical realistic and inexpensive A good set ofopportunities should include things that really push the boundaries Justbecause an idea is placed on a list of opportunities does not mean thatthe organization is bound to do it immediately If no out-of-the-boxideas are considered it will typically be tough to reach the aggressive parameters necessitated by the vision

The first round of opportunities usually includes many items thatcould easily be replicated by your competitors (eg giving customersbaseball tickets or taking them out for dinner) These are fine but theleadership team should be encouraged to think about things thatthe competition will have a more difficult time duplicating One usefultechnique for identifying these types of solutions is to think about theproblems your customers face on a daily basis (Note These donrsquot nec-essarily need to be problems with you or your organization you shouldjust think about the problems faced in general) If the facilitator lists


06_047461 ch03qxp 10406 1200 PM Page 38

these problems and then questions the group on potential ways to solvesome of them it can frame a very interesting and powerful discussionSome solutions and opportunities identified are typically things that arerelatively easy to implement and yet are viewed as having great value bythe customer These opportunities help differentiate you from the com-petition and create strong long-term customer relationships

A public-sector example might be useful to illustrate this point Manyyears ago in most states the process for renewing a driverrsquos license wassimple Go to the Department of Motor Vehicles (DMV) wait in a linethat was three city blocks long get to the front find out you are miss-ing a single piece of necessary documentation and as a result enjoy re-peating the process a second time In many states the DMV has realizedthat a problem its customers (ie the general public) face is that they arepressed for time Spending a day on license renewal was not viewed asproductive or enjoyable and inevitable complaints about poor servicewere a certain result An opportunity that may arise in a brainstormingsession for a DMV leadership team may therefore be

Make alternate methods of license renewal available to enable cus-tomers to get their new license in a more convenient fashion

This opportunity would solve the customer problem of lengthy re-newals reduce the complaints coming into the DMV and perhaps evenrequire fewer DMV personnel depending on the registration optionsunder consideration for implementation Note the fact plus implicationsof the fact format applies to opportunities as well Other examples ofwell-written opportunities are as follows

bull ldquoPartner with a travel agency to provide access to travel informa-tion online to reduce employee frustration and save moneyrdquo

bull ldquoDevelop distributive print capabilities to enable us to improvecustomer convenience and print at their siterdquo

bull ldquoProvide staff training in how to communicate with customerswhich would help identify cross-selling opportunities and buildlong-term relationshipsrdquo


06_047461 ch03qxp 10406 1200 PM Page 39

The final segment of the brainstorming session should be dedicated tothreats The facilitator can open this discussion by once again referringto the vision and parameters of success and asking ldquoWhat external issues beyond our control could negatively impact our ability to achievethe visionrdquo The threats should be written in a format consistent withthe rest of the SWOT categories As noted earlier external can beviewed as outside the entire organization for a company-wide strategicplan or external to the business unit for a lower-level strategic plan Examples of well-written threats include

bull ldquoEconomic downturn would lead to decrease in recreational spend-ing impacting sales of almost all of our productsrdquo

bull ldquoIncreasingly stringent regulations are forcing up our compliancecosts and will soon result in either dramatic price increases or sell-ing at a lossrdquo

bull ldquoHiring freeze imposed by corporate results in overloading our superstars and will eventually lead to turnoverrdquo

The threats portion of the brainstorming session tends not to last aslong as the others because many of the issues that are identified have al-ready been discussed in some detail through the other categories Thirtyminutes is usually plenty of time to complete the brainstorming with arepresentative list of threats

The entire process for SWOT generation described usually takes ahalf-day or less Is it dangerous to build a strategy for the future based ona half-day of brainstorming opinions It could be dependent on severalfactors Remember that this informal approach was recommended only incertain situations For example small organizations usually have a lead-ership team that wears many hats The same executive may be responsi-ble for various operational responsibilities as well as dealing with saleshiring and so on The risk is minimized in this circumstance because theleaders are intimately familiar with most of the strategic building blocksIn other words there isnrsquot as much risk of missing critical process peopleand other factors that the executives wouldnrsquot be familiar with The samelogic could apply to a business unit within a larger organization


06_047461 ch03qxp 10406 1200 PM Page 40

Another requirement for using the informal approach is a strong andcohesive leadership team A strong team understands not only its ownarea of expertise but also how the interactions work among the differ-ent functions within the company The requirement for a cohesive teamis critical to make the SWOT generation session productive versus anextended exercise in finger-pointing and denial

Some tips and cautions will help make this process easier for the facilitator First and foremost it is inevitable that some of the issues sur-faced during brainstorming will more naturally fit into other SWOTcategories For example suppose the group is trying to identify weak-nesses One leader offers the following

Pay scale dictated from corporate is low relative to other area com-panies resulting in constant loss of key employees

According to the definitions this may be considered to be a threat ver-sus a weakness because it is imposed from outside There are two waysto handle this idea when it is surfaced (1) explain it is really a threatand recommend it be surfaced again later or (2) transcribe it and add itto the list The latter approach is strongly recommended Remember thatthe objective of all the data generation is to get a representative list of theissues a company faces when trying to achieve a vision The objective isnot simply to create a technically perfect set of SWOTs Donrsquot engageor let participants engage in long-winded debates over whether one par-ticular issue is a weakness or a threat

Another tip is to create a matrix to tabulate the types of issues beingraised The columns of the matrix should be the SWOT categoriesand the rows should be the five components of strategy (ie financecustomer process people and technology) as shown in Exhibit 32

As the ideas are called out in the brainstorming session the facilitator(or someone appointed by the facilitator) should keep track of the typesof ideas being suggested For example one of the leaders may suggest

Market services throughout Canada to attract new business

This would be classified as a customer opportunity so a check shouldbe placed in the corresponding box on the matrix Keeping track of


06_047461 ch03qxp 10406 1200 PM Page 41

issues in this manner is a good way to minimize the probability that en-tire categories of issues are overlooked The facilitator may direct ques-tions to specific portions of the matrix to fill in gaps In other wordsldquowhat technology weaknesses will prevent us from achieving our vi-sionrdquo and so forth Again this will help minimize the probability thatthe informal assessment approach will result in missing key issues

The output of this assessment will be a list of issues that will influencethe organizationrsquos ability to achieve its vision including internal and ex-ternal positives and negatives This list of issues will be utilized in de-veloping the strategy map to be discussed in later sections If theorganization is sufficiently large or complex and feels that the informalapproach will not suffice techniques for a more formal assessment arepresented in the next section

Implementation Formal Assessment

Most organizations take a more formal approach to strategic assess-ment to ensure they have considered all vision-critical issues The formatof the formal assessment will vary from company to company butmany of the common questions are listed in Exhibit 33

The questions on the left should be viewed as a menu just like in arestaurant When conducting an assessment these are menu items to


Strengths Weaknesses Opportunities Threats

Finance

Customer

Process

Technology

People

EXHIBIT 32 SWOT Matrix

06_047461 ch03qxp 10406 1200 PM Page 42


EXHIBIT 33 Formal Assessment Template

Key Questions Potentially useful tools

Financial perspectivebull What are the key financial indicators bull Brainstormingbull What are the trends for the key indicators bull Runcontrol chartsbull What external factors will impact bull Brainstorming

our financialsbull What is the budget for strategic plan execution bull Sledgehammer

Customer perspectivebull What are the key customer segments bull Brainstormingbull What are the key SWOTs surrounding bull System maps

relationships with key customer segmentsbull What ldquomust-bersquosrdquo of the relationships are not met bull Kano analysisbull What can we do to ldquodelightrdquo each segment bull Kano analysisbull What are our key competitorsrsquo strengths bull Focus groups

and weaknesses researchbull How will the industry change in the future bull Focus groups

research

Process perspectivebull What are the SWOTs surrounding key internal bull System maps

relationships (Including support functions)bull Which processes have strategic significance in bull Process maps

terms of gaps that need to be closedbull Which processes have strategic significance in bull Process proficiency

terms of strengths and capabilities to be matrixleveraged

bull What are the strengths and weaknesses of our bull Product worksheetproduct offering

Learning amp growth perspectivebull What does management think key SWOTs are bull Mgmt interviewsbull Does management have a consistent vision bull Mgmt interviewsbull How high is morale and what are the bull Mgmt interviews

key influences employee focus groupsbull Do employees understand the vision bull Ee focus groupsurveybull Do employees agree with management bull Ee focus groupssurvey

on 1 and 3bull What future technology changes will impact us bull Focus groupsresearchbull How will needed workforce skills change in the bull Focus groupsresearch

future and are we prepared to be successful in that environment

06_047461 ch03qxp 10406 1200 PM Page 43

select from This doesnrsquot mean that every question needs to be asked inevery assessment Also most restaurants prepare dishes for customersupon request that are not listed on the regular menu In the same waythese questions should not be viewed as exhaustive It is common whendoing an assessment that new and different questions will arise as youprogress through the different categories

In the right-hand column are tools and techniques that are commonlyused to help answer the related question The reader should note that itisnrsquot mandatory to use the tools to answer questions the tools are sim-ply there to help when needed It should be noted that just like in theinformal assessment the goal of all the questions and tools is to estab-lish SWOTs The output of this assessment will look just like the out-put of the informal assessment but this group of issues should be morecomprehensive and voluminous Because the main theme of this book isthe linkage of process and strategy the process assessment will be pre-sented first and in the most depth Financial customer and learning andgrowth assessment techniques will follow

PROCESS ASSESSMENT IMPLEMENTATION

For the process assessment is typically the most difficult to execute suc-cessfully many reasons The first is that a typical organization has thou-sands upon thousands of processes When conducting an assessment itis impossible to analyze all of them thoroughly to determine theSWOTs of each Another complicating factor is that many organiza-tions are so functionally focused that few people understand the flowsof the major cross-functional processes In other words they under-stand their own portion of the process but therersquos an overall lack of un-derstanding of the entire process This could limit the effectiveness ofbrainstorming key process SWOTs because most issues identifiedthrough brainstorming will be of a functional versus cross-functional nature

This tendency toward functional focus highlights a larger problemThe management team of an organization often doesnrsquot have a thorough


06_047461 ch03qxp 10406 1200 PM Page 44

knowledge of its companyrsquos processes This is obvious (and under-standable) when a manager is new to the organization but it is alsolikely to be a problem when a manager has achieved a senior positionthrough consistent promotions within the same functional area It canbe a serious barrier to both assessment and ongoing decision making ifthe management team doesnrsquot have sound process understanding

Another barrier to process assessment is that when most people thinkabout processes in their organization they inevitably think only aboutthe negatives If you ask the question ldquoWhat is the first thing that comesto mind when you think about the processes in your organizationrdquo mostpeople respond ldquoThey are bureaucraticrdquo ldquoThey need to be streamlinedrdquoldquoThey need serious upgradingrdquo and so on Very rarely is someonersquos firstreaction ldquoWe have a great product development processrdquo or somethingof that nature The implication of this tendency is that an organizationhas to be careful that its assessment doesnrsquot get overloaded with weak-nesses while neglecting strengths and opportunities

Fortunately all of these potential barriers are navigable through theformal assessment process The first issue is the inability to thoroughlyanalyze thousands of processes because of time and resource con-straints The good news is that it isnrsquot necessary to do so The point ofthe assessment is not to analyze everything rather it is to determinewhich processes have strategic significance Two categories of processesmay impact strategy (1) those that seriously block the organizationfrom meeting strategic goals and (2) those that the organization does sowell that leveraging their capability could take the organization to thenext level This is why the first two questions on the assessment tem-plate in the process section are as follows

1 Which processes have strategic significance in terms of gaps thatneed to be closed

2 Which processes have strategic significance in terms of strengthsand capabilities to be leveraged

The first question can be answered by using two tools common toprocess analysis the system map and the process map System maps are


06_047461 ch03qxp 10406 1200 PM Page 45

ideal tools for a strategic assessment because they evaluate interactionsIt has been said that the job of a manager is not to manage actions butto manage interactions Managing actions is micromanagement For ex-ample it shouldnrsquot be the role of the accounting manager to look overthe shoulder of the accounts payable clerk to ensure that the steps of theaccounts payable process are being followed day in and day out Thejob of the accounting manager should be coordination and integrationof all the functions within accounting such as accounts payable accountsreceivable payroll and so on Then as the accounting manager movesup to CFO and COO and CEO the responsibility continues to be co-ordination and integration of more diverse areas This means that by thetime a manager reaches the level where he or she is devising strategy heor she will need to have a familiarity with the large cross-functionalprocesses of the organization Evaluating these interactions to deter-mine SWOTs is ideally suited to the system map

To understand the system map it is instructive to begin with thebasic components of the process as illustrated in Exhibit 34

Anyone familiar with process analysis and improvement is probablyfamiliar with this basic chain of components Starting in the middlethere is a box labeled PDCI which stands for Process-Department-Company-Industry The system map is a flexible tool that can be usedto evaluate the interactions of any of these units with its suppliers and


Suppliers CustomersInputs PDCI Outputs

EXHIBIT 34 System Model Basic Components

06_047461 ch03qxp 10406 1200 PM Page 46

customers Processes have customers that may be internal or externalFor example the cargo shipping process for an airline would have thereceiver of the freight as a customer The admissions process for a hos-pital would have a combination of external (the patient) and internal(doctors nurses) customers Departments have customers that are oftenother departments This is easily seen when you consider the supportfunctions of an organization Human resources or information technol-ogy for example have internal customers consisting by and large of therest of the organization

Companies obviously have the external customer group consisting ofthe buyers of their product(s) or service(s) but they can also view theirboard of directors and shareholders as customers (from a private-sectorperspective) and the legislature taxpayers and so forth as customers(from a public-sector perspective) Industries may share the same exter-nal customer groups as the company example although evaluationwould take a broader view (Instead of looking at what Ford customersare looking for for example the objective would be to determine whatall auto buyers are looking for) So the first step in building a systemmap is to determine what frame of reference you want to use (ie selecta process department company or industry that has a customer or sup-plier relationship you want to analyze)

Whatever you choose for the box in the middle it will have certaininputs which are the key things that must be present for the PDCI toget started For the hospital admissions process for example the inputscould consist of a patient a referral from an external physician admis-sion forms and so on For an HR department inputs may be a job ap-plicant request for filling an open position from the hiring departmentand the like The inputs typically come from suppliers which could beinternal or external In the previous examples a patient or job applicantwould obviously be external while the requests and forms would comefrom internal sources

Located to the right of the PDCI box are the outputs which are defined as what is produced from the PDCI For example the outputof the shipping process would be freight arriving at its desired location


06_047461 ch03qxp 10406 1200 PM Page 47

The output of a hospital would be a discharged and (hopefully) healthypatient The output of an IT department would be (hopefully) smoothlyrunning systems and projects completed on time and within budget Theseoutputs go on to the customer which again could be internal or external

Again these components are not revolutionary concepts Basicprocess mapping texts have discussed and explained these basic com-ponents for years What differentiates the system map from basicprocess mapping tools is the remainder of the components which focuson the interactions between the basic components It begins with thefact that customers all have certain needs which are referred to as spec-

ifications and expectations or specs and expects in Exhibit 35Specs are the formal needs of the customer being analyzed Imagine

drawing up a contract between your organization and the customer inquestion Specs would be the items you would expect to be part of the con-tract For example how much would the product or service cost when itwould be delivered how long it would be guaranteed to last and so onExpects are the informal needs of a customer These things would nevershow up on a contract but nevertheless are important to a customer Forexample customers want to know that your organization cares aboutthem has sympathy when there is a problem is polite and helpful on the


EXHIBIT 35 System Model Customer Needs

Suppliers Customers

Specs andExpects

Inputs PDCI Outputs

06_047461 ch03qxp 10406 1200 PM Page 48

phone and so forth These things are critical to customer satisfaction buttypically wouldnrsquot be part of a formal list of specifications

The point is that to truly satisfy the customer of the PDCI the out-puts must meet their formal and informal needs Whenever the specsand expects are not met there will be gaps shown in Exhibit 36

Gaps typically show up in terms of output and can come in any formcost service speed timeliness friendliness honesty and the like Howdoes the organization know when it has gaps Because customers willlet you know They provide feedback to your organization on bothspecs and expects to let you know how you are doing much in thesame way you provide feedback to your suppliers These feedback loopsare shown in Exhibit 37

Feedback can be formal or informal Formal feedback is typically ini-tiated by the organization versus the customer It is a concerted effort toproactively find out what the customers are thinking and how they feelExamples of formal feedback would include surveys phone interviewsand so on Informal feedback is that which the organization is reliantupon customers to provide This comes in the form of customer-initi-ated phone calls e-mails face-to-face discussion and so on


EXHIBIT 36 System Model Gaps in Meeting Customer Needs

Specs andExpects

Gaps


06_047461 ch03qxp 10406 1200 PM Page 49

It is not advisable to rely solely on informal feedback to keep in touchwith your customer base This will put you in a prime position for over-reaction to a tiny subset of customers who have had either an extremelygood or extremely bad experience with your organization For examplethink about the situation in which you would provide feedback to an air-line regarding a flight yoursquove recently taken Very rarely would a passen-ger call an airline and say ldquoWe took off from Houston about ten minuteslate made up most of the time in the air and got in to Denver pretty muchon schedule The food was mediocre and it took about ten minutes to getmy bagmdashjust wanted you to knowrdquo This type of flight experience wouldnever prompt someone to sit down and provide feedback to the airlineand this is the experience most customers will have What a passengerchooses to provide feedback on is the instance in which it took 24 hoursto get from Houston to Denver the gate agents were surly and uninfor-mative the plane was dirty and smelly and their bags went to LondonOr on the other hand when they were in a hurry and left their computerin the gate area and the airline tracked them down and returned it rightbefore their big presentation These extreme conditions are what prompt


EXHIBIT 37 System Model Feedback Loops

Specs andExpects

Gaps

Feed Back Loop Feed Back Loop


06_047461 ch03qxp 10406 1200 PM Page 50

passengers to provide feedback on their own While it is important to un-derstand both the wonderful and terrible experiences passengers havehad it is dangerous to make management decisions based solely on theextremes So if no formal feedback mechanism is in place it shouldbe questioned whether a new one should be developed

The term feedback is common and well-understood The next com-ponent of the system map is typically less familiar and deals with thecommunication going in the other direction This type of communica-tion is known as feed forward and the feed forward loops are shown inExhibit 38

Feed forward is the way in which you help customers manage theirexpectations it is how you let them know what to expect from you Forexample if you go to Disney World and want to get in line for one ofthe rides there will always be a sign there telling you how long the waitwill be If the sign says 45 minutes then a typical customer accepts that45 is a minimum and at other places this may be true However at


Feed Forward Loop

Specs andExpects

Gaps

Feed Forward Loop



EXHIBIT 38 Feed Forward Loops

06_047461 ch03qxp 10406 1200 PM Page 51

Disney World 45 minutes will be the maximum They have done stud-ies that show that 45 would be a worst-case scenario a sign saying 45minutes usually means you will get on in 30 or 35 So if a customer getsin line thinking the wait is going to be 45 minutes long and winds uphaving to wait only 30 how would they feel Probably quite goodhappy excited and satisfied because Disney set their expectations andthen exceeded them

This is the essence of what good feed forward is supposed to do Letthe customers know what is coming so they can be prepared Thinkabout the implications of not having good feed forward If you donrsquothelp customers set their expectations they have no choice but to settheir own The danger in this is that they could set their expectations sohigh that even if you do everything perfectly you could wind up dis-appointing them Imagine the Disney waiting-in-line scenario in the ab-sence of a sign If customers got in line for one of the rides and expectedto wait 10 minutes how would they feel when the actual wait time was30 minutes In all likelihood they would feel angry and upset and thisimpression would stick with them for the rest of the day The instructivepoint here is that the same 30-minute wait would be perceived com-pletely differently by the customer depending on whether good feed for-ward was present or not

These are the components of the system map As has been noted it canbe an extremely valuable tool for evaluating key relationships during thestrategic assessment phase of the process There are two common appli-cations (1) how a company interacts with its external customers and (2)how key internal departments serve as customer and supplier to eachother The former application is best suited for the customer portion ofthe assessment and the latter application is ideal for the process portionof the assessment Because the first question in the process assessmentsection is ldquoWhat are the SWOTs surrounding key internal relation-shipsrdquo the first system map example will be of an internal nature

Not every organization will have the same internal relationships des-ignated as key An insurance company for example may consider the


06_047461 ch03qxp 10406 1200 PM Page 52

relationship between underwriting and claims to be critical On the otherhand a company responsible for customizing its product offering to meetindividual client needs may consider the relationship between sales andmanufacturing to be vital to future success While there will be industry-specific differences such as these it is a given that relationships betweenkey support functions (which could include HR IT Finance Purchasingetc) and the core business should be analyzed via the system mapThe purpose in analyzing these relationships is to determine whether thesupport functions truly provide support or are working for their ownpurposes The following example will focus on HR work through thedevelopment of the system map step-by-step and describe the identifica-tion of SWOTs upon completion of the diagram

A blank system map template is shown in Exhibit 39


EXHIBIT 39 System Map Template

Customer Expects Gets

1 12 23 34 45 56 6

Supplier Specs We Get

1 12 23 34 45 56 6

Feedback to Supplier

1234

Feedback from Customer

1234

Feed Forward to Customer

1234

Feed Forward from Supplier

1234

I6- Get Data O6- Get Data

Most Important Gap_________________


I1

I2 I3 I4

I5

I7

I8

Gap causing issues1234

Internal gap causing issues1234

O2 O3O4

O5

O7

O8O1

06_047461 ch03qxp 10406 1200 PM Page 53

Note that the right-hand side of the map has positions labeled O1through O8 This is typically referred to as the output side of the dia-gram and it is necessary to answer a series of output questions to com-plete it The left-hand side is referred to as the input side of the diagramand there are eight additional questions (I1 through I8) to be answeredto complete it as well The designations O1 to O8 and I1 to I8 are listedon the template at the place in which the answer to the correspondingquestion should be written The user will find that the learning curve forcreating a system map is very steep In other words after you have doneit once or twice you probably will not need the questions anymoreHowever they can be useful as a sort of cheat sheet while you become familiar with the tool The relevant questions are listed as follows

System Output Questions (O1ndashO8)

1 Who is your customer2 What are the customerrsquos expectations of you (Be as specific as

possible)3 How do you think the customer would rate your level of service

for each expectation4 How do you get feedback to know this customer is satisfied5 What forms of feed forward do you use to help set and manage

customer expectations6 What gaps exist between expectation and output Can these be

quantified with data7 Which is the most important gap to your customer8 What internal processes and issues create this gap

System Input Questions (I1ndashI8)

1 What suppliers contribute to the gaps in customer service Selectthe most influential one(s)

2 What are your expectations of the key supplier(s) (Be as specificas possible)


06_047461 ch03qxp 10406 1200 PM Page 54

3 What outputs does the supplier actually deliver to you (Howwould you rate their service)

4 How do you give the supplier(s) feedback to evaluate their performance

5 What forms of feed forward do the supplier(s) use to help set andmanage your expectations

6 What gaps exist between your expectations and output Canthese be quantified with data

7 Which is the most important gap to you8 What are the causes of this gap

To complete an example analyzing the HR support function the firststep is to fill in the PDCI box in the middle with HR Then it is possi-ble to begin answering the designated questions Output question num-ber one reads ldquoWho is your customerrdquo There are many alternatives forhow to answer this question depending on what you need to know Forexample if this were a process improvement example and the objectivewas for an HR process team to determine how well the hiring processwas working the options for customer groups could be ldquohiring man-agersrdquo or ldquoapplicantsrdquo If the objective were to determine compliancewith hiring regulations the customer might be ldquoregulatorsrdquo Because thepurpose of this particular map is strategic assessment and the goal is toanalyze the relationship between HR and other internal departmentsthe answer to this question can simply be listed as ldquoOperationsrdquo asshown in Exhibit 310

Questions two and three on the output side deal with customer ex-pectations and how well they are being met Question two reads ldquoWhatare the customerrsquos expectations of yourdquo and there is an instruction tobe as specific as possible From a facilitation perspective it is a goodidea to have representatives from both HR and operations in the roomto talk through the answers to these questions and complete the systemmap A good technique at this point is to ask the HR representatives togive their opinion on what the operations people need from them Afterthey list several items prompt the operations people for their opinions


06_047461 ch03qxp 10406 1200 PM Page 55

in order to determine how accurate and complete the list is The supplierdepartment (HR in this case) sometimes has a skewed view of what itscustomer truly needs This may be grounds for a weakness to add to theSWOT list

When question two has been answered there will be an agreed-uponlist of customer expectations Question three reads ldquoHow do you thinkthe customer would rate your level of service for each expectationrdquo Thequestion is phrased in this fashion to encourage the facilitator to use asimilar approach to the one described in the prior question Ask the HRrepresentatives to predict how the operations people would rate HRrsquoslevel of service for each requirement using a scale of ExcellentndashGoodndashFairndashPoor The purpose of this is twofold First it will help determinewhether the two groups have a consistent view of the service being pro-vided Having HR present its view first is a good way to initiate thisSecond in most cases the supplier department is more critical of itself



1 12 23 34 45 56 6


1 12 23 34 45 56 6


1234


1234


1234


1234


Most Important Gap

HumanResources

Operations

_________________Most Important Gap_________________ I1

I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1

EXHIBIT 310 Human Resources System Map

06_047461 ch03qxp 10406 1200 PM Page 56

than the customer department is This avoids the potential group dynamics roadblock of putting one department in the position of criti-cizing the other At any rate completing questions two and three andlisting them on the map could yield something like Exhibit 311

In this particular organization there were two ratings of ldquopoorrdquoOne deals with HRrsquos inability to fill open positions and the other dealswith inconsistent application and administration of reward and recog-nition systems While it is inadvisable to make a concrete rule that every

ldquopoorrdquo identified through system mapping will beget a weakness for thelist of SWOTs it is a good practice to question whether the ldquopoorrdquoitems have strategic significance In this case inconsistent application ofreward and recognition could possibly lead to turnover of key person-nel so this definitely could have strategic ramifications Looking at theother extreme note that there is a rating of ldquoexcellentrdquo for providingadequate training This could also have strategic significance If thecompany is looking to expand its horizons by adding a new serviceline or will be adding a substantial number of employees for growthpurposes it is definitely significant that HR has the capability to suffi-ciently get them up to speed

The next few questions deal with communication between HR and theoperating areas Question four asks how operations provides feedback toHR to let them know (1) what their needs are and (2) how well HR ismeeting them The real issue here is whether any formal type of feedbackexists If there are no surveys or tools of that nature administered by HRit is incumbent upon operations to continually communicate their needsThis could lead to a communication and coordination problem Ques-tion five asks how HR provides feed forward to operations to help themmanage their expectations (In other words how does HR let operationsknow what is going on in HR that will eventually impact them) The re-sults for these questions are shown in Exhibit 312

The feedback is indeed primarily informal in this case It is an openquestion whether lack of a formal survey is a gap large enough toprompt attention from the organization The feed forward appears to bea combination of formal and informal Benefit briefings are definitely a


06_047461 ch03qxp 10406 1200 PM Page 57



1 1 PFill open positions fast2 2 EProvide adequate training3 Good communication 3 F4 4 GAccurate benefit admin5 5 FCoordinate wline mgrs6 6 G


1 12 23 34 45 56 6


1234


34


4


1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1

Show concern for people7 7 PConsistent reward

1 Phone calls2 Emails

1 Departmental meetings2 Phone calls3 Benefit briefings




1 12 23 34 45 56 6


1234


1234


1234


1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1


EXHIBIT 311 System Mapping Customer Expectations

EXHIBIT 312 System Mapping Customer Communication

06_047461 ch03qxp 10406 1200 PM Page 58

formal kind of feed forward and departmental meetings may be as wellObviously the objective in both the feed forward and feedback boxes isto get quality versus quantity The facilitator should look at the entirelist of issues and ask whether the mechanisms listed are sufficient tokeep supplier and customer on the same page

Output question six reads ldquoWhat gaps exist between expectation andoutputrdquo The purpose of this question is to collect data whenever possi-ble to either confirm or deny the perceptions presented and evaluated inthe customer expectations box For example the first item operationsdeemed critical was to fill open positions quickly Assume that an agreed-upon acceptable target for filling open positions might be 45 days Operations gave HR a rating of ldquopoorrdquo suggesting that they believe thatHR was quite ineffective in meeting the required timeline There are twopossibilities here (1) either HR really is deficient in meeting the acceptedtime frame in which case it may be necessary to analyze the process or(2) HR does very well in meeting the 45-day target but for whatever rea-son operations has the perception that there are problems This could bedue to many factors but the point is that fixing the process is not the bestcourse of action heremdashfixing the perception is This could be worthy ofinclusion on the SWOT list

Questions seven and eight on the output side are designed to deter-mine what are the causes of some of the bigger gaps in the relationshipbetween customer and supplier Question seven reads ldquoWhich is themost important gap to your customerrdquo The group should look over thelist of items in the customer expectations box in the lower right-handcorner of the diagram and identify which one is causing the most painfor the customer In other words which gap would the customer wantclosed more than any other Once this has been selected the groupshould think through what internal issues might be contributing to thegap These will be listed under output question eight Responses fromthis organization are listed in Exhibit 313

Filling open positions in a timely fashion was the top-priority gap ac-cording to the group The causes for this gap are listed in output questioneight Incomplete information from managers is the top gap-causing issue


06_047461 ch03qxp 10406 1200 PM Page 59

listed This is a significant finding because the information needed to filla position generally comes from the same operations people who are un-happy with poor service from HR In other words the operations peoplecould be causing their own problem in this case The same could be saidfor the issue regarding lack of job descriptions These are supposed tocome from the hiring manager and not having one could result in HRimproperly screening candidates This could obviously send the entireprocess back to the drawing board A noncompetitive pay scale could result in many rejections of job offers lengthening the process as wellAll of these issues may have strategic significance depending on theirseverity

A common mistake made by first-time facilitators is thinking theymust select one issue only as the answer to ldquowhat is your most impor-tant gaprdquo If there are two or three issues relatively even in importance





1 12 23 34 45 56 6


1234


1 Phone calls2 Emails34


1 Departmental meetings2 Phone calls3 Benefit briefings4


1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8


Internal gap causing issues1 Incomplete info from mgrs

Fill open positions fast

2 Understaffed3 No job descriptions posted4 Noncompetitive pay scale5 Impatient hiring managers

O2 O3O4

O5

O7

O8

O1


EXHIBIT 313 System Map Gap Prioritization

06_047461 ch03qxp 10406 1200 PM Page 60

it is permissible (and advisable) to look for gap-causing issues for eachone In the HR example it is quite possible that looking for gap-causingissues for inconsistent reward and recognition for example would yieldanother list of critical items for the SWOT list

The output side of the map is now complete The questions led thegroup through a discussion of customer needs and how well theyare being met (both perceived and actual if the relevant data was col-lected) the lines of communication open between customer and PDCIthe number-one problem in the key customerrsquos eyes and a host of in-ternal issues that contribute to the problem This is already a consider-able amount of potentially valuable information but to complete thepicture it is necessary to look at the input side as well

The first question on the input side is ldquoWhat suppliers contribute tothe gaps in customer servicerdquo The purpose of this question is to select theentities external to HR that will provide products or services HR needs tosatisfy the selected customer group In the given example suppliers mayinclude the operating departments corporate HR regulators that set com-pliance policy and so forth These are illustrated in Exhibit 314

It is a good practice to list the suppliers in order of the perceived im-pact on the ability to meet customer expectations This hierarchy wouldimply that the organization felt like operations had the most impact onHRrsquos ability to meet the needs of operations (which isnrsquot unusual) fol-lowed by corporate HR and finally regulators

Because operations has been selected as the supplier with the mostimpact the next two questions on the input list are as follows

bull What are your expectations of the key supplier(s)bull What outputs does the supplier actually deliver to you

These questions should be answered with only operations in mind Inother words what does HR expect or need from operations in order toprovide good service to operations as a result And how would HR ratethe operations level of service (ExcellentndashGoodndashFairndashPoor) in each oneof these categories


06_047461 ch03qxp 10406 1200 PM Page 61

It is rare for one single supplier to be the determining factor in all

gaps on the customer side If corporate HR also is a significant contrib-utor to gaps then questions two and three should be answered againwith a focus on corporate HR The process should be repeated until allsuppliers that have a significant impact on HRrsquos ability to deliver goodservice have been discussed In the example for this organization it wasfelt that the top two suppliers (operations and corporate HR) have sig-nificant impact on the ability to deliver good service but regulators didnot Therefore the resulting system map is shown in Exhibit 315 witha dividing line between those requirements needed from operations andthe ones aimed at corporate HR

There are several significant findings in this portion of the map Firstand foremost operations is clearly contributing to its own problemsThe failure to provide clear job requirements can directly impact theability to fill open positions quickly and the failure to provide adequate





1 12 23 34 45 56 6


1234






1234


Most Important Gap

HumanResources

OperationsOperations

Corp HR

Regulations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1


EXHIBIT 314 System Map Suppliers

06_047461 ch03qxp 10406 1200 PM Page 62

lead time with requests probably contributes to a perception gap thatHR never gets things done on time Both of these may be significantfindings to add to the list of strategic SWOTs With regard to the relationship to corporate HR the fact that policy is not clear or con-sistent could certainly handcuff the ability of local HR departmentsto deliver quality service Looking at the other extreme the ldquoexcel-lentrdquo rating for corporate expertise may lead to multiple strategic advantages

Questions four and five on the input side revisit the communicationlinks between suppliers and the PDCI The links between operationsand HR were established on the output side and many are simplyreprinted on the map and the links between HR and corporate HR havebeen added in Exhibit 316

Nothing especially significant was revealed by the communicationquestions in this example although perhaps the fact that corporate and


EXHIBIT 315 System Map Supplier Gap Analysis




1 1 PClear job requirements2 2 FGood communication3 3 PRealistic deadlines4 4 PConsistent clear policy5 5 GListen to local issue6 6 FFlexibility7 7 EExpertise


1234






1234


Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1


06_047461 ch03qxp 10406 1200 PM Page 63

local HR meeting only once a year would be something to think aboutmore frequent meetings may be useful

The next question (input question six) deals with the collection ofdata to confirm or deny the presence and severity of gaps on the supplierside Just as it was on the output side the intent here is to determinewhether the gap is factual or perceptual Things like policy changes canseem to happen all the time because they cause local people such aheadache but in reality it may not happen very often

Question seven on the input side reads ldquoWhich is the most importantgap to yourdquo This is analogous to the same question on the output sidebut this time HR gets to choose which of the input gaps they most wantto see closed The one selected by the HR department in the example isclear job requirements This springs from the tendency of the hiring de-partments to not be specific enough when telling HR to find candidates tofill a certain position As noted previously this results in HR recruiting


EXHIBIT 316 System Map Supplier Communication Links






1 Phone2 Dept mtg3 Annual meeting4 Phone






1 Phone calls2 Emails3 Annual meeting4 Phone callsemails


Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1


06_047461 ch03qxp 10406 1200 PM Page 64

and interviewing people who are ill-suited to the position in questioncausing delays in the ability to fill open positions

The final question (input number eight) reads ldquoWhat are the causesof this gaprdquo The intent is to determine why in this case the hiring de-partments are not being clear in their requirements Several potentialcauses for this phenomenon are listed in the now completed system mapshown in Exhibit 317

Typically it takes around an hour with a small group to complete asystem map with potential additional work needed for data collectionWhen complete it is standard to think about what key learning pointsneed to be added to the SWOT list For example the list of SWOTscould be as follows

bull ldquoHiring departments do not provide clear job requirements re-sulting in delays in filling open positions and causing poor cus-tomer servicerdquo

bull ldquoCorporate HR is constantly changing policies and proceduresforcing local department to spend undue time on ensuring com-pliance versus serving internal customersrdquo

bull ldquoInconsistent application of the reward and recognition policyhurts morale and leads to turnover of key personnelrdquo

bull ldquoPay scale is not competitive with other companies in the areawhich results in higher turnoverrdquo

bull ldquoPay scale is not competitive with other companies in the areawhich results in higher first offer refusal rate and delays hiring newpersonnelrdquo

bull ldquoHR department cares about our people and their issues which in-crease moralerdquo

Note that all are written in the fact plus implications of the fact for-mat as always It is common to get around a half-dozen key issues fromeach system map discussion Having said this keep in mind thereshouldnrsquot be a target number The issues that will have an impact on theability to achieve the vision are the ones that should be noted whetherthere are two or twenty


06_047461 ch03qxp 10406 1200 PM Page 65

Recall that the purpose of the map is to assist in answering the firstquestion from the process section of the strategic assessment templatethat reads ldquoWhat are the SWOTs surrounding key internal relation-shipsrdquo System mapping sessions should almost always be set up to dis-cuss the relationships between HRmdashOperations ITmdashOperations andFinancemdashOperations These are support functions that every organiza-tion typically has and that need to be sufficiently plugged into the restof the business to achieve any meaningful vision After the three stan-dard applications it is up to the facilitator to determine which internalrelationships are worthy of analyzing via system mapping sessions It isnot uncommon to spend a day or two conducting system mapping ses-sions to uncover the relevant internal SWOTs















Most Important Gap

HumanResources


Corp HR

Regulations

_________________Most Important Gap____________________ I1

I2 I3 I4

I5

I7

I8

Gap causing issues1 No time2 Donrsquot understand process

Clear job requirements

3 Complex job desc form




O2 O3O4

O5

O7

O8

O1


EXHIBIT 317 Complete System Map

06_047461 ch03qxp 10406 1200 PM Page 66

STRATEGIC PROCESS IMPROVEMENT

The second process assessment question from the template reads ldquoWhichprocesses have strategic significance in terms of gaps that need to beclosedrdquo In other words which processes are prime candidates for strate-

gic improvement If you ask a typical employee what comes to mind whenthinking about the processes in his or her organization the first responsewill typically be negative Common answers are things like ldquoThey are bureaucraticrdquo ldquoThey need streamliningrdquo ldquoThey donrsquot workrdquo ldquothey taketoo longrdquo and so forth Very rarely do people think about the positive as-pects of their processes first the natural tendency is to think about howto fill the gaps For this reason strategic process improvement is the mostcommon technique for illustrating how processes can drive strategy Theidea behind strategic process improvement is to determine which of theorganizationrsquos processes are the most vital to future organizational successand ensuring that these processes are running at peak efficiency And ifthey arenrsquot fixing them so they are

The Chrysler product development case presented in Chapter 1 is anexcellent example of a process that would need to be targeted for strate-gic improvement Successful automakers must be able to predict con-sumer desires and develop and deliver the models that will satisfy themIt has been referenced that the idea-to-showroom-floor cycle time priorto the AMC acquisition was five years Chrysler obviously identifiedproduct development as one area in need of strategic improvement Fol-lowing the acquisition Chrysler looked at how AMC executed thisprocess and noticed significant differences At Chrysler product devel-opment had been managed functionally The process at AMC was moreteam-based Groups of people from different departments brought di-verse expertise to the table and worked together from the beginningThis enabled each area to have a say in the decision making and helpthem identify potential conflicts and resolve them on the spot Chryslermodified its process to incorporate some of AMCrsquos practices and the re-sults were dramatic The idea-to-showroom-floor cycle time was reduced


06_047461 ch03qxp 10406 1200 PM Page 67

by over two years and new products became the backbone of theChrysler resurgence in the early 1990s The Dodge Viper debuted in1992 Chrysler Concorde in 1993 the redesigned Dodge Ram in 1994the Chrysler Cirrus and Dodge Stratus in 1995mdashall giving the buyingpublic something new and different to look at The success continuedwith the introduction of the truly innovative PT Cruiser in 2001 whichhas been a strong selling model for the company ever since

The merger that created DaimlerChrysler in 1998 intensified the focuson product development In 2001 the company announced furtherprocess changes and improvements The first was that the new productteams would be arranged by vehicle type versus specific model Fiveclasses (ie small vehicle premium vehicle family vehicle activity vehi-cle and truck) were named giving the teams even more opportunity toshare information and avoid the silo effects from the old days A secondchange was the integration of purchasing specialists into the teams tomake for more cost-effective buying for all vehicle lines Further stan-dardization across the companyrsquos main product lines (Chrysler Mer-cedes Mitsubishi) enabled the teams to further reduce costs by leveragingeconomies of scale while simultaneously reducing development time

Another excellent example of strategic process improvement comesfrom Dominorsquos Pizza The chain began as a single store in YpsilantiMichigan in 1960 and has grown into a multibillion-dollar juggernauttoday Their growth has been largely the result of process innovationDominorsquos pioneered some of the changes in its industry that we know ascommonplace today A key process in the pizza delivery business has al-ways been the ordering process Dominorsquos and its competitors obviouslywant to make this process as simple and painless for the consumer aspossible Many years ago the more popular chains risked business lossbecause it simply took too long to process customer orders It was com-mon for a queue to back up on the phone with customers being forcedto wait to place orders and frequently giving up and ordering elsewhere

Dominorsquos started by creating a customer database with names ad-dresses and ordering history Whenever a customer called to place anorder the Dominorsquos employee immediately had the information handy


06_047461 ch03qxp 10406 1200 PM Page 68

This eliminated the need to ask for and write down directions It alsosped up the process time to take an order which reduced the time cus-tomers spent in the queue waiting for the store to pick up the phone Because most competitors have benchmarked and adopted Dominorsquosprocess having a delivery chain ask for your phone number so theyknow who and where you are is now commonplace It is easy to forgetthat not long ago this was a real customer headache

So how does an organization identify the key processes during the as-sessment process This is a challenging question to answer because ofthe aforementioned multitude of processes in most organizations If anorganization has 10000 processes then it is a fair bet that most peoplein the organization will feel that at least 9999 of them could stand to beimproved So trying to settle on the vital few that will have the most sig-nificant strategic impact is quite a challenge (The good news is thatsome of these processes may be identified in the prior system mappingexercise when evaluating key internal relationships For example a sys-tem mapping workshop evaluating the SalesndashManufacturing relation-ship may identify a key gap-causing issue as lack of communicationleading to an unsuccessful product development process)

Fortunately there are tools that help with the identification of processestargeted for strategic improvement The tool listed in the template is theprocess map Most people are at least somewhat familiar with basic flow-charting documenting a step-by-step flow of how a process works Aprocess map illustrated in Exhibit 318 adds the dimension of account-ability to the standard listing of steps

What differentiates a process map from a standard flowchart is the issueof accountability Note that there are swim lanes drawn across the mapThe people or departments that are involved in the process each have theirown swim lane and each step of the process is documented in the swimlane of the department responsible for execution of that step

This particular example comes from IBM Credit and is an excellentexample of the value of looking at processes cross-functionally Asnoted in Chapter 1 many organizations are highly functionally focusedThe standard approach to improvement of cross-functional processes in


06_047461 ch03qxp 10406 1200 PM Page 69

a functionally focused organization is to have each function try to im-prove its own individual piece of the process This example illustratesthe fallacy of that approach

IBM Credit is not in the business of making computers it is in thebusiness of financing them The process map illustrates the steps cus-tomers have to go through to gain approval for financing after they havemade the decision to buy an IBM computer Note how many depart-ments are involved and steps are necessary to tell a customer ldquoyes wersquolllet you buy a computer from usrdquo The cycle time to complete this processwas roughly six days If you were a sales representative what would yourperspective be on this Almost certainly you would not be pleased sinceit gives the prospective customers a long time to think about their pur-chase and potentially change their mind IBM Credit felt the same wayso it set out to reduce the cycle time

The traditional approach to process improvement at the time was tohave each department do its share to reduce its portion of the cycle time


Customer

Sales Rep

Financing

Credit

BusinessPractices

Requestfinancing

Customernotified

CallIBM

Credit

Receivequote

Callcustomer

Logrequest

Sendreq tocredit

Enterdata in

computer

Checkcredit

Write results

Modifyrequest

Writeterms

Pricing

Admin

Send toBPO

Put dataon spread

sheet

Write interest

rate

Send toadmin

Typequote

FedexTo rep

EXHIBIT 318 IBM Credit Process Map

Adapted from Reengineering the Corporation

06_047461 ch03qxp 10406 1200 PM Page 70

So in this case the Financing department manager would work with hisor her people to improve the steps of financing the Business Practicesmanager would work with his or her people to improve the steps ofbusiness practices and so forth The thinking was that if each area im-proved its portion of the process the cycle time would be dramaticallyreduced

But IBM Credit approached it another way If you have ever seen arelay race on television you would probably agree that there are twoways for a team to lose a race One way is simply to not run fastenough To be sure only one team runs fast enough to win But if ateam loses because it doesnrsquot run fast enough usually it only loses by asmall margin If a team loses a relay race by a lot it typically is as a re-sult of dropping the baton versus lack of speed As IBM Credit lookedat the process map it realized that so many handoffs were built into theprocess that a lot of baton passing was going on So they astutely ques-tioned how much time was being spent actually working on the processversus passing the work back and forth Studies revealed that out of thesix days of cycle time only about two hours of process time were beingspent working on these requests The rest of the time the requests werebeing handed from one person to the other or sitting in employeesrsquo in-boxes and out-boxes

The traditional approach to process improvement clearly would notwork here If each manager worked with the employees in the individ-ual departments to improve the processing time of their individual linkthey might shave the processing time down from two hours to ninetyminutes While this would represent a 25 decrease in process time thecycle time would still be six days The problem lies in the handoffswhich are cross-functional issues Traditional functional flowcharts willnot bring this type of problem to light which highlights the benefits ofthis type of process map

The instructive point from a strategic perspective is that as noted earlier a good manager needs to manage interactions versus actionsand this type of chart highlights the interactions This is one of the rea-sons why the process map is listed as a tool for the strategic assessment


06_047461 ch03qxp 10406 1200 PM Page 71

Another benefit of using the process map for assessment will be illus-trated through the following example

Bubble Production Process Understanding Process Constraints

A critical concept for managers to be comfortable with is that of un-derstanding process constraints This will be illustrated by means of asimple example The demo requires a bottle of bubble-blowing solutiontwo wands used to blow the bubbles a ruler and a flipchart withmarker Suppose five people are set up in line at the front of a room andtheir job is to execute the bubble production process Each personshould be given a specific role defined as follows

bull Dipper responsible for placing a wand in the bottle of bubble so-lution removing it and placing it in front of the

bull Blower responsible for positioning near the wand and blowing thebubbles into the air

bull Catcher responsible for taking the second wand selecting a bub-ble while they are all in the air catching the bubble on the wandand presenting it to the

bull Measurer responsible for taking a ruler and holding it next to thebubble and calling out the size so the

bull Recorder responsible for listening to the measurer can write thenumber on a flipchart

The group should be given a five-minute time limit to begin produc-ing bubbles Anyone else in the room should observe as the process isexecuted so an accurate process map can be drawn at the end of the five-minute time period The resulting process map is shown in Exhibit 319

There are several instructive things about this process map For ex-ample note that both the dipper and the blower inspect for film Thedipper wants to make sure that the wand goes to the blower with amplesolution in the wand and the blower doesnrsquot want to huff and puff tono avail if no bubbles are going to come out of the wand so both havea compelling reason to check But there is no question this is a redun-dant step unnecessary to do twice


06_047461 ch03qxp 10406 1200 PM Page 72

73

Plac

eru

ler

by

Lis

ten

bubb

le

Dip

ping

Blo

win

g

Cat

chin

g

Mea

suri

ng

Rec

ordi

ng

Dip

wan

d

Rem

ove

from

bott

le

Insp

ect

for

film

Plac

ene

arbl

ower

Plac

ew

and

bybu

bble

Pres

ent

tom

easu

rer

Rea

d

Wri

te

dow

n

Cal

l out

Cat

ch

Aim

Puck

erB

low

Insp

ect

for

film

Sele

ctbu

bble

EX

HIB

IT3

19B

ubbl

e P

rodu

ctio

n P

roce

ss M

ap

06_047461 ch03qxp 10406 1200 PM Page 73

In the real world this sort of thing happens all the time Two de-partments do exactly the same thing because either (1) one departmentdoesnrsquot know the other is doing it or (2) the second department (theldquoblowerrdquo) got the equivalent of a wand with no solution in it fromthe first department (the ldquodipperrdquo) 17 years ago so they have beenchecking for it ever since Just as common and even more sad some-times the person who had the job before the person who had the job be-fore the current dipper presented the person who had the job before theperson who had the job before the current blower a wand with no solu-tion in it 30 years ago and everyone in both departments has now beenchecking for it ever since even though nobody knows why anymoreThis type of legacy process inefficiency is present in many organizations

It follows that another big plus of the cross-functional process map isthat it can identify repetitive efforts between departments Note that afunctional flowchart illustrating the steps in the blowing process alonewould not have illustrated this redundancy nor would a functionalflowchart of the dipping process Therefore a leadership team must un-derstand the big-picture cross-functional process flows within their or-ganization they are the only ones high enough in the organization tounderstand and identify areas of potential overlap

Another important point from this demo is to note that there was nomention of objectives given to the group prior to the beginning of theprocess This was intentional In almost every case the process opera-tors will assume that the objective is to produce and record big bubblesThe blower and dipper go slowly to try and create big bubbles but eventhen it is obvious that the catcher cannot catch them all Out of everyten bubbles to come out of the wand the catcher is lucky to catch oneor two of them Imagine how the process would change if after a fewminutes the facilitator mentioned that in prior groups there has neverbeen an instance where less than 20 bubbles were recorded on theflipchart All of a sudden the dipper and blower would speed up becausethey are not worrying about bubble size and it would become evenmore evident that the catcher could not keep up bubbles would be hit-ting the floor all over the place


06_047461 ch03qxp 10406 1200 PM Page 74

This phenomenon has far-reaching implications An important pointis that even though the names of the departments in the process (andeven the steps executed) would be identical whether the objectives werebubble volume or bubble size the behavior of the process operatorswould be very different This illustrates how important it is that every-one who has responsibilities for execution of a cross-functional processunderstands the whole process instead of just their portion of it So thejob of management is to manage the overall process not to try to opti-mize each part of it This means that management cannot reinforce and

reward functional behavior at the expense of process behavior

A more important point is the determination of which processes havestrategic significance Suppose the bubble example was revisited andyou went department by department trying to determine the capacity ofeach For example start with dipping and look at it in isolation Inother words instead of considering the entire process assume you arein the dipping business and all you are responsible for is what is shownin Exhibit 320

Think about the capacity of the dipping process In other words if thedipper never had to wait for the blower how many bubbles could beblown from all the solution that could be dipped out of the bottle in sayone minute Assume that the latest in bubble-dipping data collectiontechnology helped establish that the correct number was 150 bubbles perminute

Now assume that the second company is in the bubble-blowing busi-ness As such all this organization is responsible for is the steps in Exhibit 321


EXHIBIT 320 Dipping Process

Dipping Dipwand

Removefrom bottle

Inspectfor film

Place nearblower

06_047461 ch03qxp 10406 1200 PM Page 75

The assumption to be made this time is that the blower never has towait on the dipper In other words the wand is always positioned fullof solution and ready for the blower to begin To understand capacitythe question that must be asked is how many bubbles could be blown in one minute (without hyperventilating) Assume that the latest in bubble-blowing data collection technology helped establish that the correct number was 225 bubbles per minute

The third company is in the catching business The catching processis illustrated in Exhibit 322

The assumption to make in this instance is that there are always bubbles in the air for the catcher to pick from so there is never a needto wait for the dipper and blower Further assume that there is no delaytime waiting for the measurer on the back end the bubble is measuredinstantaneously and the process is repeated So how many bubbles couldbe caught and presented in one minute It would realistically take aboutfive seconds to do each one so the capacity would be around twelveper minute

The fourth company is in the measuring business following theprocess shown in Exhibit 323

The assumptions in this step are critical Assume that the measurerdoes not have to wait for the catcher Recall that the objective at the be-ginning of the exercise was to look at the capacity of each departmentin isolation Therefore the question is how many bubbles could be mea-sured without the constraint of having to catch them first So if therewas always a bubble sitting on the wand waiting to be measured itcould probably be measured in less than two seconds so the capacityfor a minute would be around 45 bubbles


EXHIBIT 321 Bubble-Blowing Process

Blowing Inspectfor film

Aim Pucker Blow

06_047461 ch03qxp 10406 1200 PM Page 76

The last company is in the recording business following the processshown in Exhibit 324

The assumption here is that someone is calling out numbers continu-ously or at least as fast as the recorder can write them down Assum-ing that one number per second is recorded the recording capacity willbe 60 bubbles per minute

The capacity for each department within the process is summarizedas follows

bull Dipping Capacity = 150bull Blowing Capacity = 225bull Catching Capacity = 12bull Measuring Capacity = 45bull Recording Capacity = 60


EXHIBIT 322 Bubble-Catching Process

Catching Selectbubble

Place wandby bubble

Present tomeasurer

Catch

EXHIBIT 323 Bubble-Measuring Process

Measuring Place rulerby bubble

Read

Call out

EXHIBIT 324 Bubble-Recording Process

Recording Listen Write down

06_047461 ch03qxp 10406 1200 PM Page 77

This data show the capacity of each department in isolation Becausethese departments are linked cross-functionally in the process howeverthis isnrsquot a realistic way to look at it Taking the big-picture view of theprocess it is evident that the overall capacity is really only 12 bubblesIt doesnrsquot matter how many can be dipped or how many can be blownall that matters is how many can be caught If you actually conduct thedemo it will be obvious that this is the case Bubbles will be hitting thefloor because the catcher canrsquot keep up and the measurer and recorderwill be idle for much of the time waiting for the catch Therefore catch-ing is known as the constraint

It is a common saying that a chain is only as strong as its weakestlink This is analogous to saying that a process is only as productive asits constraint An important corollary is that to increase the strength ofthe chain it is only necessary to strengthen the weakest link Increasingprocess performance is therefore accomplished by zeroing in on andimproving the constraint It follows that if the objective of the bubbleproduction process is to increase volume any meaningful solution hasto be targeted toward the catch This means that automating the bubbleblowing wonrsquot help It means that adding resources to dipping wonrsquothelp And it even means that a common sense solution like eliminatingthe duplicate inspection being conducted by both dipping and blowingwonrsquot help Think about it It is very likely that a typical organizationwould view the cross-functional map and realize it had two depart-ments doing exactly the same thing So they would in turn form a teambetween dipping and blowing determine how to alter the process so theinspection would only be done once train everyone in the new proce-dure and the capacity would still be 12 bubbles So the supposed im-

provement would add no value to the process whatsoever In fact itmay damage profitability because now dipping and blowing will beable to go even faster resulting in wasted solution while more bubbleshit the floor because catching cannot keep up

These kinds of common sense solutions are perfect illustrations of howmany organizations go about process improvement exactly backwardfrom the way they should Many functionally focused organizations ask


06_047461 ch03qxp 10406 1200 PM Page 78

each department manager to submit a performance plan each year thatdescribes what they will do to improve their part of the organization Inother words the dipping department manager submits what he or she willdo to improve the dipping process the catching department manager sub-mits what he or she will do to improve the catching process and so forthCompanies often require action items budget dollars and great volumesof detail to substantiate the activities The thinking appears to be that ifeach of five departments improves its performance 10 the overall or-ganization will get 50 better But the bubbles example illustrates the fallacy of this thinking In reality improving the performance of each offive departments by 10 only improves performance by 10 Catchingis the only area in which improvement is meaningful and in the other fourout of five departments time and resources are being consumed to no purpose

The bubbles illustration was included to demonstrate a critical con-cept regarding how to determine which processes have strategic signifi-cance because of gaps Your organization probably has 10000 or moreprocesses but the good news is that you donrsquot have to improve all ofthem The ones with the strategic significance are the catchers or con-

straints It follows that one responsibility of the leadership team whenit comes to process assessment is to identify and manage the processesthat are the constraints in their organization

One technique for accomplishing this is to use process maps to dia-gram work flows from a big-picture perspective The facilitator shouldthink about the main work flows within the organization For examplea hotel might view its work flow as shown in Exhibit 325


Reservations Check In RoomService Check OutCleaning

EXHIBIT 325 Hotel Work Flow

06_047461 ch03qxp 10406 1200 PM Page 79

The recommended process for constraint identification in this casewould be to get people together from each area and create a high-levelcross-functional process map that illustrates swim lanes and handoffsjust like the IBM Credit and bubbles examples did So the hotel wouldhave reservations agents front desk personnel (to provide feedback onboth check-in and check-out) dining room staff and housekeepers tocover the five main areas from left to right

It is important when conducting the mapping session that the facilita-tor not let the group get bogged down with too much detail A goodpractice is to have each group describe its own process in a maximum offive steps Sticking to this maximum enables the map to be drawn in a rea-sonably short period of time and will be useful for promoting discussion

The purpose of mapping the process on such a high level is twofoldFirst the objective is to try to identify constraints This is generally mucheasier to do with the entire process in view Brainstorming process prob-lems (even with a cross-functional group of people) without the entireprocess in view tends to result in each functional area identifying prob-lems within their area versus between areas The other benefit of cross-functional mapping in this fashion is education Typically even at thishigh level there will be participants in the group who are not aware ofhow the other departments execute their portion of the process A sam-ple process map resulting from this exercise is shown in Exhibit 326

The next step after completing the map is to discuss as a group wherethe problems arise Looking at the entire map provides a better perspec-tive on which problems are the most significant This particular organi-zation provides insurance to corporations as opposed to individuals andthe policy issuance step is a major headache The information comingfrom underwriting is rarely complete requiring investigative work priorto policy issuance This means that at times coverage is actually boundwith pricing based on incomplete information giving rise to the possibil-ity of unforeseen losses Another potential problem spot was the selectiveuse of risk engineering to do the risk analysis There were no hard-and-fast guidelines to help underwriting determine when the specialized


06_047461 ch03qxp 10406 1200 PM Page 80

81

CR

M

Und

er-

wri

ting

Ris

ken

gine

erin

g

Polic

yis

suan

ce

Cla

ims

Targ

etac

coun

tG

athe

rcl

ient

info

Proo

fin

foE

nter

data

Pric

ing

Ana

lyze

risk

s

Ent

erda

taC

reat

epo

licie

sSe

nd t

ocl

ient

Rec

ord

clai

mC

heck

cove

rage

Prep

are

sub

Issu

equ

ote

Bin

dco

vera

ge

Set

rese

rves

Neg

otia

teD

ispo

se

EX

HIB

IT3

26In

sura

nce

Pro

cess

Flo

w

06_047461 ch03qxp 10406 1200 PM Page 81

expertise was necessary This caused the situation to evolve to a pointwhere risk engineering was used if there was time for it but skipped ifthere was not This obviously is not the best criteria for making the de-termination of whether the analysis should be done Some of the poten-tial SWOTs resulting from this particular mapping session couldtherefore be

bull ldquoIncomplete information from broker results in delays in quotingrdquobull ldquoIncomplete information from underwriting results in (potentially

very long) policy issuance delaysrdquobull ldquoUnrealistic deadlines encourage underwriting to skip risk engineer-

ing analysis potentially resulting in an inaccurate quoterdquobull ldquoProcess for procuring risk analysis is not followed potentially re-

sulting in an inaccurate quoterdquobull ldquoPoor data entry makes it difficult for claims to evaluate occur-

rences and begin the negotiation processrdquo

Note that the first issue is broker-related and does not spring from anyparticular step on the flowchart But it is common when discussing thecross-functional flow to have issues arise that impact the process thatmay not be specifically diagrammed It is important to capture these is-sues when they arise so this one is added to the list

Diverse organizations may need to look at more than one cross-func-tional flow to enable a discussion of the key process constraints but thisshouldnrsquot be an overly time-consuming part of the assessment Remem-ber that the important point when facilitating a mapping session is tosurface key issues it is not to create a technically perfect flowchartSometimes groups get bogged down trying to ensure they have theproper steps to the letter and that they havenrsquot left out even the mostminute detail It is important to differentiate this exercise from a tradi-tional improvement teamndashstyle process analysis The map in this case issimply to open up a discussion of the key issues so trying to be techni-cally perfect is not an objective

Identifying key process gaps is certainly important but it is only oneaspect of determining which processes have strategic significance There


06_047461 ch03qxp 10406 1200 PM Page 82

also needs to be thought given to the positive side In other words whatis the organization so good at that thought needs to be given to how tobest capitalize on the capability This gives rise to the next question onthe template which reads ldquoWhich processes have strategic significancein terms of strengths and capabilities to be leveragedrdquo There are basi-cally three different types of process-leveraging techniques to be con-sidered process extension market extension and enterprise creation

Process extension deals with thinking about the different links on thevalue chain Consider the diagram in Exhibit 327

The diagram shows that each entitymdashsupplier your organizationand customermdashhas a series of process steps for which it is responsibleProcess extension means thinking about ways to change the definedareas to assume more control over the process In other words it in-volves taking over one of the links in the chain from a customer or sup-plier because your organization can do it better So the new flow couldappear as shown in Exhibit 328

This diagram shows the instance where your organization assumedresponsibility for something that used to be the customerrsquos responsibil-ity It must be noted that this should not be viewed as a confrontational


Defined responsibilities

Suppliers Your Organization Customers

EXHIBIT 327 Process Extension

06_047461 ch03qxp 10406 1200 PM Page 83

situation or that your company is taking something away from yourcustomers Instead it should be viewed as taking control of a processlink because you have the capability to do it better and create a win-winsituation

A few examples might be useful in illustrating how process extensioncan work A well-known company in the Midwest was responsible forbuilding and delivering customized large machines to a Fortune 500client base The machines were expensive and complicated to build andthe 50000-foot view of the process is illustrated in Exhibit 329

So the process was really very simple Suppliers would ensure that therelevant materials were available and the machine-build organizationwould clarify the expectations of the customer manufacture neededparts assemble the machines and ship to the customer When a ma-chine arrived on the customer site the customer would unpack it set itup and start using it in their factories

It seems straightforward but there was a major recurring processproblem Customers would routinely damage the machine when settingit up Because they were using technicians and maintenance people whohad little experience with the new machines it resulted in higher war-ranty claims lower customer satisfaction and endless finger-pointing





06_047461 ch03qxp 10406 1200 PM Page 84

between the customer and the machine-build representatives over whosefault it was that the machine wasnrsquot functioning as advertised Moreoften than not the machine-build company had to send a representativeto the customer site to patch up both the machine and the relationship

The solution was a classic case of process extension The companydecided to send a technician with the machine to each customer siteThe technician would lead the efforts to unpack and set up the machineto get it ready for use In other words they changed the process bound-aries as shown in Exhibit 330

The benefits of the new process were numerous Travel and personnelcost remained relatively flat since most jobs required a technician to visita customer site eventually anyway (and in the old process the visits wereusually longer while the technician diagnosed and fixed all the prob-lems) The solution was viewed as a big plus by the customer Becausethe machine was ready to use faster the technician could demonstratefeatures answer questions and spend more time with the customer in anon-confrontational manner This resulted in large gains in customer


ShipParts


Definespecs

Fabricate Assemble Ship Set up Produce

EXHIBIT 329 Machine-Build Process Extension Example Before

ShipParts


Definespecs


EXHIBIT 330 Machine-Build Process Extension Example After

06_047461 ch03qxp 10406 1200 PM Page 85

satisfaction and increased the productivity of the machine so the cus-tomer could justify the expense more quickly

A second example of process extension comes from Enterprise Rent-a-Car If you were to ask a group of people who the biggest rental carcompany is the answer will inevitably be Hertz And who is numbertwo Avis Continuing with this line of questioning will get people to listNational Budget Alamo Thrifty Dollar and so on Most people willlist six or seven companies before they think of Enterprise if they thinkof Enterprise at all But Enterprise took over as the largest car rentalagency in the country several years ago and has remained so with a355 market share in 2004

Why has Enterprise been so successful Because they extended theboundaries of the car rental process Before Enterprise most car rental lo-cations could be found at airports To be sure this is a time when peoplefrequently need cars But Enterprise reasoned that there were times whenpeople would need a rental car other than when they were at an airportThis usually happens when their own automobile has been wrecked or isin the shop which also happens to be the one time when they cannot gopick up a rental car So Enterprise came up with the common sense solu-tion of going to pick the customer up This enabled them to access an en-tirely different customer segment with different sets of needs than thetraveler segment that was always fought over by the industry Enterpriseset up relationships with large auto dealers insurance companies and automotive repair companies to help ensure that any vehicle rented at anoff-airport location would be an Enterprise vehicle They made things eas-ier for the customers not only by picking them up but also by dealingwith the insurance aspect of car rental so customers wouldnrsquot need toAnd they have created and dominated a market in such a way that nowthe airport-focused organizations like Hertz realize the potential and aretrying to play catch-up

Just to be clear The Enterprise example really shows two instances ofprocess extension The first deals with the transfer of vehicle from carrental company to renter Enterprise assumed control of this link fromthe customer by going to pick the customer up The second illustration


06_047461 ch03qxp 10406 1200 PM Page 86

of process extension is in the insurance portion of the process The cus-tomer used to have to deal with this but Enterprise assumed controlover it Note that in both instances win-win situations were created Enterprise benefited in the first case because the access to a huge new cus-tomer segment drove sales and the customer benefited because of the im-proved ease of finding transportation The insurance portion of the dealwas easier for Enterprise to negotiate and navigate because they have ex-perience and the muscle that comes with large volumes of business andthe customer was relieved of dealing with a headache in a time when theyare often distraught to begin with

Another process extension example comes from General Electric GEdoes pretty much everything from making appliances and jet engines toproviding insurance and loans One of their best-known divisions is theappliance division Many years ago GE made the appliances and soldthem through a network of small medium and large distributors Thelarge ones had no problem keeping the entire GE product line stockedon the shelves and in full view of potential customers but the smallerdistributors were having a problem The inventory carrying costs of thefull product line were too high to justify keeping everything in inventoryon site As a result these distributors were only stocking certain appli-ances causing GE to lose potential sales

The process extension solution GE took over inventory managementfrom the small distributors They set up central warehouses in large citiesand agreed to let the smaller distributors order right out of the centralstock conditioned upon the agreement that the distributors keep the fullGE product in sight for prospects to view In this way GE added inven-tory carrying cost versus the old system of passing it on to the distributorssooner but this was more than offset by the additional sales brought in byincreased exposure of the product lines And distributors benefited fromreduced carrying cost and increased sales potential Again this qualifies asa win-win solution (Actually since the customer also benefited from eas-ier access to more products this was a win-win-win solution)

A final process extension example is an internal one meant to showthat there are many different applications of this line of thinking A


06_047461 ch03qxp 10406 1200 PM Page 87

common internal customerndashsupplier relationship is that between IT andthe rest of operations This is an interesting example because as wasnoted in the system mapping section support functions often have thesame groups serving as both customer and supplier to their portion ofthe organization This relationship is illustrated in Exhibit 331

It is commonplace in most organizations for operational areas to makeproject requests of IT Upon receiving the request IT ranks it relative toother priorities then eventually develops and delivers the finished productor service for the requesting area to use This process seems so simple butin most organizations there are significant recurring problems Often ITand operations do not speak the same language IT doesnrsquot understand thetrue problems operations faces and operations has no idea what technol-ogy is available or what is or is not possible The result is often unmet ex-pectations operations makes a request that IT cannot possibly deliver onand then IT is perceived as aloof and uncaring when they do not deliver

This is a potential example of process extension because miscommu-nication usually begins when IT receives the request There is typicallysome sort of form for the requesting department to fill out that specifiesexactly what IT is being asked to do This form requires operations to fillin a lot of details that are critical to IT but that operations may not trulyunderstand the significance of And even if operations does understandthe significance they often do not understand the technical details wellenough to complete the form properly This starts a negative chain reac-tion IT gets an incomplete or misleading form so they misunderstandthe importance or relevance of the project This can cause critical projects


Determineproject need

Operations IT

Develop Test DeliverDocument

projectrequest

Prioritizerequest

EXHIBIT 331 Internal Process Extension IT Project Requests

06_047461 ch03qxp 10406 1200 PM Page 88

to be improperly prioritized and force them to wait in the queue whileless important projects are completed Even more seriously it results incompleted projects that do not meet customer expectations because ofmisunderstanding from the beginning

The process extension solution then is simply to expand ITrsquos re-sponsibility within the process as shown in Exhibit 332

By assuming control of the documentation step in the process IT cansolve a lot of problems First sitting with the operations person makingthe project request enables IT to understand exactly what is being re-quested This obviously can help set realistic expectations for the oper-ating group making the request (in other words it can provide goodfeed forward discussed in the system map section) Second IT can en-sure that all the technical details of filling out the request form are at-tended to saving time and potential rework later in the process Finallyit can break down barriers between departments resulting from lack ofcommunication and create more of a team atmosphere This almost cer-tainly would lead to a higher level of customer satisfaction Once againprocess extension results in a win-win situation for the organizationless rework lower cost better results increased productivity and highersatisfaction level

In terms of strategic assessment it is recommended that a facilitatorconduct a brainstorming session specifically to try to identify process ex-tension applications The best way to conduct this exercise is to describewhat process extension is provide several examples and then give theparticipants a chance to think about possible company examples From



Operations IT


projectrequest

Prioritizerequest


06_047461 ch03qxp 10406 1200 PM Page 89

a technique perspective it is important to have a session focused solely

on process extension If any other techniques are mixed in it will dilutethe focus on this type of process leveraging opportunity

The second type of process leveraging technique is known as market

extension This involves attaining a high level of process proficiency ina certain segment in a market then using the proficiency to attack an-other segment within the market A classic example of this technique isProgressive Insurance For many years Progressive was known as acompany that catered to the high-risk driver if you were a Progressivecustomer it was a fair bet that you had more than a few blemishes onyour driving record The entire auto insurance market could be repre-sented as shown in Exhibit 333

Progressive specialized in the high risk segment The instructive factis that there is not as much traffic (no pun intended) in this segment Theonly way to achieve long-term profitability is to maintain excellentprocess performance in underwriting policy issuance claims and so onProgressiversquos process performance was so good that they began to buildreserves at a rate that gave them the capability to take on the giants ofthe industry in the medium-risk segment And again the proficiency inthe key processes generated significant returns (Note Progressive isalso a good example of process extension In addition to the excellencein traditional insurance functions they have extended their control overprocess links to include brokering Indeed a whole series of advertise-ments was built around the theme ldquoWe may not have the lowest pricebut we can tell you who doesrdquo)


High-Risk Drivers

Medium-Risk Drivers

Low-Risk Drivers

Market Segments

EXHIBIT 333 Market Extension Automobile Insurance Example

06_047461 ch03qxp 10406 1200 PM Page 90

Another example of market extension comes from Nypro The com-pany specializes in injection molding and has been in business for over 50years Up until about the mid-1980s the company was known as a playerin the low-precision injection molding market making toys and so forthAn aggressive approach to process improvement upgraded the companyrsquosability to produce higher-precision injection molding products enablingthem to attack new market segments such as medical devices and com-puter chips This transformed the company from $65 million in sales inthe mid-1980s to over $700 million in 2005

Again the best technique for discovering potential market extensionopportunities during strategic assessment is to describe the techniqueprovide the participants with a few examples then ask for potential com-pany applications It is common when brainstorming potential examplesto hear items that are technically more process extension than market ex-tension The facilitator should keep in mind that if a good idea surfacesunder the ldquowrongrdquo technique the most important thing is simply to addit to the list anyway As in the rest of the assessment the objective is toidentify all of the key SWOTs not to develop a technically perfect listof market extension possibilities

The final form of process leveraging technique is also the most aggres-sive It is called enterprise creation Enterprise creation is using the capa-bilities of a process to drive an entire new business or strategic directionfor the organization A classic example of this is HampR Block The orga-nization is best known for providing income tax preparation services Itonly takes a moment of thought to realize that managing the work flowin a tax prep firm would be a tremendous challenge The volume of workbuilds up to a tidal wave approaching the April 15 filing deadline thendrops off severely The only way to manage this shifting level is to recruithire and train employees in the ldquoHampR Block wayrdquo bring them in to helpprocess the avalanche of work and then let them go

The company developed a very high proficiency level in the recruit-ing hiring and training processes So much so in fact that it enabledthem to use the proficiency to drive strategic direction Proficiency inthese particular processes paved the way to doing them for others Since


06_047461 ch03qxp 10406 1200 PM Page 91

these three processes are the cornerstones of what a temp agency woulddo HampR Block opened temp service agencies throughout the countryTherefore the process excellence enabled them to create an entirely newprofit center

Another excellent example of enterprise creation comes from LLBean The company is known for its sales of outdoor wear primarilythrough its catalogs This method of transaction necessitated that thecompany become proficient at call center processes The company addedcenters in 1985 1988 1997 and 2004 The expertise in this area grew tothe point that the management team realized that selling this capacityto other businesses could create an additional revenue stream This is partof the reason the company has grown into a billion-dollar enterprise

Ideas for enterprise creation are not restricted to the private sectorWhen brainstorming potential applications for a state Department ofManagement several years ago an idea came up concerning the new staterecycling contract One of the existing responsibilities of the Departmentat the time was to deliver mail to all the government locations in the stateThis necessitated that the Department of Management have the logisticalexpertise to move things around among all the state buildings When thesubject of enterprise creation came up one of the participants mentionedthat the state was in the process of sending the new recycling contract outto bid to the private sector The idea was forwarded that since the logisti-cal infrastructure was already in place it would be possible to leveragethis capability to move recycled materials just as easily as they moved themail Since the department is obviously a not-for-profit organization thiscould save millions of dollars versus what the private sector would charge

One of the strangest examples of enterprise creation came from a smallnot-for-profit physical rehabilitation clinic in the Midwest The cliniclike many small organizations was having trouble getting its managers toproperly complete the performance appraisal process Annual reviewswere being done poorly (if at all) the forms were borrowed from a largerorganization and were overly complex and the managers saw no incen-tive to do the reviews since compensation wasnrsquot based on them The senior leadership felt that it was necessary for long-term development to


06_047461 ch03qxp 10406 1200 PM Page 92

conduct the reviews so the clinic created performance appraisal softwareto make it easier for the managers to complete them The software was interactive and walked each manager through a set of questions to helpanalyze performance The product was a professional-looking printout toreview with the employees It was so much easier to use than the priorprocess that the managers loved it and this fulfilled senior managementrsquosneed to formalize the career development path

The story could have ended here and been a nice example of processimprovement but there is much more One day a visitor from a localbusiness was in the clinic office and happened to see an acquaintancecompleting an appraisal on the computer Noticing the software thevisitor remarked that it looked great and asked where the clinic pur-chased it Upon being told that it was internally developed the visitorasked how much they would charge to sell it to his organization Thisspurred a huddle of the management team to determine a fair pricesince selling it wasnrsquot something they had even thought about To makea long story short word got out locally about the software Severalcompanies wanted to purchase it from the clinic Demand grew to thepoint where it became a revenue source for the organization A hybridphysical rehabilitation clinic and performance appraisal software devel-oper certainly doesnrsquot seem like a logical match While it is true that thecompany sort of stumbled into this opportunity versus driving it fromwithin it is an excellent example of how process capability can be lever-aged to drive totally new enterprises

There is an important point to make about all three process leveragingtechniques a company will not typically find them unless it looks forthem In other words specific time needs to be dedicated to trying to iden-tify examples of each type Most organizations get so tied up in trying tofix problems that they never really think about how to leverage processstrengths That is why any complete strategic assessment needs to includea session on these techniques As has been noted it is important to con-duct these sessions in series rather than in parallel In other words it is im-proper technique to explain all of the techniques at once and then ask forexamples It is much better to explain one technique provide examples


06_047461 ch03qxp 10406 1201 PM Page 93

then give the group adequate time to think of company examples beforemoving on to the next category

The strategic template lists the process proficiency matrix as a tool touse to help answer the question about devising SWOTs from process-based opportunities The matrix is really just a form to help you recordand organize ideas A sample is shown in Exhibit 334

To complete the matrix it is customary to list the name of the processto be leveraged in the left-hand column The second column is for pro-ficiency class The primary purpose of this column is to get the partici-pants thinking about how the performance of the organizational processcompares to competition within and outside of their industry Recom-mendations for categories are as follows

bull WC = world class best anywhere regardless of industrybull IC = best in the industry has a competitive advantagebull AV = average can compete within industrybull NI = needs improvement noticeable gapsbull WW = worldrsquos worst update your resumes

The world class category examples are typically candidates for enter-prise creation If a company has developed a capability to the pointwhere it is world class it is critical from a strategic perspective to deter-mine how to best leverage the strength The HampR Block hiring process


Candidate forhellip

Process ProficiencyClass

ProcessExtension

MarketExtension

EnterpriseCreation

Comments

EXHIBIT 334 Process Proficiency Matrix

06_047461 ch03qxp 10406 1201 PM Page 94

is a classic example of a world-class process because it extended beyondthe boundaries of the tax preparation industry to present an enterprisecreation opportunity

Industry class examples are typically candidates for market extensionConsider excess liability insurance carriers Excess liability means thatthe organization only gets involved in paying a claim if something really

bad happens For example a Fortune 500 company may need $150 mil-lion in liability insurance coverage One insurer might provide $100 million in coverage with a $5 million deductible or something of that nature Then the excess liability carrier will provide coverage from $100million to $150 million So if a claim is for $125 million the excess lia-bility carrier would pay the amount over $100 million which obviouslywould be $25 million But the good news for the carrier is that a claimof $98 million would cost them nothing as this is below the $100 mil-lion ldquoattachment pointrdquo

Anyway the point is that the customers of a company like this willonly be organizations large enough to need $150 million (or more) in liability coverage This means that medium and small organizations arenot attractive prospects However one of the key tasks done when pric-ing excess liability policies is risk assessment typically conducted byhighly trained engineers This expertise is obviously valued by the com-pany because it enables them to give accurate (profitable) pricing But itis also valued by the customer since during the analysis the engineersoften identify things that the company can do in terms of preventativemeasures to reduce the probability of a large claim occurring at allWhile medium and small companies may not need the coverage on agrand scale they could benefit significantly from the expertise providedby the engineering team The company could enter the medium and smallmarket segments and sell the risk engineering services for a fee leverag-ing its expertise and generating fees for the organization

Any proficiency class may generate process extension examples Extension may happen because an organization is very good at what itdoes and it is obvious that assuming control over more links in theprocess would be beneficial as in the machine build example previously


06_047461 ch03qxp 10406 1201 PM Page 95

offered It is also possible that extension would be necessary to close agap For example consider the medical industry in Houston There aremany huge hospitals in the area and several are growing As a resultthere is a shortage of qualified candidates to fill positions One of themost difficult positions to hire for is that of nurse Most qualified nursesalready have good positions so hiring is a difficult process This partic-ular hospital compounded the problem by having a difficult process forengaging and interacting with search firms that specialized in hiringfor the medical profession So the proficiency class was definitely needs

improvement The process extension solution was simply to purchase asearch firm to do the hiring for them This helped them bring the ex-pertise in-house and have specialists on staff who were close to both themarketplace and the needs of the hospital

Another process extension example comes from a situation with a se-rious gap The proficiency class worldrsquos worst is listed tongue in cheekbut the point of phrasing it so bluntly is to alert the organization thatsomething needs to be done right away to close the gap For examplemany financial services organizations set up offices abroad in places likeBermuda or the Cayman Islands to capitalize on favorable tax laws Butin order to reap the benefits of the tax advantages it is sometimes neces-sary to jump through legal hoops For example a Bermuda-based insur-ance company may have to do business with Bermuda brokers who inturn do business with US brokers who in turn do business with USclients This does two things It ensures that the carrier conducts businessin Bermuda under Bermuda tax laws instead of in the United Statesunder US tax laws which could save the company millions of dollarsUnfortunately it also isolates the company from its customer base po-tentially leaving them out of touch with their customersrsquo changing needsThis also puts them at the whim of the intermediate links Should a USor Bermuda broker make a mistake or communicate poorly it is easierto tell the client that the carrier is to blame This is an untenable positionfor the carriers because they cannot adequately defend themselves sincetoo much contact could run them afoul of the tax laws


06_047461 ch03qxp 10406 1201 PM Page 96

This is a case in which it would be natural to label the productservicedelivery process as worldrsquos worst It would be difficult to imagine a sit-uation in which the customers and their specific needs were so difficultto determine by the supplying company Because these needs are so dif-ficult to determine it makes it that much tougher to meet them From astrategy perspective some type of analysis needs to be done to evaluatewhether giving up the tax advantages would bring in enough businessand help avoid enough losses to justify the move This definitely needsto be an item on the SWOT list

The examples presented for the various proficiency categories arelisted in the proficiency matrix in Exhibit 335

Note that the comments section in the right-hand column is usedto describe the problem or the process opportunity These only need tobe reworded slightly to turn them into properly written SWOTs asfollows

bull ldquoDevelop temporary agency business to leverage expertise in re-cruiting hiring and trainingrdquo

bull ldquoOffer risk engineering consulting to nonndashFortune 500 companiesfor a fee to generate risk-free incomerdquo

bull ldquoSend a technician to the customer site when shipping a machineto aid in setup reducing warranty costs and getting the machinerunning fasterrdquo

bull ldquoBuy a search firm to locate hard-to-find categories of employeeensuring that we will always have sufficient in-house expertiserdquo

bull ldquoGeographic isolation from customers puts us out of touch withtheir needs and forces an over-reliance on the brokersrdquo

The workshops and focus groups utilized to determine process lever-aging examples are often the most interesting and enlightening portionof the assessment They force participants to think about issues that oth-erwise will not be thought of

The final strategic question from the process section of the templatedeals with the productservice offering The overarching question is


06_047461 ch03qxp 10406 1201 PM Page 97

straightforward ldquoWhat are the strengths and weaknesses of our prod-uct offeringrdquo There are several issues to be discussed in making this de-termination These are presented in the form of questions in the product

worksheet shown in Exhibit 336The first question directs the user to list the main products that are

considered to be competitors of the product your company wants to an-alyze For example Dell might want to evaluate a certain type of laptopcomputer against similar products from Gateway Compaq IBM Sonyand so on

Questions two and three are centered around the comparison be-tween your product and competitorsrsquo products Why do customers buyfrom you instead of the competition Or why do they buy from thecompetition instead of you Consider the example of a youth basketballorganization that was looking to purchase T-shirts for all the playersthat participated in their tournament The two choices for a vendorwere Haynes and Gildan The Haynes product was lighter which couldbe desirable on hot days There also was a bigger color selection tochoose from and the turnaround time for delivery was quicker On theother hand the Gildan product felt heavier (making it seem of better


Candidate forhellip


ProcessExtension

MarketExtension

EnterpriseCreation

Comments

Hiring (tax prepfirm)

WC Yes Could develop temporary agency business toleverage process strength

Product delivery(insurance)

IC Yes Engineers known for their expertise couldoffer risk consulting to small companies fora fee

Set up process(machine-build)

AV Yes Sending a technician to aid in setup couldreduce warranty costs and get machine running faster

Hiring (hospital) NI Yes Thin labor pool competitive market Could buy a search firm so we own the process


WW Yes Isolated from customers and need to bridgegeographic divide

EXHIBIT 335 Completed Process Proficiency Matrix

06_047461 ch03qxp 10406 1201 PM Page 98


Product Answers

1 What competitive products a)bare on the market )c)d)

2 What features of this product make it a)superior to each competitive product b)

c)d)

3 What features of each competitive product a)make it superior to ours b)

c)d)

4 How long has this product been on the market

5 How long is a typical product life cycle

6 How long does it take for us to develop the ldquonext-generationrdquo product

7 Is this development time slower than equal toor faster than our competitors

8 What customer needs does our product fill

9 How will these needs change in the future

10 How do we gather customer information to ensure we can identify and adapt to changing needs

11 How does the reputation of the company enhance or hinder product perception

EXHIBIT 336 Product Worksheet

06_047461 ch03qxp 10406 1201 PM Page 99

quality) was less expensive and had an appealing collar style that theother choice did not have Either organization could get value out ofcompleting the product comparison of questions two and three to de-termine what the key SWOTs might be

The next few questions deal with product maturity and the ability toinnovate and turn out the next-generation product Question four askshow long the product has been on the market and question five is aboutthe typical life cycle Think about the technology of personal computersand how fast the definition of ldquostate of the artrdquo changes Technologicaladvances continue to make computers better faster more powerfulsmaller lighter and so on Conservative estimates would put the lengthof time a product could remain on the market and be lsquocutting edgersquo ataround six months If the product being evaluated has been on the mar-ket for five months it is obviously time to question how long it will re-main viable Question six probes further into the product developmentprocess asking how long it takes to turn out the new and improved ver-sion of a product If a product has a six-month product life cycle and ayear-long product development cycle time the company would obvi-ously be in a precarious position Predicting the ideal product two cyclesforward would be very difficult (at least with any consistency) Questionseven completes the analysis of the development process by asking if thecompany development time is faster than slower than or about the sameas the competition In a quick-moving industry having a developmenttime slower than competitors is certainly a competitive disadvantage

The next questions are of a big-picture nature Question eight askswhat needs the product fills For example a cell phone fills the need formobile communication access to emergency services personnel andother needs The follow-up question then asks how these needs mightchange in the future In the case of cell phones recent features added include the ability to take photographs send and receive e-mails playmusic and other features This enhances the access and mobility ele-ment that customers value It can be instructive to think about what features could be added to continue to meet and exceed expectations inthe future


06_047461 ch03qxp 10406 1201 PM Page 100

Question ten asks how customer information is gathered to ensurethat changing needs can be identified so the organization can adapt Itis important not to base all new product development or analysis of customer needs on opinion or gut instinct Intuition instinct and expe-rience are certainly important to new product development but only inconjunction with data collection

The final question asks how the reputation of the company enhancesor hinders the perception of the product This can identify potential bar-riers or advantages that need to be included in the SWOT list For ex-ample one of the newer models of automobile is the Mini Cooper Ifyou didnrsquot know the manufacturer of the car then you would have no

preconceived notions about process quality On the other hand if youknew that the car was made by a company like BMW you would havecertain expectations Volvo might create a different set as would YugoBecause Volvo is known for safety any car coming from that organiza-tion would carry the assumption that it is safe BMW carries the expec-tation of being expensive well built and fun to drive Yugo was a veryinexpensive vehicle not known for exceptional durability Note that theperceptions of the various companies had no bearing on the actual qual-ity of the Mini Cooper it simply illustrates that the company reputationmay dramatically affect the perception of its product regardless of ac-tual product quality (Mini Cooper is made by BMW by the way)

A sample product worksheet is shown in Exhibit 337 using a com-parison of one product to several different types of competing products

There is nothing magical about the worksheet but the questions aredesigned to help the organization think through its product positioningand it may generate several critical SWOTs For example the previ-ous worksheet could yield the following

bull ldquoOne county newspaper is aggressively trying to build circulationin its local market resulting in a 27 drop in our circulation inthat area in the last yearrdquo

bull ldquoOur writers are generally better than local papers enhancing ourreputation and leading to customer retentionrdquo


06_047461 ch03qxp 10406 1201 PM Page 101


Product City Newspaper Answers

1 What competitive products a) Internetare on the market b) Magazines

c) County newspaper

2 What features of this product a) Local coupons traditional mediummake it superior to each the ldquofeelrdquo of reading the papercompetitive product b) More frequent information more

local informationc) Better writing more information

broader perspective

3 What features of competitive a) Real-time information its freeproduct make it superior to ours younger generation grew up on it

b) Better expertise more in-depthanalysis name recognition

c) More local information

4 How long has this product Paper has been publishedbeen on the market since 1925

5 How long is a typical Indefinite though new forms ofproduct life cycle information provision are eroding

our market share

6 How long does it take for us to Not applicable in a traditional sensedevelop the ldquonext-generationrdquo though we do have an online product version of the paper today

7 Is this development time slower than The same as the county paper but not equal to or faster than our competitors applicable to the other forms of media

8 What customer needs does our The need to be informedproduct fill

9 How will these needs change Customers will continue to put a premium on convenience and technology makes information flow much easier electronically

10 How do we gather customer Web surveys and informallyinformation to ensure we can identify and adapt to changing needs

11 How does the reputation of the Reputation is a positive with older company enhance or hinder customers because we have reliable product perception delivery and have been around forever

Younger customers are more Internet-focused and the reputation isnrsquot a factor

EXHIBIT 337 Product Worksheet Example Daily Newspaper

06_047461 ch03qxp 10406 1201 PM Page 102

bull ldquoThe Internet provides up-to-the-minute information to our cus-tomers decreasing reliance on and demand for the paperrdquo

bull ldquoAdvertising rates are based on circulation numbers and the intro-duction of new forms of media will erode our numbers and driverates downrdquo

bull ldquoCustomers perceive the Internet gives them free access to informa-tion so they donrsquot see the need to spend extra on the newspaperrdquo

bull ldquoCustomers go to work earlier and earlier in todayrsquos businessworld not leaving time to read the paper in the morningrdquo

bull ldquoOur Internet product enables us to compete with other real-time sites and keep customers conditioned to look to us for theirinformationrdquo

bull ldquoPutting our product online has caused circulation to go down be-cause customers donrsquot see the need to buy a paper when they canget the same information online for freerdquo

bull ldquoMany customers like to read the paper while they eat breakfastwhich is something they cannot conveniently replace with a com-puter terminalrdquo

bull ldquoOur biggest customer segment is the long-term people who grewup reading the paper every day and arenrsquot that familiar with the Internet circulation will drop if we cannot profitably attractyounger customersrdquo

bull ldquoCoupons defray the cost of the paper for the customerrdquobull ldquoMost customer information is gathered through web surveys

which may not be reliable indicators of the needs and feelings ofthe entire customer populationrdquo

bull ldquoContinued reliance of society on technology will almost certainlynegatively affect circulation numbersrdquo

This is just a sampling of the ideas a good discussion of product po-sitioning can promote

Again these questions tools and workshops presented should beviewed as a menu to pick from for the process assessment Each organiza-tion has its own set of issues and challenges that will make the assessment


06_047461 ch03qxp 10406 1201 PM Page 103

process unique but properly following the guidelines presented will delivera set of process SWOTs from which the organization can build a solidplan The remainder of the assessment sections to be discussed serve as anecessary supplement to the process assessment

FINANCIAL ASSESSMENT IMPLEMENTATION

The goal of financial assessment is straightforward to assess the currentposition and think through what the numbers are predicting about thefuture The template suggests an analysis of the key financial indicatorsand how they are trending The purpose of this is to reinforce whetherthe organization is in a growth climate or a mature climate which willdictate different strategic decisions Brainstorming can be used for iden-tifying key financial indicators but practically all companies will al-ready know what they are Tools listed that will help analyze trends arerun and control charts A run chart is simply a tracking of data as it risesand falls over time as shown in Exhibit 338

This particular chart shows a sales level that is generally stable or flatover time There are many ups and downs but no discernible long-termtrends This could mean many things Perhaps the demand for the prod-uct or service the company makes has flattened out Perhaps the cam-paigns designed to boost sales have not worked Perhaps price increases(or decreases) were put in place that kept sales dollars flat but dramati-cally affected profitability Any of these are possibilities The instructivepoint here is that the chart can give you the foundation to build a hy-pothesis from but it is up to the management team to use its knowledgeto determine the true reason behind flat sales This is an important con-cept because it illustrates one of the benefits of formal versus informal as-sessment Informal assessment requires little data because everything isbased on brainstorming This puts the burden on the management teamto do three things (1) remember the topic of sales during brainstorming(2) accurately remember the financial figures and trends and (3) assignthe proper cause to craft a well-written SWOT In the formal assess-ment the first two issues will not be significant because the assessment


06_047461 ch03qxp 10406 1201 PM Page 104

process addresses them Therefore all the management team will need todo is assign the proper cause This reinforces the notion that the formalassessment will yield a more comprehensive list of key SWOTs

Control charts are also referenced as a potentially useful tool for dataanalysis A control chart is simply a run chart with mathematically deter-mined limits added These limits differentiate the type of everyday varia-tion that is built into the process from truly unusual events A practicalexample may help illustrate this concept Suppose your drive to work inthe morning takes an average of 30 minutes Sometimes it may take 35sometimes it may take 25 but the average is about 30 Knowing thiswhat would you do if one day it took you 32 minutes to get there Youare two minutes above average which in this case is a bad thing Shouldyou form a task force of your subordinates to walk the trail back to yourhouse to determine where exactly the two-minute deviation occurredThis would obviously be an ineffective strategy since you probably just


325

275

225

$(T

hous

ands

)

175

125

75Mar May JulApr Jun Aug Nov Apr AprJul JulMar MarOct Feb FebAug AugJun

Month

JunSep SepDecNovJan-99

Jan-00

Sep Dec May MayOct Oct

CL=18694

EXHIBIT 338 Monthly Sales Run Chart

06_047461 ch03qxp 10406 1201 PM Page 105

caught an extra red light or there were a few more kids at the crosswalkthan normal By the time your task force walked the trail those kidswould be in their second period class and there would be nothing to find(Which brings up another interesting point Subordinates would nevercome back to the boss and say ldquoGee we have no idea why the deviationoccurredrdquo They would instead craft an explanation that may or may nothave anything to do with reality This could quite possibly be followed bya management decision based on their report that would send the com-pany spinning off in an inappropriate direction)

On the other hand if one day the drive time was 120 minutes wouldyou consider that to be unusual This would almost certainly be thecase and the interesting point is that you wouldnrsquot need a task forceto tell you why it happened You would know it was because of the fifteen-car crash or the water main break or whatever The point is thatsomewhere between the 30-minute average and the 120-minute extremesomething happens Normal everyday fluctuation gives way to truly un-usual events This boundary between common and special is importantto understand because it can impact your management decision mak-ing Consider the control chart example in Exhibit 339

106 The Strategic Process$(

Tho

usan

ds)

1550

1350

1150

950

750

550

350

150

Jan-

98 Feb

Mar Apr

May Ju

n Jul

Aug Sep

Oct

Nov Dec Fe

bM

ar AprM

ay Jun Ju

lAug Se

pO

ct Feb

Mar Apr

May Ju

n Jul

Aug

LCL=17361

CL=79662

UCL=141962

Sep

Oct

Nov Dec

Jan-

00

Jan-

99

Month

EXHIBIT 339 New Customer Sales Control Chart

06_047461 ch03qxp 10406 1201 PM Page 106

Note the similarities to the run chart The only real difference is the pres-ence of the UCL (Upper Control Limit) and LCL (Lower Control Limit)lines These lines cannot simply be set wherever the user wants to set themThey are calculated based on actual historical data on the subject in ques-tion The formulas for construction of the limits and theory behind themcan be found in any elementary statistics book but the important item forassessment purposes is the interpretation The interpretation of Exhibit339 tells us that because everything is inside the limits with no discernibletrends new customer sales is basically steady over the course of time Is thisa good or a bad thing It depends on the target for new customer sales Inthis chart the organization averages just under $800000 per month in newsales If the target is $1000000 per month then the organization is andwill continue to be predictably lousy Several potential SWOTs could re-sult from this finding including any or all of the following

bull ldquoInsufficient sales to new customers threaten overall profitabilityrdquobull ldquoSales incentives aimed at new customer attraction have not suc-

cessfully enabled us to meet our targetsrdquobull ldquoSales force inexperience is preventing us from attracting sufficient

new businessrdquo

On the other hand consider the chart presented in Exhibit 340This particular version has a point in December 1999 that is above

the upper limit (UCL) This is typically referred to as a special cause sit-uation The appropriate course of action in this case is to investigate todetermine the cause which in this example could yield any of the fol-lowing SWOTs

bull ldquoPrice cutting at 1999 year-end attracted new customers but re-sulted in negative bottom-line impact that is threatening all new in-vestmentrdquo

bull ldquoSales development training conducted in November 1999 drovenew customer acquisition higher than ever beforerdquo

bull ldquoOffer prospects long-term buying incentives to attempt to repeatthe record acquisition at the end of 1999rdquo


06_047461 ch03qxp 10406 1201 PM Page 107

Once again the chart gives valuable data regarding what happenedbut the management team must use its knowledge and experience to de-termine why it happened and the implications of the event Any of thethree conclusions listed are plausible reasons for the spike on the graphmanagement must determine the real reason

Control charts are not new tools invented for the purpose of strategicassessment On the contrary they have been used for various businessapplications dating all the way back to prendashWorld War II Using themfor trend identification and interpretation is sometimes very helpful dur-ing the assessment process and not only for financial figures It is com-mon to see control charts used for tracking customer and process data aswell Using these charts to supplement other more traditional forms of financial analysis can yield good information for assessment purposes

The next question posed on the financial assessment template isldquoWhat external factors will impact our financialsrdquo The purpose of thisquestion is to get management to think about potential future financialissues these types of things will not show up on charts filled with his-torical data The tooltechnique listed for this question is brainstorming


Tho

usan

ds)

1550

1350

1150

950

750

550

350

150

Jan-

98 Feb

Mar Apr

May Ju

n Jul

Aug Sep

Oct

Nov Dec Fe

bM

ar AprM

ay Jun Ju

lAug Se

pO

ct Feb

Mar Apr

May Ju

n Jul

Aug

LCL=17361

CL=79662

UCL=141962

Sep

Oct

Nov Dec

Jan-

00

Jan-

99

Month

EXHIBIT 340 New Customer Sales Version Two

06_047461 ch03qxp 10406 1201 PM Page 108

which could be supplemented by forecasting dynamic financial analy-sis or a host of other more sophisticated analytical techniques

The final question under financial assessment deals with the budgetthat has been allocated to strategic plan execution This is a criticalquestion because many organizations do not link strategy and budgetMany times plans wither and die when initiatives resulting from plandevelopment are not properly funded and the associated objectives arenot met Failure to allocate resources also creates the impression thatstrategy isnrsquot that important or that it is something to do only afteryour real work is done The tool jokingly referred to as being useful tohelp answer the budget question is a sledgehammer The point beingmade here is that it must be ldquohammered homerdquo from the beginning ofstrategic plan development that the completion of the plan is the start-

ing point not the finish line Many managers have a project mentalityonce the plan is complete they (consciously or subconsciously) cross itoff their to-do list and move on to the next item In reality the workonly begins once the plan is complete Having budget dollars dedicatedto execution is a must in order to reinforce the importance of the planand give the organization a realistic chance to execute it effectively

CUSTOMER ASSESSMENT IMPLEMENTATION

The purpose of the customer assessment is to balance internal analysiswith the external perspective No assessment can truly be completewithout considering the needs and direction of the marketplace Thequestions and tools from the customer assessment are reprinted in Ex-hibit 341

The first question deals with customer segmentation There are anumber of ways a company can segment its customer base (eg prod-uct type size of customer geographically) The objective is to isolate thedifferent segments that are strategically important to meet the missionand vision determine each segmentrsquos needs and expectations and thinkabout how those needs may change in the future


06_047461 ch03qxp 10406 1201 PM Page 109

For example consider a traditional US airline The segments of theairline might be business travelers leisure travelers and cargo shippersThe business traveler segment may put a premium on convenience andspeed of travel A business traveler might be willing to pay an extra fewhundred dollars to travel from Dallas to Chicago if the flight leaves attheir preferred time is nonstop and will get them there in time for theirbig meeting A leisure traveler however may be far more interested inprice This person might be willing to leave at 6 am and connect in SaltLake City to get from Dallas to Chicago if it can be done cheaply

The interesting thing about this example is that the same person canfit into both segments at different times This illustrates the need for seg-mentation by customer type versus simply segmenting into passengersand cargo The cargo segment may be further broken down into high-

volume and low-volume shippers if the company feels that needs andexpectations will vary between the two groups and each group needs tobe analyzed

Another segmentation example comes from the consulting businessOrion Development Group is one of the top consulting companies in the


Customer Assessment

Key Questions

What are the key customer segments

What are the key SWOTrsquos surrounding relationshipswith key customer segments

What ldquomust bersquosrdquo of the relationships are not met

What can we do to ldquodelightrdquo each segment

What are our key competitorsrsquo strengths andweaknesses

How will the industry change in the future

Potentially Useful Tools

Brainstorming

System maps

Kano analysis

Kano analysis

Focus groupscustomer research


EXHIBIT 341 Customer Assessment Framework

06_047461 ch03qxp 10406 1201 PM Page 110

country specializing in the fields of strategy development and processimprovement It has partnerships with universities throughout theUnited States and a large portion of its business involves conductingpublic seminars through the universities The public seminar partici-

pants are a key customer segment These people receive one of the sem-inar brochures in the mail decide that the topic would be of value andregister and attend the programs at the university The need of this seg-ment is transfer of information The range of participants might be fromthose who know nothing about a topic to those who are practically ex-perts but they share the goal of learning more to determine whether andhow to implement the chosen concepts in their own organizations

The next segment consists of in-house training customers These com-panies receive the brochure in the mail and decide that it would be ofgreater value to have an instructor come to the company and teach agroup of internal people versus sending a person or two to a universityto learn This segment shares the public seminar participantsrsquo goal ofknowledge transfer but wants to discuss more of its own company ex-amples and how the concepts specifically apply

The third main customer segment is the process consulting customersThese companies have a specific process problem they need help in fix-ing This involves having a consultant come on site to help with themapping determine process gaps help identify prioritize and imple-ment solutions and so forth In short facilitate the entire process forfixing the problem

The fourth and final segment for the company is the strategic consulting

customers These companies need assistance in the development of a strate-gic plan or Balanced Scorecard While this segment shares many of thesame characteristics as the process consulting customers (ie they needhelp finding a solution to a gap they are experiencing) the company choseto separate the strategic clients for a very important reason the contactlevel within the customerrsquos organization Requests for process consultingcan come from many different levels within the customer organization depending on the size and complexity of the process in questions Requestsfor development of strategic tools however almost always come from the


06_047461 ch03qxp 10406 1201 PM Page 111

companyrsquos executive team Because of this it is important that Orion havepeople handling these requests and conducting the engagements who havebeen executives and can relate to executives

Once the appropriate customer segments have been defined the com-pany may proceed to question two from the assessment templateldquoWhat are the key SWOTs surrounding relationships with key cus-tomer segmentsrdquo Each segment the company considers to be of strate-gic importance (ie it will significantly impact their ability to meet theparameters established by the vision) can be analyzed via the systemmap tool introduced in the process assessment section In this instancethe company as a whole should be placed in the PDCI box and thecustomer segment placed in the oval as the answer to output questionone An airline example is shown in Exhibit 342

The customer segment system maps raise a host of important issues fordiscussion The box in the lower right-hand corner is an analysis of thekey customersrsquo needs and how well they are being met both perceivedand actual if data is collected The feedback and feed forward questionstell how connected the company is to the customers and the analysis ofgap causes provides feedback on the internal processes and issues thatcause the gap This is valuable information in itself but looking at thesupplier side helps complete the picture The box in the lower left-handcorner enables the company to evaluate its suppliers again both per-ceived and actual if data is collected The communication boxes are stillpresent to evaluate interaction quality and the gap analysis gives an in-dication of how much of the problem is internal versus external Poten-tial SWOTs that could come out of this exercise are as follows

bull ldquoScheduling department bases schedule on models versus real-world experience resulting in overcrowding of hubs that leads toflight delaysrdquo

bull ldquoFrequent Flyer program is perceived by customers to be averageat best and certainly doesnrsquot attract customers to the airlinerdquo

bull ldquoHeavy turnover among gate agents results in poorly trained staffdealing with customers and unmet expectationrdquo


06_047461 ch03qxp 10406 1201 PM Page 112

bull ldquoCost pressures have reduced spare crew and plane availabilityleading to more flight delaysrdquo

bull ldquoCumbersome negotiation process prevents us from making midtermchanges to the pilot contract resulting in operational delaysrdquo

bull ldquoPilot expertise is superb contributing to an industry-best safetyrecordrdquo

bull ldquoOutdated flight control technology prevents controllers from op-timizing traffic flowrdquo

bull ldquoFood service is extremely poor on domestic flight creating a win-dow of opportunity for competitorsrdquo

bull ldquoCustomers value our convenience when flying between majorcities leading to repeat businessrdquo

Does a company need to create a system map for every customer seg-ment Of course not The objective is to determine which segments are


EXHIBIT 342 Airline Customer System Map Example


1 1 ESafety2 2 FOn time flights3 Knowledgeable agents 3 P4 4 GConvenient flight times5 5 PGood food6 6 G


1 1 FClear regulations2 2 GProper traffic control3 3 FFair treatment at nonhubs4 4 FFlexibility5 5 GFair demandsexpectations6 6 EFlight expertiseskills7 7 EReliable equipment


1 Annual mtg2 Negotiation3 Repeat business


1 Survey2 Cust care Phone calls Letters34


1 Advertising2 Website


1 Annual meetings2 Negotiations3 Informal


Most Important Gap

Airline Business Traveler

FAA

Pilot union

Boeing


1

2

3

I2 I3 I4

I5

I7

I8

Gap causing issues1 Overcrowded hubs2 Lack of experience

Proper traffic control

3 Lack of needed technology

Internal gap causing issues1 Maintenance delays

On-time percentage

2 Scheduling too many flights3 Lack of planes4 Crew scheduling5 Lack of staff

O2 O3O4

O5

O7

O8

O1

Fast baggage handling7 7 FGood EE program

06_047461 ch03qxp 10406 1201 PM Page 113

the most important strategically and analyze them There are usuallyabout a half-dozen or less strategically important segments so the sys-tem map analysis should take one to two days to effectively completepending data collection issues The participants in the session should bea combination of people who understand customer needs with thosewho can pinpoint internal reasons for not meeting those needs Collect-ing data to confirm or deny perceptions is a critical part of the analysisAn organization often perceives one set of needs to be critical but thecustomer has a very different list of expectations It would be appropri-ate to add a SWOT dealing with the lack of understanding of cus-tomer needs in this case

The next two questions introduce terms that were popularized by theKano model of quality introduced by Noriachi Kano in the 1980s Themodel holds that there are three levels of customer needs and satisfac-tion The first and most basic is the ldquomust berdquo level A ldquomust berdquo issomething that absolutely has to be there or the customer will be upsetThe absence of a must be is sure to provoke an immediate negative cus-tomer reaction For example consider a stay in a hotel The list of itemsthat would qualify as must be include a clean room hot water a bed anelectronic key that opens the door a television and so on No matterwhat price a customer pays almost any customer would consider theseto be standard features

An important feature of the must be category is that meeting all ofthem doesnrsquot guarantee customer satisfaction or loyalty Customersdonrsquot usually call their friends after a hotel stay and tell them ldquoI stayedin a great hotel this weekendmdashit had a bed Right there in the roomYou have to go check this place outrdquo In fact a must be could be dia-grammed as shown in Exhibit 343

The vertical scale reflects customer satisfaction The range is from a to-tally dissatisfied customer at the bottom to a completely satisfied cus-tomer at the top The horizontal scale measures how well the particularcharacteristic has been fulfilled The left-hand side of the scale indicatestotal lack of the characteristic in question and the right-hand side reflectsthat the characteristic has been completely fulfilled


06_047461 ch03qxp 10406 1201 PM Page 114

In the case of the must be the line drawn on the model shows that theabsence of the must be characteristics reflect a very dissatisfied cus-tomer but as more and more must bersquos are met the satisfaction levelstarts to rise However notice that the satisfaction never goes aboveneutral reemphasizing the point that meeting the must be cannot resultin a high level of customer satisfaction or loyalty Meeting the must bersquosis just like the ticket to get into a movie you have to have one to get inbut the ticket doesnrsquot make going to the movies a memorable experi-ence Kano pointed out that so many organizations spend so much time


EXHIBIT 343 Kano Model of Quality The ldquoMust Berdquo

CustomerSatisfaction

Scale

Absence ofCharacteristic

Presence ofCharacteristic

Must Be

Satisfied

Neutral

Dissatisfied

06_047461 ch03qxp 10406 1201 PM Page 115

just trying to satisfy the must be characteristics that they do not realizethey are just meeting the minimum

The moral of the story is that to create a high degree of customer satis-faction it is necessary to move beyond the bare minimum level The sec-ond level of customer satisfaction called more is better does just thatMore is better features may not be absolutely necessary to the customersbut the more they see of them the better they like it For example a towelin a hotel is a must be but the bigger thicker and softer the towel ismdashmore is better A television might be a must be but the capabilities of hav-ing cable movie channels on-demand movies and video games is betterThe more is better line has been added to the model in Exhibit 344

Note that the absence of any more is better features still yields a lowlevel of customer satisfaction but as the more is better features becomepresent the level rises to well above neutral Indeed fulfilling more isbetterrsquos can yield a fairly high level of customer satisfaction and loyalty

Kano felt that there was an even higher level however and he calledit ldquodelightersrdquo A delighter is a special feature that the customer doesnrsquotexpect but when it is present it provokes an immediate positive reactionA great example comes from Doubletree Hotels If you ask a roomful ofpeople what differentiates Doubletree from the other hotel chains youwill immediately hear ldquoThe cookiesrdquo Many years ago Doubletree begangiving warm fresh-baked cookies to guests upon arrival and this simplefeature continues to make a big impression Another example comesfrom the Hotel DeVille in Binghamton New York A guest returned fora second visit six months after his initial stay and was upgraded to asuite for no charge Upon entering the room he found a fruit basket andbottle of champagne with a note that read ldquoWelcome backrdquo with hisname on it This sort of thing might be expected when visiting the samehotel over and over but for a two-time visitor it made a huge impres-sion And there has never been an instance when this traveler has returned to Binghamton without staying in the Hotel DeVille

Premium hotel chains (versus economy hotels) really have to go theextra mile to do something that qualifies as a true delighter Herersquos an ex-ample from the Four Seasons that would certainly make the grade A


06_047461 ch03qxp 10406 1201 PM Page 116

customer was checking out of a Four Seasons and told the desk clerk thathe was very nervous because he was flying to New York to make a 2 pmpresentation to over 400 people He was so nervous in fact that he lefthis presentation materials in a briefcase right in front of the registrationdesk and didnrsquot discover the error until he was on his flight to NewYork To his dismay there was no chance of getting back to the hotel ontime so he had no choice but to make the best of it At 1 pm he wasbusy lining up flipcharts on the stage side by side and putting large writ-ing on them (trying to write large enough for 400 people to be able tosee) when the doorman from the hotel in his originating city walked in



Scale



Must Be

Satisfied

Neutral

Dissatisfied

More isBetter

EXHIBIT 344 Kano Model of Quality The ldquoMore Is Betterrdquo

06_047461 ch03qxp 10406 1201 PM Page 117

This gentleman had found the briefcase driven to the airport flownto New York found the hotel and delivered the training materials Thiswould almost certainly qualify as a delighter by any standards The de-lighter line has been added to the model in Exhibit 345

Note that the absence of delighters still yields no less than neutralwith regard to customer satisfaction Because customers do not expectdelighters they cannot be disappointed when they are not presentHowever continuing to provide delighters to customers results in thehighest rating for customer satisfaction and loyalty

There are a number of important points to be made regarding Kanoanalysis First an alert observer would note that all the delighter exam-ples given require additional cost Whether it is a bottle of champagneor a flight to New York it certainly is possible that a delighter will addto the expense side of the ledger However the goodwill and customerloyalty generated through these giveaways can more than offset the costinvolved if they are deployed judiciously

Remember also that if the strength of your company lies in develop-ing strong customer relationships identifying and implementing a de-lighter is not a one-time chore for you As soon as a delighter is introducedit quickly begins sliding down the scale toward must be Think about theDoubletree example a frequent guest at the hotel would be looking for-ward to receiving the cookies and if they werenrsquot there it would causedissatisfaction Even though other comparably priced chains donrsquot havecookies Doubletree has set the expectation and now must live up to itThink about buying a new car Things like CD players automatic doorlocks automatic windows power steering anti-lock brakes air bagsmdashall of these were considered delighters at one time but today they are al-most all seen as must be features This phenomenon dictates that anorganization must continue to come up with new and interesting de-lighters to keep its customers happy and loyal

The phrasing of the last sentence was critical the company must con-tinue to come up with delighters It is a mistake to rely on customers to tellyou what would delight them your organization must determine what de-lighters could be Most customers donrsquot understand your business well


06_047461 ch03qxp 10406 1201 PM Page 118

enough to even begin to know what you may be capable of providing Forpurposes of strategic assessment the two questions from the template aremeant to determine what must be features are not being met and what de-lighters might be possible It is recommended that a focus group be con-ducted with people within the organization to determine what issues fallin each category The process should be as outlined in Exhibit 346

Note that the delighters exercise is split into two categories Whentrying to identify delighters participants typically start with ideas thatinvolve free giveaways The delighter is that they should take the cus-tomer to the baseball game out for dinner to the golf course and the



Scale



Must Be

Satisfied

Neutral

Dissatisfied

More isBetter

Delighter

EXHIBIT 345 Kano Model of Quality ldquoDelightersrdquo

06_047461 ch03qxp 10406 1201 PM Page 119

like These are good relationship-building ideas but they are not pow-erful competitive differentiators because they can be so easily matchedby competitors

A different and more lasting delighter can be found if the focus switchesto solving customer problems The facilitator should instruct the partici-pants in the focus group to put themselves in their customersrsquo shoes andthink about the problems they face on a daily basis This doesnrsquot neces-sarily need to be problems with your company The intent is to determinewhat causes your customers pain from any source Once a list has beencompiled brainstorm ways in which your organization can solve their


Identify any that are regularly unmet

Define concept of delighters

Brainstorm Type I delighters

Identify customer problems

Brainstorm Type II delighters

Brainstorm must be characteristics

Write SWOTs documenting impact


EXHIBIT 346 Conducting the Kano Focus Group

06_047461 ch03qxp 10406 1201 PM Page 120

problems for them Experience shows that solving problems for customersthat they are not expecting you to solve creates a long-lasting delighterThe Machine build opportunity for process extension actually originatedout of a Kano brainstorming exercise The customer problem identifiedwas that of damaging machines during the setup phase leading to theprocess extension suggestion of sending the technician with the machineto assist

Sample SWOTs that could come out of a Kano exercise are as fol-lows with must be violations followed by different types of delighterpossibilities The context of the example is for a hotel

bull ldquoElectronic keys routinely do not unlock guestroom doors resultingin return trips to the front desk and lower customer satisfactionrdquo

bull ldquoLimited hot water during peak early morning hours results incustomer complaintsrdquo

bull ldquoHigh turnover and insufficient staffing levels among the house-keeping staff results in some rooms not being cleaned until verylate in the day delaying check-in for new guests and inconve-niencing existing guestsrdquo

bull ldquoStock an umbrella in each guest room in the spring to preventguests from getting wet during the rainy seasonrdquo

bull ldquoProvide passes to the adjacent health club to premium guests al-lowing them to get a first-rate workout for freerdquo

bull ldquoPlace fruit basket in the room of all returning guests welcomingthem back to the hotelrdquo

bull ldquoElectronically transmit receipts to customersrsquo e-mail address toaid in expense reportingrdquo

bull ldquoProvide video conferencing capabilities in guest rooms so businessguests can conduct meetings in privaterdquo

The Kano exercise is very useful in provoking thought and evaluatingcustomer relationships in nontraditional ways

The next customer assessment question involves identification ofcompetitorsrsquo strengths and weaknesses The potential tools listed to an-swer this question are focus groups andor research The organization


06_047461 ch03qxp 10406 1201 PM Page 121

must evaluate how much formal research is needed to determine thenecessary level of competitive analysis The product worksheet devel-oped in the process assessment section provided an informal version ofcompetitive product assessment a similar thought process could applyto competitors Many organizations conduct excellent formal researchso it would be up to the organization to decide how best to glean thenecessary SWOTs for planning purposes

The final customer assessment question is about the industry in generaland how it will change in the future Once again the company must de-cide between focus groups and formal research to identify the necessaryinformation If the decision is made to use focus groups a good process isto pick a time point in the future (five years out ten years out whateverthe planning horizon happens to be) Ask what changes are going on inthe industry and how they will transform the way business is conductedby the target date listed It is instructive to think about technology com-petitor consolidations customer consolidations the mutation of productand service offerings and so forth Upon completion of this focus groupthe customer assessment questions will have been answered

LEARNING AND GROWTH ASSESSMENTIMPLEMENTATION

There are two purposes to the learning and growth assessment One isto evaluate the support systems of the organization to determine howwell they will be able to fuel process performance customer satisfactionand financial results The other is to ensure that management takes aparticipative role in generating the SWOTs This component can beessential to buy-in later in the process The questions and tools used inthe learning and growth assessment are reprinted in Exhibit 347

The first question brings management opinion into the assessment Itis a good idea to schedule individual interviews that are approximatelya half-hour in length for the senior leadership team These interviewsshould consist of roughly half a dozen questions to start and all should


06_047461 ch03qxp 10406 1201 PM Page 122

be centered around the identification of SWOTs Suggested interviewquestions include

bull What is the vision for the future (Salesrevenue key customergroups number of employees etc)

bull What are the top three strengths of the organization that will helpus achieve this vision

bull What are the top three weaknesses of the organization that willprevent us from achieving this vision

bull What are the top opportunities you think we need to capitalize onto help us take steps toward the vision

bull What external threats may hamper our ability to meet the visionbull How would you rate employee morale on a scale of 1 to 10 (10

being the best) and what factors contribute to the rating given


EXHIBIT 347 Learning and Growth Assessment Questions and Tools

Learning and Growth Assessment

Key Questions

What does management think key SWOTrsquos are

Does management have a consistent vision

How high is morale and what are the key influences

Do employees understand the vision

Do employee agree with management on Q 1amp3

What future technology changes will impact us

How will needed workforce skills change in the futureand are we prepared to be successful in thatenvironment


Management interviews


Management interviewsemployee focus groups

Employee focus groupssurvey


Focus groupsresearch


06_047461 ch03qxp 10406 1201 PM Page 123

Asking the vision question can be very revealing The interviewee mightneed some prompting to give a usable answer It is good to ask about anoverall sales projection (if you are in a for-profit organization) becausecomparing the numbers given from executive to executive reveals how intune they all are to the business The same holds true if asking about cus-tomer needs and how they will be changing Sometimes the range of an-swers makes it clear that certain members of the team are not reallyplugged in to the business One assessment revealed that a few manage-ment team members could not even identify the external customers of theorganization much less discuss their needs Having executives who areout of touch with customer needs is obviously not a healthy situation anddefinitely worthy of mention on the SWOT list

The next four interview questions literally ask for management opin-ions in the four SWOT categories The goal is not only to get feedbackon the key issues but also to determine whether management is consis-tent in their view of what the key issues are For example during one assessment the interviewer had eight executive team interviews to sched-ule The first seven respondents all said that the number-one weakness ofthe organization was lack of trust and cooperation among the membersof the management team The eighth and last executive said thatthe number-one strength of the organization was management team co-operation and trust After watching the group interaction during the assessment it became obvious that the final executive was damaging re-lationships among all members and was the cause of the problem Whilethis may have been clear anyway the interview process illustrated howproblematic the situation had become

The next question asks management to rank employee morale on ascale of 1 to 10 and discuss factors that influence their rating Under-standing the morale of the workforce is imperative to the assessmentprocess A company with high morale is far more adaptable to changethan one with low morale If the ranking is low and the causes are fix-able it would be a good idea to include the potential fixes as opportu-nities on the SWOT list If the causes are not fixable they should beincluded as threats on the SWOT list In either case it is important to


06_047461 ch03qxp 10406 1201 PM Page 124

assess the morale factor Note that employee focus groups are listed asa potential tool for assessing morale in addition to management inter-views It is instructive to see whether employees have the same percep-tion of morale that management does and whether the causative factorsare consistent Significant disparity in the perceptions of the two groupscould indicate that management really doesnrsquot understand or feel con-nected to their employees which certainly should be added to theSWOT list

A related employee focus group question is about the company vi-sion Many organizations have an employee group that understands thevision and lives it day to day which is a powerful strength to have Inother organizations the employees can quote vision verbatim but it re-ally doesnrsquot mean anything to them or affect how they do their jobsAnd still other organizations have employees who have no idea the com-pany has a vision or even what a vision is for Asking about the visionusually leads to a revealing discussion of how much ownership the em-ployees have in company success and can certainly lead to the genera-tion of many key issues for the list of SWOTs Marked differences inmanagement and employee perceptions on vision for the future shouldbe noted as well

The next learning and growth assessment question deals with futuretechnology It is typically useful to (either formally or informally) assesshow technology will impact the organization and industry in the futureThis can be done via focus groups or more formal research Since tech-nology is increasing the speed of business on almost a daily basis it isimperative to spend time trying to determine relevant technology-focused SWOTs If the chosen course is to use focus groups it is agood idea to mix internal technology experts operational people andemployees who are close to the customersrsquo needs This mix will enableyou to discuss the technological capabilities that customers want the capabilities that processes need and the techno-trends that might resultin filling all the gaps

The final learning and growth assessment question is focused on theworkforce skills necessary to be successful in the future Being good at


06_047461 ch03qxp 10406 1201 PM Page 125

what you currently do is often not sufficient to guarantee future successFor example many years ago there was certainly a company that wasnumber one in its field of producing buggy whips for horse-drawn car-riages Being the best today is no guarantee of future success howeverNo matter how cost efficient the company was or how wonderful itsproduct was it became irrelevant when people started traveling by carand didnrsquot need buggy whips any more Therefore the long-developedskills of the employees in whip production eventually became irrelevant

A more recent example comes from a state Treasury DepartmentTax returns in the state had always been processed manually so havingan army of reviewers on staff possessing a certain set of skills was re-quired But due to resource constraints the state began a big push to-ward electronic filing The skills needed to succeed in this environmentwere obviously much more technology-oriented so the current skillscould be at odds with necessary future skills Identifying whetherskills needed for the future are present in the current workforce is thefinal critical element for the SWOT list

SUMMARY

It is important to remember that the questions posed in the templateshould be viewed as a menu not all of them will be ordered in every situ-ation When conducting an assessment of any individual organizationcertain questions may be excluded and additional questions added It isnecessary to keep the overall intent in mind identifying the key issues thatwill impact the ability to meet the parameters established by the organi-zational vision Once the assessment has been completed the organizationwill be ready to take the SWOTs generated and move to the next stepbuilding a strategy map


06_047461 ch03qxp 10406 1201 PM Page 126

127

c h a p t e r 4

STRATEGY MAPS

The strategy map is a tool popularized by Robert Kaplan and DavidNorton in their series of Harvard Business Review articles and books

focused on strategy and the Balanced Scorecard The map is the next stepin the strategic process taking all the data gathered during the strategic as-sessment and using it to develop a one-page blueprint that articulates thestrategy of the organization In this chapter the definition developmentand utilization of the map will be presented

DEFINITION

A strategy map is a tool that enables an organization to articulate itsstrategy through a series of cross-functional cause-and-effect relation-ships There are several important concepts embedded in the definitionThe first is the idea that the map helps articulate strategy Many organi-zations have a strategic plan thick enough to resemble an encyclopediaGiving this plan to a stakeholder (eg manager employee board mem-ber customer) to help them understand the direction of the company isa fruitless exercise It is extremely difficult to understand such a docu-ment unless the stakeholder has tremendous interest a thorough appetitefor detail and a lot of time on their hands The strategy map howeverclearly illustrates the main strategic themes of the organization and howthey are linked together This enables the organization to effectively tellthe story of its strategy in a relatively short period of time

07_047461 ch04qxp 10406 1201 PM Page 127

Another key element of the definition is the cross-functional aspectMany organizations develop strategy in pieces the sales department de-velops a forecast the operations people develop ideas to make processesmore efficient finance develops the budget human resources develops atraining plan and so on Then it is all cobbled together and called a strat-egy Upon reading a client companyrsquos strategic plan an external consul-tant commented that ldquoI am clearly the only person who has ever readthis plan from cover to coverrdquo When asked why he explained that notonly were the writing styles dramatically different but there were severalpoints where the plan contradicted itself There were also identical ini-tiatives identified and explained in multiple places illustrating that theauthors were unaware of what the other authors had already covered

The impact of this situation is that each functional area within thecompany would attempt to execute its portion of the plan indepen-dently which may or may not be effective The job of senior manage-ment is to make all of the pieces work together not try to optimize eachpiece at the possible expense of the whole The strategy map providesthe perfect vehicle for illustrating how all of the different pieces shouldfit together and support each other So instead of human resources de-veloping a training plan in isolation for example the specific opera-tional needs driven by the training will be highlighted on the map Therelationships between operational efficiency customer satisfaction andfinancial return will be illustrated on the map as well

The third key element of the definition is the cause-and-effect rela-tionship between strategic objectives Suppose you went to the employ-ees in your organization and asked ldquoWhat is the number-one objectiveof our companyrdquo How many different answers do you think youwould get Would management answer the question the same way thatthe front-line employees would In the 1991 movie City Slickers thelead character (played by Billy Crystal) is a middle-aged man who goesout West to find himself He is having a midlife crisis and is looking formeaning in his life He runs into a grizzled old cowboy (played by JackPalance) who is very straightforward and asks him ldquoDo you knowwhat the secret of life isrdquo When the Crystal character doesnrsquot respond

128 S t r a t e g y M a p s

07_047461 ch04qxp 10406 1201 PM Page 128

the cowboy holds up his index finger and says ldquoOne thing just onething You focus on that and nothing else means (anything)rdquo Crystalsays ldquoGreat but what is the one thingrdquo And the cowboy respondsldquoThat is what you have to figure outrdquo

Companies are the same way It is extremely important that everyonein the organization be focused on the same overall goal The strategymap provides the perfect format to illustrate what that goal is It is typ-ically listed at the top of the map and several arrows are drawn into itThe arrows originate at supporting objectives that the company deemsnecessary to achieving the overall number one Consider the examplefrom a state Treasury in Exhibit 41

Strategy Maps 129

Learning andGrowth

Process

Customer

Financial

Increase StakeholderSatisfaction

Promote PositiveImage

Enhance CustomerCommunication

Maintain FinancialIntegrity

Manage Budget(InternalExternal)

Generate Revenue Manage Investments

Streamline KeyProcesses

Minimize Early OutImpact

Optimize ContractManagement

Increase ElectronicCapabilities

Develop PositiveCulture

Improve InternalCommunication

Manage TechnologyResources

Provide Customer-Friendly HR Service

Improve

Security

EXHIBIT 41 Department of the Treasury Strategy Map

07_047461 ch04qxp 10406 1201 PM Page 129

Note the number one objective titled Increase Stakeholder Satisfactionis listed at the top of the map Stakeholders in the organization includedthe state individual and business taxpayers the recipients of the educa-tional grants administered by the Treasury the governor and the legisla-ture the organization was responsible for satisfying a diverse group ofexternal parties Note that four arrows lead directly into Increase Stake-

holder Satisfaction These should be read as an IF-THEN statement Inthis case IF the organization Promotes a Positive Image Enhances Cus-

tomer Communication Maintains Financial Integrity and Develops a

Positive Culture THEN it will Increase Stakeholder Satisfaction In otherwords the supporting objectives illustrate what is necessary from a cause-and-effect perspective to make the top objective happen These relation-ships hold throughout the diagram The Finance section provides anotherexcellent example IF the organization Manages Budget Generates

Revenue and Manages Investments THEN it will Maintain Financial

Integrity Note that this particular diagram has a great deal of focus onStreamlining Internal Processes The reason for this is that the Treasurywas in the midst of its second early retirement program within the last fiveyears The impact was loss of over 30 of its employee base most ofwhom had the longest tenure with the organization Since this reductiondid not come with a corresponding reduction of responsibilities it was im-perative to improve process efficiency To that end Increasing Electronic

Capabilities would raise the percentage of taxpayers who could file elec-tronically reducing the pressure to process manual returns Optimizing

Contract Management would enable outsourcing of certain functions re-ducing pressure on internal resources Because they were allowed to selectreplacements for those accepting the early retirement on a 1-to-4 or 1-to-5basis Minimizing Early Out Impact directed them to select which posi-tions needed to be filled the most from a strategic perspective to keep theirkey processes functioning properly

Connecting objectives in this way forces the leadership team to thinkcross-functionally It takes them out of the component strategy mindsetand forces them to think holistically One of the more productive meet-ings in the entire strategic process is the one in which the leadership


07_047461 ch04qxp 10406 1201 PM Page 130

team sits down to discuss and debate the connections It often happensthat a preselected objective cannot be connected to the remaining ob-jectives There are two possibilities when this occurs One is that thelone objective is really not connected to anything else in which case theorganization should question whether it should be an ongoing part ofthe strategy The other possibility is yet-to-be-determined objectiveswould help connect the lone objective to everything else and the assessment process did not identify them In this case the managementteam should identify and add whatever needs to be added to completethe picture It follows that one of the more valuable uses for the strat-egy map is to ensure that an integrated set of objectives emerges

Note the categories or perspectives listed in the upper left-hand cornerof each layer of the map In this case the four perspectives are FinancialCustomer Process and Learning and Growth These follow the flow ofthe strategic assessment process described in the prior chapter The hier-archy for each individual company is determined by the cause-and-effectrelationship among the perspectives In a for-profit organization the hi-erarchy is usually simple to establish and is illustrated in Exhibit 42

Starting at the bottom Learning and Growth consists of those thingsthat fuel strong Process performance Developing people promotingstrong internal communication building good systems and so on arethings that companies of today must do to drive process success At thenext level the strategy map targets the processes that are key to the fu-ture of the organization and establishes objectives for them as wellThese processes are typically the ones customers care most about or thethings the company must be proficient in to keep their customers happyAnd the resulting customer satisfaction in turn drives financial resultsThere usually isnrsquot much discussion to be had when establishing theserelationships

Not-for-profit organizations are a bit different The strategy map ismarginally tougher to construct because the position of the Financial sec-tion isnrsquot as obvious Some organizations like the Memorial Blood Cen-ter of Minneapolis retain the traditional hierarchy with Financial at thetop One of its critical issues is recruiting enough donors to keep the blood

Strategy Maps 131

07_047461 ch04qxp 10406 1201 PM Page 131

supply sufficient to area hospitals The service fees generated by this ac-tivity help the organization Maintain Acceptable Operating Marginswhich was the top objective on its first strategy map The organizationreasoned that it needed the financial focus on top because the ultimateoutcome was to stay in business so ldquothat others might liverdquo as inscribedon their cornerstone plaque And they couldnrsquot stay in business withoutacceptable operating margin

Other not-for-profit organizations view the Financial section a bit dif-ferently The Treasury example in Exhibit 41 for instance has Finan-cial positioned as shown in Exhibit 43

The thinking in this instance is that the ultimate goal of the not-for-profit is to satisfy customers and one component of this is sound finan-cial management In other words taxpayers want the Treasury to be costefficient and provide service at minimal fees This explains not only whyFinancial is important to customer satisfaction but also why Process ef-ficiency is linked to financial performance Learning and Growth support


FinancialPerspective

CustomerPerspective

ProcessPerspective

Learning and GrowthPerspective

EXHIBIT 42 Relationship of Strategy Map Perspectives For-Profit Organization

07_047461 ch04qxp 10406 1201 PM Page 132

Process performance as in the for-profit model This hierarchy is proba-bly the most common in a not-for-profit sense

A third way to view Financial is to place it at the very bottom of thechain as shown in Exhibit 44 This is the format utilized by the MichiganState University Vet School when developing its strategy map

The vet school reasoned that its entire strategy was fueled by tuitiondollars and once these were generated it would have the money tofund learning and growth initiatives which in turn would lead to goodprocess performance and ultimately result in customer satisfaction

So which flow of perspectives is correct All of them The secret for thenot-for-profit company is to select the format that tells the story the waythe organization wishes to tell it there isnrsquot an answer that is universallycorrect This concept also extends to the names of the perspectives Whilemost strategy maps follow the traditional four-perspective format thereis nothing magical about the four traditional categories If a fifth per-spective is needed or if the company wishes to rename one of the four to

Strategy Maps 133


CustomerPerspective

ProcessPerspective


EXHIBIT 43 Relationship of Strategy Map Perspectives Not-for-Profit Organization

07_047461 ch04qxp 10406 1201 PM Page 133

better reflect its business situation then so be it The process to be coveredfor strategy map development has some flexibility built in to identifywhen additional or different perspectives might be necessary

Examples of additional perspectives used by different organizationsin the past include environmental health and safety product and sup-plier the list of potential candidates is long The key is that the organi-zation considers a particular category to be of such strategic importancethat it needs to be elevated to perspective level Going back to the Trea-sury example notice the bar down the right-hand side of the diagram la-beled Improve Security When developing their strategy map the teamrealized that they managed a huge financial portfolio (ie all of thestatersquos tax money) and had access to a great deal of confidential infor-mation (ie all residentsrsquo personal financial data) It was determinedthat if they didnrsquot have strong security of dollars and data everythingelse was irrelevant Hence security was elevated to perspective leveland placed along the side of the map with general arrows flowing intoeach perspective symbolizing that security drove everything



CustomerPerspective

ProcessPerspective

Learning amp GrowthPerspective

EXHIBIT 44 Relationship of Strategy Map Perspectives Not-for-Profit Organization Alternative

07_047461 ch04qxp 10406 1201 PM Page 134

An excellent example of a for-profit strategy map comes from theOrion Development Group As noted in the prior chapter during thecustomer segmentation example Orion specializes in strategic planningand process improvement The first strategy map developed by the or-ganization is provided in Exhibit 45

There are several interesting points to be made about this strategy mapThe number-one objective is Maintain Strong Financial Position Whilethis is not remarkable note that the only objective feeding into the top isIncrease Revenue A reader unfamiliar with the organization would (cor-rectly) suppose that there is a missing financial objective here it wouldseem that in this case the IF-THEN statement would be incomplete Inother words to say ldquoIF we Increase Revenue THEN we will Maintain a

Strong Financial Positionrdquo excludes the cost side of the equation While

Strategy Maps 135

Maintain strongfinancial position

Increase revenue

Strengthen existingcustomer relationships

Establish Orion brand

Manage universitynetwork

Attract newcustomers

Expand productlines

Standardizeservice delivery

Develop alternativemarketing channels

Improve salesprocesses

Improve internalcommunication

Optimize consultingstaff quality

Define partner-manager balance

Financial

Customer

Process

Learningand Growth

EXHIBIT 45 Consulting Company Strategy Map

07_047461 ch04qxp 10406 1201 PM Page 135

this is true Orion has a somewhat unique business model The vast major-ity of the company expenses are paid to consultants who have been trainedto deliver their materials These consultants are not salaried employees theyare paid on a per diem or per project basis structured around how muchwork they actually do So if they arenrsquot working Orion isnrsquot paying Thismeans that the company is not under pressure (like most of its competitorsare) to sell services just to make payroll Because most of their staff has separate consulting practices to draw business from Orion can focus ontaking only those engagements that are mutually beneficial to itself and itsclients So since cost is proportional to revenue increasing revenue isenough to help the company Maintain a Strong Financial Position

Dropping down into the customer perspective note that there are twoobjectives entitled Strengthen Existing Customer Relationships and Attract New Customers These both sound very generic and could appearon virtually any organizationrsquos strategy map Very few Boards of Directorswould look at objectives like these and exclaim ldquoGreat job leadershipteam Who would have ever thought that attracting new customers wassomething we should focus onrdquo There are two important topics to consider when titling objectives Some leaders of the strategy mappingmethodology would say that the customer objectives should reflect valuepropositions offered to the customer For example instead of Attract New

Customers the objective might be retitled to say Provide Differentiated

ProductService Combinations to New Customers This could provide insights into what the company thinks will attract the new customersnamely the product line expansion referenced in the Process section

If your organization feels that the objectives sound better by addingmore detail then you should do it that way But however it is done re-member that the process to be described for building the map utilizes allthe data gathered during the strategic assessment phase The objectivetitled Attract New Customers might be consistent from company tocompany but all the issues relating to it will differ dramatically Thismeans that when it is time to select measures and initiatives for success-ful new customer attraction the choices will be based on the data gathered during their own unique assessment For this reason some


07_047461 ch04qxp 10406 1201 PM Page 136

companies decide to keep the top-level map as simple as possible and letthe uniqueness emerge in the more detailed planning levels

Note the volume of arrows flowing in to Attract New CustomersWhile it is unwise to simply count the number of arrows and assumethat this establishes the hierarchy of importance in this case it certainlyappears that finding new customers is a main focus area for the organi-zation Because the cost structure previously referenced virtually guar-antees that new customers mean more profitability it makes sense thatattraction would be of paramount importance

One of the more significant objectives on the map is Establish Orion

Brand Note that the objectives leading into this are Expand Product

Lines Standardize Service Delivery Develop Alternative Marketing

Channels and Optimize Consulting Staff Quality The message givenhere is that the organization wants to establish that the combination ofits people products and methodology make it unique

The Learning and Growth objectives also make important state-ments Almost every organization could Improve Internal Communica-

tion but in Orionrsquos case it is particularly critical The consultants are theservice providers Not only are they scattered throughout the countrybut most of them arenrsquot even full-time Orion employees Ensuring thatall service providers are on the same page and up to speed with cur-riculum updates and project requirements is a monster challenge But ifthe objective of Standardizing Service Delivery is to be met Orion mustfind ways to overcome the communication barriers Nothing leads todissatisfied customers and lost business faster than multiple consultantstelling a client different things The communication objective also feedsImprove Sales Processes The consulting staff has expertise in a wide va-riety of industries and methodologies When a new sales opportunitycomes along it obviously increases the probability of closing the deal ifOrion can reference its experience in relevant areas The problem at thetime was that there was no central database to keep track of such thingsleading to less convincing proposals and potentially lost business

The objective at the bottom of the map is Define PartnerManager

Balance This is the foundation of the map meaning that focus on this

Strategy Maps 137

07_047461 ch04qxp 10406 1201 PM Page 137

would be necessary to fuel everything else The reason this objective isso critical is that Orion has no formal management team In otherwords there isnrsquot a group of people paid to manage everything or every-one else The partners in the organization are also their service line prac-tice leaders Sometimes the tendency of the partners is to get so wrappedup in service delivery that they neglect overall management responsibil-ities This behavior is reinforced by the fact that service delivery is moredirectly connected to revenue generation than are management respon-sibilities So the organization felt conscious effort was needed to ensurethat future growth was being planned for as well as todayrsquos bottom-lineperformance

The use of strategy maps does not have to be confined to the organi-zation-wide level An excellent example of a functional area strategymap comes from the Human Resources Department at Texas ChildrenrsquosHospital (TCH) The organization is in an extremely aggressive growthphase expanding from 3000 to an eventual 7000 employees over thespan of a few short years The HR department recognized the tremen-dous challenges they would face in supporting the organization in theface of such aggressive growth and their planning session yielded thestrategy map shown in Exhibit 46

The first instructive point is the hierarchy of objectives Since HR isa support function it is only natural for Customer to go on top butnote that in this case Customer refers to internal versus external partiesFor HR to be deemed ultimately successful the operating areas of thehospital must receive the service they need and the executive team mustbe convinced that the service provided by HR is being delivered in acost-effective and efficient manner So the Customer perspective is at thetop driven heavily by the Financial and Process perspectives Learningand Growth occupies its familiar position at the base providing thefoundation for strong performance

The HR department at TCH is very progressive in their thinkingContinuous Quality Improvement (CQI) was initiated at the hospital inthe early 1990s and still flourishes more than a dozen years later TheHR management team has internalized the concepts to the point that


07_047461 ch04qxp 10406 1201 PM Page 138

problem solving and process improvement is truly a way of life forthem This made the strategy mapping session extremely interestingand resulted in a map containing objectives that one wouldnrsquot tradi-tionally look for on a Human Resources planning document

For example note that in the Customer section there are objectives ofEstablish Value Scorecards and Provide Value-Added Consulting

Strategy Maps 139

Leverage HR LeadershipExcellence

DefineEnforce Re-Prioritization Process

Maintain StaffSkill Levels

Improve EmployeeRetention

Recruit High-QualityEmployees

Market HRCompetencies

Anticipate FutureOrganizational Needs

Operate CostEffectively

Provide Value-Added Consulting

Services

Establish ValueScorecard(s)

Facilitate Two-WayCommunication

Enhance LeadershipDevelopment Process

Delight Internal Customers

Learning ampGrowth

Process

Financial

Customer

Clarify OrganizationalPriorities

Refine Internal Com-munication Processes

Adapt Structure toSupport TCH Growth

EXHIBIT 46 Texas Childrenrsquos Hospital Human ResourceDepartment Strategy Map

07_047461 ch04qxp 10406 1201 PM Page 139

Services Obviously if the department was delivering value-added ser-vices it would make its internal customers happymdashif they recognized itThe idea behind the value scorecards was to be able to demonstrateto the operating areas that HR was providing this quality service that lit-erally added value The purpose was not to make HR look good it wasto illustrate how the department could assist operating areas in makingtheir jobs easier It was felt that demonstration of value would lead toincreased reliance on HR to execute the necessary personnel-relatedprocesses freeing up the clinical areas to focus on what they wanted tofocus on treating sick children This would certainly help achieve thetop objective of Delighting Internal Customers

Another instructive point can be made from the Process perspectiveNote that some of the objectives are to Recruit High-Quality Employees

Improve Employee Retention and Enhance the Leadership Development

Process If this were an organization-wide strategy map these would allbe housed in the Learning and Growth perspective All of them deal withsupport processes that from the top level would be viewed as fueling coreprocess performance In the case of HR however processes like recruit-ing retention and leadership development are core processes those arethe things HR is set up to do So their presence in the Process section iscompletely appropriate And obviously recruiting and retention are bothdefinitely worthy of objective-level importance given that the organiza-tion was trying to more than double its employee base in a relatively shorttime span Leadership development would be instrumental in preventingchaos in the midst of all the growth

Note that in the Learning and Growth section there is an objective ofMaintain Staff Skill Levels This refers to the internal HR staff In theprocess to be covered for development of the strategy map the choice ofverb will be referenced as an important issue To say maintain in thissense implies that the skill level of current HR employees is excellent orat least good enough that the management team doesnrsquot feel it needs tobe improved upon And in the case of human resources at TCH thiswas certainly the case This reinforces the base objective of the entiremap which was to Leverage HR Leadership Excellence


07_047461 ch04qxp 10406 1201 PM Page 140

The strategy map has grown in popularity over the years The toolwas part of the original Balanced Scorecard methodology introduced byKaplan and Norton in the early 1990s But for whatever reason manyorganizations failed to incorporate the map into their strategic processright away Many organizations heard ldquoscorecardrdquo and immediatelylatched on to the measurement aspects of the process Even today manyorganizations that have been focused on Balanced Scorecards for yearsare discovering that the strategy map can help them fill gaps in theirstrategic process It is critically important for development and commu-nication of strategy

STRATEGY MAP IMPLEMENTATION

The process for developing the strategy map involves taking all the datagathered through the (formal or informal) strategic assessment processand using it to determine what the objectives should bemdashand then linkingthem together The process will be separated into two phases objectiveidentification and linkage The formal process for objective identificationis illustrated in Exhibit 47

The assessment process was utilized to identify the strategic issues(strengths weaknesses opportunities and threats) that impact the or-ganizationrsquos ability to achieve the parameters established in its mission

Strategy Maps 141

Record each strategic data point on a sticky note

Give each column a verb-noun title

Sort into the four strategy map perspectives

Sort like issues into columns within each perspective

EXHIBIT 47 Strategy Map Development Process Objective Identification

07_047461 ch04qxp 10406 1201 PM Page 141

and vision It is not uncommon to have more than 200 issues identifiedthrough the various tools and techniques This can be overwhelmingwithout a good process for focusing and refining so following the stepsillustrated in Exhibit 47 is crucial

Begin by recording each strategic issue on its own individual stickynote Establish five areas in the room labeled

1 Financial2 Customer3 Process4 Learning and Growth5

All of the sticky notes should be lined up under the ldquordquo category tobegin with The leadership team responsible for the development of thestrategy should then go to the sticky notes and start pulling them off theldquordquo area and placing them in the category that each one is mostclosely associated with Some ground rules and tips to assist in the place-ment are as follows

Use ldquoCheat Sheetsrdquo

To assist in placement put a reference note beside each perspective cat-egory that gives insights into what types of things should be sortedthere For example the reference for Learning and Growth could be

bull Peoplebull Internal Communicationbull Support Stuff

It should be explained that People refers to your people not customersHiring them training them keeping them keeping them happy and so onAnd Internal Communication refers to your people talking to your peoplenot to customers or the external world Support Stuff is what your organi-zation does to keep the wheels turning but that really isnrsquot a part of the


07_047461 ch04qxp 10406 1201 PM Page 142

core business If you are an insurance company for example it is criticalto have a good disaster recovery plan to prevent you from losing criticaldata on losses customers and so forth But an insurance company is notin the disaster recovery business (except for paying for other companiesrsquodisasters) so this would be a Support Stuff issue

The cheat sheet for the Process section should include core internalprocess issues as well as product and service delivery issues The Customercategory in for-profit companies could include external customers thecommunity industry market brand image reputationmdashanything repre-senting the external view This is not meant to be an exhaustive list because some things are industry-dependent For example an insurancecompany would list its broker network in the Customer section as well Financial is pretty straightforwardmdashitrsquos all about the money

These cheat sheets are useful because they help speed up the organiza-tion of what could be a very large quantity of information The best tech-nique is to place the tips on sticky notes next to the perspective titles andthen remove them once all the notes are sorted (The reason for remov-ing them is to prevent predetermined categories for the next round ofsorting which will be explained shortly)

Sort by the Fact Not by the Implications of the Fact

Recall that the process for recording SWOTs emphasized that eachissue include both fact and implications The proper technique for sort-ing is to focus on the fact as the categorization criteria For exampleconsider the comment

Well-trained employees help build strong long-term customer relationships

This would be placed in the Learning and Growth category since thefact is well-trained employees The long-term customer relationshipswould be the outcome of this so it wouldnrsquot be placed in the Customersection Similarly the suggestion

Strategy Maps 143

07_047461 ch04qxp 10406 1201 PM Page 143

Bringing new products to market takes too long causing us to loseour competitive edge

would probably be viewed as a process issue if the fact was related tothe product development process Losing the competitive edge would bethe customer-related outcome

It is natural to question why so much emphasis is placed on includ-ing the implications of the fact as part of the SWOT if it is ignoredduring the sorting phase The answer will be evident when drawing theconnections between the objectives when building the strategy map Forexample an objective of Developing Employee Skills might be instru-mental for streamlining processes in one organization and equally vitalfor building customer relationships in another The implications of thefact aid in the determination of desired outcomes in each case

Donrsquot Force the Sticky Notes into a Particular Column

Recall that every strategy map does not necessarily have to fit into thefour standard objectives It is entirely possible that when analyzing thesticky notes in the ldquordquo category the group will feel that some of theissues donrsquot really fit into any of the perspectives When this happensthe group should leave them in the ldquordquo category until sorting is com-plete At this juncture the group should analyze all of the issues thatwerenrsquot sorted and determine if there is some connection between themIf this is the case the next step is to determine whether the overall topicis important enough to be elevated to perspective level If so then a fifthperspective may be born and added to the model

Keep Talking to a Minimum

This is the easiest ground rule to understand but sometimes the hardest oneto follow The first sort should not take very long probably 10 to 15 min-utes at most If the participants start getting into long-winded discussionsabout the positioning of each sticky note then this could take far longerthan necessary A useful facilitation technique is to remind participants


07_047461 ch04qxp 10406 1201 PM Page 144

that the notes are not fastened to the initial area with super glue In otherwords if you discover later in the process that they are better suited in an-other category you can always move them The purpose of this first sortis simply to start putting some structure to the massive amount of assess-ment data it is not to place every note 100 perfectly

Donrsquot Try to Balance the Notes Across the Perspectives

In other words donrsquot feel like there should be 25 of the notes in theFinancial category 25 in the Customer category and so on In fact itwould be very surprising if it turned out this way Generally speakingthe closer to the bottom of the strategy map hierarchy you get the moresticky notes will reside So Learning and Growth will almost alwayshave the most notes (in either for-profit or not-for-profit organizations)Process will be a close second and the least will be in the Customer andFinancial categories

This does not imply that Financial is the least important or that therewere gaps in the assessment process Rather it is a reflection of the ruleto sort by fact versus implications of the fact A quick review of thesticky notes will usually reveal that almost all of the issues will have ei-ther customer or financial implications but the facts on the notes will beof a process or people nature Because of this it isnrsquot unusual to have asparse Financial section This typically is not a problem however Thepurpose of this process is to ultimately determine a good set of strategicobjectives and most organizations are extremely proficient at develop-ing financial objectives to fill any gaps that might be present

The next step in the objective development process is to sort similarissues into columns within each perspective In other words the groupshould begin with the Learning and Growth perspective Look at all ofthe sticky notes present in the category and look for common themesThe group should start pulling the notes off the wall (or whatever theyare sticking to) and realign them into columns that are connected some-how In other words the objective is to go from what is shown in Exhibit 48 to what is shown in Exhibit 49

Strategy Maps 145

07_047461 ch04qxp 10406 1201 PM Page 145


Poorly trained CSRsdamage keyrelationships

Lack of traininglowers morale

Difficult to retainqualified employees

High turnover raisestraining costs

Programming talentbest in the industrydriving productivity

Build consultativeselling skills toboost sales $

Poor utilization ofsystems hurtsproductivity

ERP system willaid in planning

Lack of PCavailability in

multiple locationsDevelop e-commerce

capabilities toboost sales

Invest in automateddesign equipment

to reduce cycle time

Make new communi-cation technology

available to all staff

FoxPro outdatedresulting in longwork-arounds

E-mail systemoutdated hurtinginternal comm

Improve projectmanagement skillsto finish proj faster










multiple locations

Develop e-commercecapabilities to

boost sales








EXHIBIT 48 Learning and Growth SWOTs Unsorted

EXHIBIT 49 Learning and Growth SWOTs Sorted

Column one appears to be related to training and skill developmentcolumn two about employee retention and column three deals with sup-port technology issues While this might seem straightforward with anexample that lists only 15 issues it can get very difficult when startingwith over 200 Tips to make the sorting process easier are as follows

07_047461 ch04qxp 10406 1201 PM Page 146

bull Think global The group should shoot for three or four columnsmaximum The columns will eventually be titled and used for ob-jectives on the strategy map so it isnrsquot advisable to have too manyof them It will dilute the focus on all objectives and unnecessarilyclutter the map Therefore instructing the group to shoot for threeor four is the best way to proceed If they wind up with five thenit really isnrsquot a problem but they shouldnrsquot wind up with fifteen

bull Donrsquot sort into SWOT categories In other words instruct thegroup that the connections they see should not be strengths weak-nesses opportunities or threats If one sticky note references ldquoex-cellent trainingrdquo and another references ldquopoor trainingrdquo and thegroup puts them in the same column that is training-based thatwould be fine But there shouldnrsquot be a ldquogood stuffrdquo column and aldquobad stuffrdquo column The reason for this will soon become evidentThe next step is to title the columns and these titles will serve as theobjectives for the strategy map Sorting into the SWOT categorieswould yield strategic objectives of Maximize Strengths Minimize

Weaknesses and so forth Because these would not really be mean-ingful stick with the content of the fact on the sticky note versuswhether it reflects a particular SWOT category

The most common mistake made when applying this rule is inthe Customer category External issues that deal with competitorsand the marketplace typically get grouped into a category togetherand when the time comes to title the column the line of reasoningin grouping them is often ldquoWell these are the things that we canrsquotdo anything aboutrdquo This often is simply a disguised threats col-umn The facilitator should be on guard for this issue and directthe group to look for other connections beyond the fact that the is-sues are negative external influences and possibilities

bull Donrsquot split into subgroups The common sense method for execut-ing this sort is to divide and conquer In other words if the leader-ship team consists of 12 executives and there are four perspectivesit seems natural to put three members into each perspective and sortall four groups simultaneously This is one time in which intuition

Strategy Maps 147

07_047461 ch04qxp 10406 1201 PM Page 147

can lead a group astray however Because the high-level sort wasdone with massive amounts of data it is only natural that there willbe sticky notes that are not categorized properly (properly in thiscase means categorized with all others of its kind with no mis-matched notes) Because of this simultaneous sorting will generallyyield one or two columns in each perspective that are very logicaland the remaining notes will form a potpourri of issues that is dif-ficult to categorize Because notes in the potpourri from one per-spective will be scattered with the potpourri in other perspectives ittypically takes quite a while to straighten everything out So long infact that doing the sorting as a full group and moving from per-spective to perspective is typically the superior approach

So the recommendation is to have the entire group begin withthe Learning and Growth perspective Even though this is wherethe highest volume of notes is usually located the categories aretypically the easiest to identify If any notes do not immediately ap-pear to fit into the established columns question whether theyshould perhaps be relocated to one of the other perspectives Whenthe sorting has been completed the group may either

deg Title the columns following the guidelines in the next step or

deg Move along to the next perspective and repeat the sortingprocess and then title all of the objectives at the end of thesorting

bull Keep talking to a minimum This is even more important now thanit was in the last step Analyzing the sticky notes and finding com-mon themes should be done silently If the group is not allowed totalk then everyone will have an equal say In other words the oneor two dominant personalities in the group will not be able to con-trol everything If this is allowed to happen the process will notonly take much longer but the resulting product will typicallynot be as good Talking fosters the practice of naming the columnstoo quickly and then trying to force the rest of the notes into thepredetermined categories It is far better to stay silent and try to


07_047461 ch04qxp 10406 1201 PM Page 148

understand the reasoning of the other team members as the stickynotes are lined up The group members should feel free to move thesticky notes to other columns if they arenrsquot comfortable withthe placement but they canrsquot talk about it

Each of the perspectives will present unique challenges when at-tempting to sort the issues The challenge in the Learning and Growthsection is dealing with the sheer volume of information The challengein the Financial section is just the opposite coming up with the rightset of objectives using what is certain to be a limited number of stickynotes The Customer section will be difficult due to the aforementionedtendency to establish a threats column But the most difficult section toperfect is typically the Process section

This is an especially important point because the focus of the first fewchapters was about how Process is becoming more and more of a forcein driving strategy So why is the Process perspective the hardest one tonail down One reason is the aforementioned fact that there are literallythousands of processes in a typical organization Trying to determinewhich few have strategic significance can be a daunting task The groupshould look for connections in the sticky notes that reference specificprocesses while still trying to keep a manageable number of columnsThis is never an easy task

Referring back to the Process section of the Treasury strategy mapthere was an objective of Streamline Key Processes This is not an idealtitle as it is very general and doesnrsquot reference specific processes but inthe case of Treasury it was justified Their organization was very di-verse consisting of a tax branch an education branch a local govern-ment branch and several authorities The decision they made was tohave an overall objective of streamlining key processes and when timecame for plan execution and measurement they would select onefrom each area to improve (For this reason it was important to insertthe word key into the objective Without it the implication is that thecompany is initiating a broad campaign to streamline all processes)Generally speaking however it is wise to avoid such a general title if

Strategy Maps 149

07_047461 ch04qxp 10406 1201 PM Page 149

possible Treasury was simply trying to avoid having too many titles forobjectives which is laudable But many organizations are just post-poning the decision of which processes need attention and focus by hav-ing such a general title to begin with (In other words when the timecomes to establish measures for an objective of Streamline Key Processesthe group will then have to decide which processes are the key ones be-fore they determine appropriate measures and the same holds true forthe establishment of process improvement initiatives)

The final step in the objective development process is to give each col-umn a verb-noun title In other words put each title in the form of ldquodosomething-to somethingrdquo This will produce action-oriented objectivesthat fit together logically on the strategy map The ground rules for thisstep are as follows

bull Pick the verb that best characterizes your intended action Incor-rect choice of a verb will obviously not doom the company but thechoice should reflect the action you intend to take For examplethe TCH Human Resources strategy map had the objective ofMaintain Staff Skill Levels This obviously sends the message thatthe level is strong already and what is needed is simply to keep itwhere it is If the wording was Enhance Staff Skill Levels then themessage sent is a little different This implies that while the skilllevel might not be atrocious there is still room for improvement Atitle of Upgrade Staff Skill Levels sends another different messagethat the current levels are clearly insufficient to support the execu-tion of the strategy so new skills are needed Again pick the verbthat best summarizes your intended action

bull Donrsquot overuse the same verb This might sound like a ridiculousrule but the tendency when naming objectives for the first time isto use the same two or three verbs over and over (improve and develop are the most common choices) While there is nothingtechnically wrong with reusing the same verb it causes the map tolose credibility Consider the following IF-THEN statement IF weImprove Staff Skills and Improve Internal Communication and


07_047461 ch04qxp 10406 1201 PM Page 150

Improve Outsourcing THEN we will Improve Internal ProcessesWhile this might certainly be true it sounds so obvious that itwonrsquot be taken seriously It sounds like no thought has been givento the objectives Since one of the purposes of building a strategymap is to have a vehicle to communicate strategy it is imperativenot to have a map that is rejected on sight because it doesnrsquot looklike sufficient thought was put into developing it

Try to put a one-objective maximum on the use of each verb Ifyou feel you need to use one twice it isnrsquot a problem but be as diverseas possible while still conveying the proper intent for each objective

bull Remember that politics count Suppose that during the assessmentphase several SWOTs were identified that hinted at deficiencieswithin the management team (eg lack of vision lack of coopera-tion silo thinking) These issues were grouped together in a columnin the Learning and Growth perspective and now the managementteam has the assignment of giving the column a title A title like Upgrade Management Capabilities might accurately summarize theissues on the list but there isnrsquot likely to be much support for an objective with such a title and think of the fiasco when presentingsuch an objective to the board or the workforcemdashprobably not theimage the company wants to create

There are two alternatives the company could pursue in a caselike this The first is to reason that the management team is part ofthe workforce and if there is another column filled with workforcedevelopment issues these could all be grouped together If thisis the course the company decided to pursue it would be impera-tive to select initiatives to execute that would aid in management development

The other possibility is to rename the objective in a more positivefashion If the management team felt the issues in the column werereal and didnrsquot want to ldquosweep them under the rugrdquo by combiningthem with employee development issues then a title such as For-

malize Management Development Program might be an option

Strategy Maps 151

07_047461 ch04qxp 10406 1201 PM Page 151

Think about your organization When someone is promoted tomanagement how is that person typically trained Many organiza-tions have no preparatory programs for new managers at all Butfor argumentrsquos sake assume your organization does have a pro-gram for employees when they first get promoted into the manage-ment ranks What happens the next time they take a step up thecorporate ladder And the time after that And the time after thatMany times organizations promote the accounts payable clerk to fi-nance manager to controller to CFO to COO to CEO never givinghim or her training in how to manage increasingly diverse areas Ifthis is the case in your organization an objective title such as For-

malize Management Development Program would convey the mes-sage that management skills need further refinement but puts theresponsibility for creating the gap on the process versus the indi-vidual This is much more likely to get acceptance and buy-in bothinside and outside of the management team

The major point to be made is that if the objective titles are of-fensive to the parties responsible for the execution of strategy thenit is highly unlikely that strategy will be executed So the goal is notto ignore problems but to illustrate them in such a way as to givethe highest probability they can be addressed effectively

Note that the objective-setting process will involve some trial anderror There is no magic answer to what topics are worthy of being per-spectives or objectives There is not a perfect number of objectives Agood facilitation question when trying to determine if a particular topicis worthy of being an objective is ldquoIf we only had three objectives in thisperspective would the column in question be important enough to rankas one of the top threerdquo For example consider the Learning andGrowth objective of Improve Internal Communication Communica-tion is so poor in some organizations that it would definitely merit con-sideration as one of the top three objectives Poor communication couldcause inefficient process performance decreased customer satisfaction


07_047461 ch04qxp 10406 1201 PM Page 152

and lost revenue In other organizations poor communication might bea minor irritationmdashnice to fix but not really that significant

The good news is that the learning curve on objective development isvery steep when using this process After going through it once or twicethe facilitator (and team members) will quickly get much better at itThe process has been used in many organizations over the last severalyears and it is a telling statement that the vast majority of organizationshave stuck with it after becoming familiar with it A vice president of amajor insurance company remarked that ldquoIrsquove been doing strategicplanning for thirty years and Irsquove never seen a process that cuts throughthe nonsense as fast as this one doesrdquo Indeed the sorting and titlingprocess should take less than a day if the SWOTs have been identifiedprior to the meeting which can be a dramatic reduction in time overother objective-setting methods

Once the objectives have been identified it is time to move to the link-age segment of strategy map development Assume the set of objectivesillustrated in Exhibit 410 were determined during the objective identifi-cation phase These will be used throughout the explanation of the link-age exercise to assist in the understanding of strategy map development

The steps for linkage are illustrated in Exhibit 411The first step is to determine the number-one objective of the organi-

zation This will be the objective that draws the most attention as it willsit at the top of the strategy map The process flowchart also includesthe selection of the number-one perspective which obviously wouldneed to happen before the objective is selected In most cases the topperspective will be obvious but there are exceptions For example ifyou were developing a functional strategy map for the claims depart-ment of an insurance company what would your top perspective andobjective be Finance isnrsquot a clear-cut choice because this would rein-force the behavior of denying claims that perhaps shouldnrsquot be deniedCustomer satisfaction isnrsquot a clear-cut choice either because it could re-inforce the behavior of paying claims that shouldnrsquot be paid So theclaims organization would be in a quandary regarding which perspective

Strategy Maps 153

07_047461 ch04qxp 10406 1201 PM Page 153


EXHIBIT 410 Strategy Map Objectives Demo

Financial

Customer

Process

Learningamp Growth

Maximizeprofitability

Penetratenew markets

Optimizesupply chain

Develop highquality staff

Reducecosts

Maintain topreputation

Increase ontime delivery

Upgradesystems

Build strongrelationships

Accelerate productdevelopment time


Perspective Objectives

Determine top perspective objective

Repeat until all objectives are linked

Review other objectives within the top perspectiveand determine direct linkages

Test for sufficiency

Move to the next perspective and look for directconnections to the perspective above

EXHIBIT 411 Strategy Map Development Linkage Process

07_047461 ch04qxp 10406 1201 PM Page 154

should be placed on top Thankfully however this is a rare case In ageneral sense for-profit organizations will start with Financial and not-for-profit organizations will start with Customer Functional strategymaps will almost always start with Customer on the top as well al-though the customers referenced will often be internal

The proper technique for performing the first step of the flowchart isto review the objectives in the top perspective that were previouslynamed The idea is to determine whether any of the identified categoriesis suitable to serve as the number-one objective for the organization Forthe purposes of this demonstration there are two Financial objectiveswith titles of Maximize Profitability and Reduce Costs Of the twochoices Maximize Profitability is really the only option for a top ob-jective Costs are important but the company focused only on costs willhave difficulty being successful over the long term There is an old busi-ness axiom that states that you cannot shrink to greatness so a singularfocus on cost reduction is typically not the most productive strategy

Note From a not-for-profit perspective it is important to choose atop Customer objective The Treasury example yielded a top objectiveof Maximize Stakeholder Satisfaction which is certainly an acceptablenumber-one goal Other not-for-profits have gotten more creative withtheir top spot The Delaware River Port Authority (DRPA) for exam-ple adopted Keep the Region Moving as its top objective This was ac-tually the mission statement of the organization so it fit nicely at thesummit The statement had a double meaning DRPA was responsiblefor managing the trains bridges ferry cruises and so on in the area sokeeping the region moving had a transportation facet to it But the or-ganization was also responsible for attracting tourists to the Camden-Philadelphia area waterfront so keeping the region moving also had aneconomic angle to it

Another interesting example is the Parks and Recreation Departmentof a major county government The first choice for top objective wasProvide Continuous Service While there is nothing technically wrongwith this objective it really isnrsquot very inspiring When questioned on the

Strategy Maps 155

07_047461 ch04qxp 10406 1201 PM Page 155

meaning of Provide Continuous Service team members commented thatthey would like to give the citizens of the county recreation options247 In light of this the top objective was changed to a more thought-provoking Play All Day While the change was primarily cosmetic it didhelp the department tell a more interesting story when explaining itsstrategy to stakeholders

The next step of the process is to determine which other objectiveswithin the top perspective directly cause the number-one objective tohappen And direct means that a simple IF-THEN statement can be madethat logically ties the two objectives together In the previous exampleit could easily be understood that IF the organization Reduces CostsTHEN it would be more likely to Maximize Profitability As is the casethroughout the mapping process if there are objectives within this per-spective that do not seem to fit consider adding additional objectives tomake the connections more clear or drop the objective in isolation

The third step says that the group should test for sufficiency Thismeans that in the previous step it was established that Reducing Costs

is necessary to help Maximize Profitability but now is the time to ques-tion whether cost reduction would be enough by itself Clearly in thiscase it would not as the generation of additional revenue would be in-strumental in the maximization of profit If this were in fact determinedto be the case it is appropriate to add another objective related to rev-enue generation So the completed Financial perspective of the strategymap would be as shown in Exhibit 412


FinancialMaximize

profitability

Reducecosts

Increaserevenue

EXHIBIT 412 Demo Strategy Map Financial Perspective

07_047461 ch04qxp 10406 1201 PM Page 156

Once the top section is complete the next step is to move to the nextperspective In a for-profit organization this would be the Customer sec-tion The proper question to ask is ldquoWhich Customer objectives directlycause one of the Financial objectives to happenrdquo Look for the most direct link between any of the Customer objectives and any single Financial objective and draw the connecting arrow into it The Customerobjectives that are candidates for demonstration purposes are Maintain

Top Reputation Penetrate New Markets and Build Strong Customer

Relationships When looking for connections between these and the ob-jectives in the Financial section it appears that direct links would occurbetween Increase Revenue and both Penetrate New Markets and Build

Strong Customer Relationships In fact this relationship makes a greatdeal of sense as it implies that keeping current customers and finding newones are instrumental for revenue growth The organization must then de-cide how to position the Maintain Top Reputation objective Because the title includes the verb maintain it is clear that the reputationis already strong It is reasonable to assume that the reputation would beleveraged to help Penetrate New Markets

Depending on the industry it might be reasonable to assume reputa-tion would drive Build Strong Customer Relationships as well For ex-ample an investment banking firm like Goldman Sachs has an excellentreputation and customers might remain with the organization becausethere is prestige in simply being a client On the other hand a retailcompany such as Wal-Mart also has an excellent reputation but cus-tomers searching for low prices might abandon the chain for anotherstore if better prices became available Pursuing the first option wouldyield a strategy map linking the objectives in the top two perspectivesas shown in Exhibit 413

Note that there are no customer objectives feeding the Reduce Costs

objective It is not uncommon to bypass the cost side when evaluating ob-jectives within the Customer perspective In other words many times allof the objectives in the Customer section feed up through the revenue sidestraight to the overall top objective Some inexperienced facilitators getnervous about this phenomenon and try to invent connections between

Strategy Maps 157

07_047461 ch04qxp 10406 1201 PM Page 157

customer objectives and the cost objective For example a common prin-ciple is that it is less expensive to keep an existing customer versus findinga new one So if there is an objective of Build Strong Customer Relation-

ships the tendency is to draw the line both into the revenue side and thecost side of the financial equation While there is nothing technicallywrong with this practice it is generally encouraged to only draw an arrowif you believe that accomplishing the lower objective will specifically resultin the achievement of the higher objective In other words donrsquot getarrow-happy If the objectives are studied and connections debated longenough it will certainly be possible to twist logic to the point that everyobjective could be connected to every other objective On the other handif the process is continued until all objectives are connected and there stillisnrsquot anything feeding Reduce Costs then it would definitely be a cause forconcern But not having arrows drawn from customer objectives into costreduction should not be an immediate cause for alarm

The next step is simply to repeat the process for all remaining per-spectives The given process objectives are Accelerate Time to Market


EXHIBIT 413 Demo Strategy Map Customer Perspective

FinancialMaximize

profitability

Reducecosts

Increaserevenue

CustomerPenetrate

new marketsBuild strongrelationships


07_047461 ch04qxp 10406 1201 PM Page 158

Optimize Supply Chain and Increase On-Time Delivery Percentage

This is a perfect illustration of why it is necessary to write implicationsof the facts on the SWOTs and keep the sticky notes available duringmap development For instance any number of issues could be behindOptimize Supply Chain that would affect the grouprsquos decision on wherethe arrows should be drawn The main theme could be that certain sup-pliers are unreliable with their delivery times limiting the organizationrsquosability to Increase On-Time Delivery Percentage Another possibility isthat the organization is not taking advantage of volume purchasing dueto decentralized ordering which could result in the failure to Reduce

Costs Still another possibility is that there is a link between procuringparts from suppliers in a timely fashion and new product introductionwhich would Accelerate Time to Market Several other potential con-nections could also be made reinforcing the need to review the stickynotes to determine the original intent

The other objective might be a bit more straightforward It seems log-ical that Increasing On-Time Delivery Percentage would be vital toBuilding Strong Customer Relationships and probably Maintaining a

Top Reputation as well And Accelerate Time-to-Market would logi-cally drive the ability to Penetrate New Markets as well as Building

Strong Customer Relationships So layering in the Process section couldresult in the map in Exhibit 414

Note that there are two ways in which the arrows from Increase On-

Time Delivery Percentage reach Build Strong Customer Relationships

One is a direct arrow connecting the two and the other is an indirectarrow that goes through the intermediate objective of Maintaining Top

Reputation This happens fairly often and is not necessarily a logicalcontradiction The reasoning in this example is that Increasing On-Time

Delivery Percentage might well help reputation building and reputationcould certainly in turn help build relationships But the direct arrow fur-ther indicates that there are aspects of building relationships that on-time delivery would solidify that separate from reputation issues

The positioning of the objectives on the map should be done with aneye toward avoiding the crossing of arrows whenever possible Sometimes

Strategy Maps 159

07_047461 ch04qxp 10406 1201 PM Page 159

it is unavoidable but in general the line crosses make the map muchharder to read which limits its effectiveness as a communication tool

Completing the map involves layering in the Learning and Growthperspective The objectives presented were Develop High-Quality Staff

Upgrade Systems and Improve Internal Communication Learning andGrowth objectives also have the characteristic that it will probably bepossible to connect them to anything else on the map There are a fewuseful techniques available to help minimize confusion emphasize themost important links and avoid cluttering the strategy map with dozensof arrows One is to see if there is a natural hierarchy within the per-spective For example Upgrading Systems could definitely help Improve


FinancialMaximize

profitability

Reducecosts

Increaserevenue

CustomerPenetrate






Process

EXHIBIT 414 Demo Strategy Map Process Perspective

07_047461 ch04qxp 10406 1201 PM Page 160

Internal Communication In some cases this connection would be directand significant enough to simply draw an arrow into the communica-tion objective and let that one feed the objectives in the other perspec-tives This would eliminate the need to have multiple connections drawnfrom every Learning and Growth objective In this case it would be im-portant to review the sticky notes in the Upgrade Systems category todetermine how many were communication related It is likely that therewill be too many other issues impacted by technology to simply drawthe arrow into communication and be done with it A more likely resultis that Upgrading Technology would drive multiple objectives at Wal-Mart the electronic distribution process discussed in prior chaptershelps Optimize the Supply Chain E-commerce capabilities could alsohelp the organization Penetrate New Markets This list of potentialcause-and-effect relationships is long

The same holds true for Developing a High-Quality Staff It would bea challenge to find an objective on the map that a high-quality staff is unrelated to The useful technique in this case is to ask the group ldquoIf wecould only pick one or two objectives to connect Developing a High-Qual-

ity Staff to which would they berdquo This should give an indication of whatthe team thinks the training and development priorities should be Thegroup should also not forget to review the sticky note issues in the staff cat-egory as these could provide insight into which connections would bemost valuable A completed strategy map is illustrated in Exhibit 415

While this map is for demonstration purposes only there are several in-teresting observations to be made with regard to the map telling the story ofthe organization A company with this map is saying that focusing on sys-tems is of paramount importance This is evident for two reasons (1) theverb chosen for the objective is upgrade which clearly implies therersquos workto be done and (2) the host of objectives that system upgrades are expectedto drive are diverse significant and cover all three of the perspectives di-rectly A question that should immediately be asked upon viewing this mapis ldquoWhat technology initiatives and budget are being built into the planrdquoIf there are no activities or budget dollars allocated to technology improve-ments this strategy is probably doomed to failure from the start

Strategy Maps 161

07_047461 ch04qxp 10406 1201 PM Page 161

This strategy map also implies that new product development is a sig-nificant priority and it is expected to drive both customer retention andnew customer acquisition Once again this should prompt an immediate


FinancialMaximize

profitability

Reducecosts

Increaserevenue

CustomerPenetrate






Process

Learningamp Growth


Upgradesystems


EXHIBIT 415 Demo Strategy Map Learning and Growth Perspective

07_047461 ch04qxp 10406 1201 PM Page 162

question about what the product development process looks like The ac-tivities needed for execution of this objective could vary widely from company to company In many organizations a formal research and de-velopment department specializes in new products If this is the case ini-tiatives to aid in Accelerating Product Development Time would mostlikely involve existing process documentation analysis and modificationIn short it might be a standard process improvement team Other orga-nizations go about product development haphazardly The process for developing products either doesnrsquot exist or is very informal These orga-nizations will have to decide whether a more formal approach is neededto develop sufficient products to meet the needs of their strategy

Another process-related observation is that Optimize Supply Chain isthe only objective that feeds Reduce Costs This implies one of threepossible interpretations

1 The internal company processes are operating at peak efficiency 2 The company does not feel that internal process inefficiencies are

significant enough to merit mention as part of the strategy3 An arrow has been forgotten OR a problem has been discovered

there is an objective of Increasing On-Time Delivery Percentagewhich would seem to imply process streamlining but the onlyarrow coming out of this objective goes into Build Long Term

Relationships which is certainly a plausible outcome of increas-ing delivery reliability But without the arrow into cost reductionit leaves open the possibility that expensive means of expeditingprocesses will be employed to get customer orders out faster Ifthis is the intention of the company then so be it but it is an itemthat should be discussed and agreed to as a management team

Interpretation discussions such as this are what make a strategy map-ping session very valuable for a management team When properly facilitated the map really makes the team think about the implicationsof their actions and do so on a cross-functional basis

Another key interpretation point can be found in the Customer sectionWhile it is too simplistic to rank the importance of objectives by merely

Strategy Maps 163

07_047461 ch04qxp 10406 1201 PM Page 163

counting the arrows going into and out of them it is healthy to see aroughly even balance between Penetrate New Markets and Build Strong

Long-Term Relationships Many companies get so excited about theprospects for growth and new business that they neglect existing cus-tomers The fact that Develop High-Quality Staff feeds strong relation-ships implies that existing customer interface will be an area of focus

STRATEGY MAP UTILIZATION

A strategy map should not be developed and then locked in a deskdrawer or put in a trophy case Some of the uses for the map (eg com-munication illustration of cross-functional relationships) have been pre-viously discussed but additional ongoing uses abound The next steps inthe strategic process post-strategy map are the identification of measures(Balanced Scorecard) and strategic initiatives These will be covered indetail in subsequent chapters but suffice it to say that each of the ob-jectives on a strategy map will have measures associated with it Thisis mentioned here because target setting is an important use for thestrategy map

Where do targets typically come from Some say past history statisticalprojections and so forth While this is sometimes true targets often hap-pen because people pull a number out of thin air and say ldquoThis is what itis going to berdquo If this is the method for target setting the strategy map canat least provide a vehicle for helping the organization think about objec-tives logically For example consider the map developed in this sectionTarget setting should always begin at the top The number-one objectiveon the map is to Maximize Profitability Pulling a number out of the airassume the company has decided that a 10 increase in profitability overthe current year is necessary to deem the strategy a success

The next step is to look at the map to see which objectives feed Max-

imize Profitability In this case they are Reduce Costs and Increase Rev-

enue The management team should question how much of the 10needed is going to come through revenue generation and how much isgoing to come through cost reduction This is a very significant point


07_047461 ch04qxp 10406 1201 PM Page 164

The company might decide that its 5050mdashhalf through more revenuehalf through less cost The company could just as likely decide that rev-enue should go up 20 and that cost will only go up 10 (If the lat-ter is the case the title of the objective should logically be changed fromreduce to manage) The point is that different initiatives will be neces-sary in the first case versus the second If the company determines thata 7 increase in revenue is needed then the next step is to drop downto the next level and decide how much will come from Penetrating New

Markets and how much will come from Building Long-Term Relation-

ships And the company must also question if a 3 reduction in cost ispossible by Optimizing the Supply Chain

This process continues throughout the diagram The map gives theleadership team the opportunity to discuss how much impact they thinkeach of the lower-level objectives will have on the objectives they aresupposed to support This can be another very valuable discussion

A further use for the strategy map is at strategic evaluation time If thecompany has a Balanced Scorecard that is issued periodically a meetingshould always follow to review the results If targets are missed discussingthe connections on the strategy map can provide potentially useful cause-and-effect information as to the reason why

SUMMARY

The strategy map has steadily grown in profile and acceptance since its in-ception in the early 1990s This step was skipped by many organizationsinterested in implementing the Balanced Scorecard Because the termscorecard implied measures many companies rushed to the measurementpart of the process and slapped numbers on things But the strategy mapis a critical precursor to the scorecard because it ensures that the rightthemes have been identified that they fit together cohesively and that allstakeholders understand the direction of the organization

Strategy Maps 165

07_047461 ch04qxp 10406 1201 PM Page 165

166

c h a p t e r 5

BALANCED SCORECARDAND STRATEGIC

INITIATIVES

The Balanced Scorecard (BSC) like the strategy map is a tool popular-ized by Robert Kaplan and David Norton in their series of Harvard

Business Review articles and books beginning in the early 1990s Thescorecard has gained in popularity over the years and is still seen as avalue-added concept almost 15 years after its inception This certifies thatusing the Balanced Scorecard has moved beyond fad status and become apopular and accepted business practice In this chapter the scorecard defi-nition will be presented followed by examples and an explanation ofscorecard development and use Because strategic initiatives should beidentified in parallel with measurement identification a section on initia-tive development will follow the discussion of scorecard creation

DEFINITION

A Balanced Scorecard is a management tool that provides senior exec-utives with a comprehensive set of measures to assess how the organi-zation is progressing toward meeting its strategic goals

There are several important aspects of the definition The first is thatthe scorecard is a management tool There are typically two levels of use

08_047461 ch05qxp 10406 1201 PM Page 166

of a BSC within an organization Level one is when the scorecard is newand the management team is still trying to figure out how to integrateit into their decision-making system At this level the scorecard is usedby the management team in basically the same way a student views hisor her report card in school The BSC comes out at the end of the grad-ing period management reviews it and notes that the organization hasmade twelve targets and missed eight and so they praise the twelvechastise the eight and move on

At level one the scorecard is usually just one agenda item out of manyon the management team meeting agenda and the person who usually re-views scorecard performance in the management team meeting is the BSCcoordinator not the CEO or president So the way it usually works is forthe big boss to chair the first few agenda items and then say ldquoWell Susanhow does the scorecard look this monthrdquo And then Susan says ldquoGreatJane Wersquove made these twelve targets and missed these eight Back toyourdquo Upon which Jane continues through the remainder of the agendatopics This is clearly the phase when the management team doesnrsquot reallyknow how to use the scorecard properly as of yet Every organization goesthrough level one but the range of time spent on it can vary widely Someorganizations are through it after one or two scorecard editions whilesome never really get through it at all

Those that are successful break through into level two where the BSCis truly being used as a management tool There are several significant dif-ferences from level one The first is that the scorecard will not be oneagenda item out of many on the management team meeting agenda In-stead it will drive the agenda Think about it If the purpose of the man-agement meeting is to discuss strategy and the future shouldnrsquot theobjectives measures and initiatives that the organization deemed vital tostrategic success be the drivers of the session A second difference betweenlevels one and two is the perception of who owns the scorecard during themeeting In level two the big boss reviews scorecard performance insteadof the coordinator This raises the perception of importance of the tool inthe eyes of everyone at the meeting

Balanced Scorecard and Strategic Initiatives 167

08_047461 ch05qxp 10406 1201 PM Page 167

But perhaps the main difference between the levels happens during thediscussion of scorecard performance In level two it is not enough to knowthat an organization has missed targets and missing one does not equateto immediate chastising In level two the focus is on why targets weremissed There are a host of reasons that a target might be missed and eachshould prompt a different response from the organization For examplea target might be missed simply because the company is measuring some-thing it has never measured before so lack of experience with the subjectresulted in setting the target unrealistically high The proper action in thiscase is simply changing the target to a more realistic level Another possi-bility is that the initiatives identified to drive the number in the proper direction are behind schedule which should prompt rigorous questioningof the team owner(s) by the rest of the management team Or the initia-tives could be on schedule but ineffective for whatever reason This wouldrepresent a learning opportunity for the management team and potentiallya change of direction Still another possibility is that something externalhas happened to change the business situation It is possible that a newcompetitor has entered the market customers have found new product alternatives and so forth The scorecard provides up-to-date informationregarding these trends and puts management in the position to determinehow to effectively combat them

Another important aspect of the definition is that the customer of thescorecard is the executive team The definition of the executive team isthe group of people ultimately responsible for the business unit forwhich the scorecard is being created If the scorecard is of the organiza-tion-wide variety the executive team would be the CEO or Presidentand his or her direct reports if the scorecard is for the Midwest regionof the organization the executive team would be the head of the Mid-west region and his or her direct reports and if the scorecard is for theIT department it would be for the head of IT and his or her direct re-ports It is important to make this distinction because the primary pur-pose of the scorecard is to help make sound management decisionsand these are the people that should be making them The scorecard can

168 B a l a n c e d S c o r e c a r d a n d S t r a t e g i c I n i t i a t i v e s

08_047461 ch05qxp 10406 1201 PM Page 168

certainly be used for communication to the workforce and to illustratethe most important measures but the main reason the BSC is imple-mented is to make better management decisions

The final note on the definition refers to the notion that the scorecardis created to help organizations measure progress toward meeting theirstrategic goals Often an organization hears ldquoscorecardrdquo and simplystarts calling its existing measurement system a Balanced ScorecardThis was common practice for years and still occurs on occasion Thestrategy map has helped on this front since the technique for establish-ing measures is to use the strategy map objectives as a starting pointThe point is that the purpose of the scorecard is to measure progress to-ward achieving strategymdashthat is why your organization should do one

This topic provides an opportunity to clear up some misnomers aboutthe Balanced Scorecard

bull The BSC doesnrsquot replace all other measurement systems The bal-anced scorecard was not designed as the be-all and end-all of mea-surement in your organization Just because you have a BSC doesnot mean the leadership team cannot look at other data The BSCis intended to focus on the strategic aspects of the business Theremay be a whole host of operational measures the leaders need tomanage to as well

bull Measuring something on a BSC doesnrsquot mean it canrsquot be measured in

other places A common misconception is that the scorecard must bea unique set of measures In other words it should consist of itemsthat are measured only on the scorecard This isnrsquot true A measuremight be valuable from a strategic perspective and useful on the BSCand also interesting when seen in context with other operational mea-sures A great example is the Treasury which keeps track of incom-ing tax dollars To claim a BSC measures progress toward achievinga strategy and aids the Treasury in decision making without includ-ing tax revenue would be ludicrous and this number is also vital tomaking operational decisions regarding todayrsquos cash flow


08_047461 ch05qxp 10406 1201 PM Page 169

bull It is not a good thing or a bad thing to be on the BSC it is just a

thing Sometimes people or departments get upset when they arenrsquotrepresented on the BSC They seem to feel that not being on thescorecard makes their department appear less important A mili-tary organization once produced a scorecard that containedaround 20 measures which certainly was a reasonable numberUnfortunately it turned out that each individual measure was re-ally an index of 10 to 15 other measures making the scorecardpractically impossible to interpret This happened because each de-partment wanted to make sure they were represented in some fash-ion on the BSCmdashand resulted in a product of limited value Notbeing on the scorecard doesnrsquot mean you arenrsquot important It couldeasily mean that a given departmentrsquos processes are hummingalong so efficiently that therersquos no need for the executive team tospend time talking about them periodically

Conversely some people or departments feel that it is a negativeto be represented on the BSC The implication is that fingers arebeing pointed at them or that they are being put in the spotlightunfairly This is certainly not the case either A given process forexample might be the key to driving an entirely new revenuestream for the organization The leadership team might want todiscuss the performance of this particular process periodically toensure they are getting the most out of it This would definitely notbe a negative thing

The moral of the story is that the measures that go on the score-card should be the things that the leadership team needs to discusson an ongoing basis to determine how they are progressing towardachieving their strategy This may or may not include DepartmentA and Department A should not have an automatically positive oradverse reaction in either case

bull Scorecard measures are not set in stone The measurement identifica-tion process is inexact Business conditions change People get smarteras they learn more about the scorecard and want to see different


08_047461 ch05qxp 10406 1201 PM Page 170

things Measures outlive their usefulness All of these are reasons whyan organization shouldnrsquot feel like it is locked in to the exact group ofmeasures that is suggested initially It is common to have a few mea-sures rotate on or off the scorecard over the course of time Remem-ber that the objective is to provide management with the informationneeded for good decision making If measures need to be added ormodified to achieve this objective then so be it

bull Each perspective does not need to have the same number of mea-

sures While it is true that a scorecard wildly out of balance wouldbe a cause for concern too many organizations waste time tryingto have exactly the same number of measures for each perspectiveA scorecard with 24 measures does not have to be divided 6-6-6-6The key is executive interest If the executives are only interested infour learning and growth measures for example it isnrsquot necessaryto fill in two more spots with worthless numbers just to balance thenumber of measures (This happens more than you might imagine)

The scorecard has been a valuable tool because it filled a void in theexecution of the strategic process In the pre-BSC world many organi-zations would dutifully create a strategic plan every year present it totheir employees then go back to their real jobs and forget about strat-egy until the following yearmdashwhen they would do it again The score-card provides a method for keeping the strategy in front of theleadership team over the course of the year This forces them to make aconscious decision to neglect strategy as opposed to neglecting it sim-ply because they got too busy with day-to-day issues

The increase in the speed of business was discussed in Chapter 1 Inthe good old days it might have been feasible to create a strategy let itrun for a year and then revisit it This practice (in most industries any-way) will not suffice in todayrsquos world conditions are simply changingtoo fast The scorecard provides the vehicle to make the midterm coursecorrections that are necessary for continued success

Scorecards can assume many different shapes and sizes Consider theTreasury example provided in Exhibit 51


08_047461 ch05qxp 10406 1201 PM Page 171

172

Cus

tom

erIn

crea

se s

take

hold

erIn

d

busi

ness

taxp

ayer

80

8073

69

74

67

prio

r ye

arsa

tisf

acti

onSt

uden

tfa

mily

80

8085

85

76

74

prio

r ye

ar

Prom

ote

posi

tive

Publ

ic o

utre

ach

3927

Spec

ial c

ause

low

imag

eev

ents

Enh

ance

cus

tom

erSp

eed

of a

nsw

erin

g ph

one

500

m6

10m

CC

tim

eco

mm

unic

atio

n

cal

l mtg

qua

lity

std

s70

66

Sp

ecia

l cau

se lo

w n

ew h

ires

Wri

tten

cor

resp

ond

ence

30 d

ays

75 d

ays

His

togr

am o

n ag

ing

resp

onse

tim

e

sel

f-se

rvic

e co

ntac

ts90

87

C

omm

on c

ause

92

avg

Fina

ncia

lM

aint

ain

fina

ncia

lC

red

it r

atin

gA

AA

AA

AA

AA

SampP

Aaa

Moo

dy

inte

grit

yA

A+

Fit

chM

ater

ial a

udit

find

ings

03

Zer

o re

peat

s

Gen

erat

e re

venu

eG

F-G

Pre

venu

e-6

FY

-15

1FY

TD

-93

SA

F re

venu

e1

4FY

-19

FY

TD

5

Enf

orce

men

t rev

enue

N

A$1

122

MFY

TD

$29

54M

Man

age

bud

get

Bal

ance

d B

udge

tlt

=95

93

FY

TD

figu

re

Man

age

inve

stm

ents

Ret

urn

on in

vest

men

t8

0-7

8

Rol

ling

12 m

onth

figu

re

Proc

ess

Stre

amlin

e ke

ySt

and

ard

ized

test

TA

T10

wks

20 w

ksSp

ring

cyc

le d

own

from

28

proc

esse

sTe

st r

egis

trat

ion

accu

racy

90

55

Per

spec

tive

Stra

tegi

c L

ag M

easu

res

Tar

get

Act

ual

Com

men

tsO

bjec

tive

L

ead

Mea

sure

s

EX

HIB

IT5

1T

reas

ury

Bal

ance

d Sc

orec

ard

08_047461 ch05qxp 10406 1201 PM Page 172

173

Proc

ess

Sale

s ta

x d

elin

quen

cy c

anc

N

A27

733

402

53 n

ew is

sued

(con

tinu

ed)

Dis

tres

sed

loca

l gov

rsquotsN

A

203

new

5 r

emov

ed (D

ec 0

2)A

utho

rity

tran

s pr

og4

84

8

Min

imiz

e ea

rly

out

Ear

ly o

ut m

gmt p

rog

210

210

impa

ct

Opt

imiz

e co

ntra

ctC

ontr

act c

ompl

ianc

e10

092

m

anag

emen

t

Incr

ease

ele

ctro

nic

r

etur

ns fi

led

by

alt m

eans

80

39

CY

TD

41

capa

bilit

ies

e

lect

roni

c d

isbu

rsem

ents

33

28

$56

B p

aid

54

of $

dis

b

ele

ctro

nic

stat

e re

ceip

ts20

18

$5

3B

rcv

d 3

5 o

f $ r

cvd

Lea

rnin

gM

anag

e te

ch

key

IT p

roje

cts

on ti

me

in3

32

3amp

Gro

wth

reso

urce

sbu

dge

t

Dev

elop

pos

itiv

eE

mpl

oyee

sat

isfa

ctio

n7

04

370

em

ploy

ees

surv

eyed

cult

ure

Impr

ove

inte

rnal

Inte

rnal

com

m e

vent

s24

36co

mm

unic

atio

n

Prov

ide

cust

omer

-Tr

aini

ng q

ualit

y9

09

598

att

end

ees

42

resp

onse

sfr

iend

ly H

R s

ervi

ces

Hir

ing

cycl

e ti

me

45 d

ays

52 d

ays

Secu

rity

Impr

ove

secu

rity

Secu

rity

bre

eche

s0

0So

ftw

are

arri

ving

in Ja

n

DR

pla

ns te

sted

ap

p10

10

0

BC

pla

ns te

sted

ap

p10

10

0

08_047461 ch05qxp 10406 1201 PM Page 173

There are several important points to be made regarding this exam-ple The first thing to note is the format Starting on the left-hand sidenote that the perspectives follow the same flow and hierarchy that waspresented on the Treasury strategy map Column two contains the ob-jectives taken directly from the strategy map This gives the highestprobability that scorecard measures will reflect success in achieving thestrategy map objectives Note the positioning of the security objectiveplaced in the bottom level of the scorecard

The third column requires a bit of explanation The topic is measuresand it is segmented into lag and lead categories The definition of a lag

measure is one that reflects an outcome or result lags tell you how wellyou have accomplished somethingmdasha reflection of bottom-line resultstoday A lead measure on the other hand is one that you would keeptrack of because you think it will drive positive bottom-line results in thefuture A lead might reinforce a certain behavior the organization feelsis necessary to achieve the corresponding lag results For example a for-profit organization might feel that participation in trade shows is a pow-erful attractor of new business Tracking the number of trade showsattended would be considered a lead measure Why Because the measureis not an end in itself an organization wouldnrsquot be tracking it to see howmany trade shows it could attend Instead the attendance would drive acertain outcome probably something like number of new customers ornew customer revenue These could serve as the corresponding lag mea-sures Note that in the Treasury example there are several of each type

Columns four and five are where the numbers appear Column fourshows the targets for each measure while column five shows the actualresults for the most recent time frame It is recommended that actual fig-ures be colored according to whether the target has been made or notRed would indicate a missed target and green would indicate a madeone Some of the numbers may be black reflecting that a target hasnrsquotbeen set for that particular category as of yet Traditional format consistsof using the colors of a stoplight to reflect progress (with yellow mean-ing cautionmdashin danger of missing the target) but this is by no means theonly way to do it


08_047461 ch05qxp 10406 1201 PM Page 174

The Treasury example makes the data display as simple as possibleone column for targets one column for actual numbers There are a num-ber of variations on this theme Multiple target columns can be added toreflect year-to-date progress one-year two-year and three-year goalsand so on The actual column reflects the most recent time frame but thescorecard can include columns for year-to-date last month or quartersame month or quarter last year rolling 12 months and so on Againthere is no perfect format The best one is the one that helps tell the storyof the organization properly so leaders can make effective decisions Thebiggest constraint is the space available to tell the story It is importantfrom a perception perspective to keep the scorecard on one page soadding too many columns can result in having to use a very small printsize

The right-hand column of the scorecard is reserved for commentsComments are extremely important in assisting the interpretation ofthe document The scorecard should be viewed like the front page of anewspaper Headlines dominate the front page If there is an article onthe front page typically only the first few paragraphs are printed be-fore the ldquoSee page A17rdquo reference appears at the bottom directing thereader to jump to another page for the rest of the story Comments onthe scorecard operate exactly the same way The comments might pro-vide a bit of insight into the headlines (ie measures) and they mightrefer the reader to where further and more detailed information wouldbe available

There are several instructive points to be made on the content of theTreasury scorecard as well It was stated previously that the organiza-tion has several stakeholder groups Some of these are spelled out specif-ically in the measures for the top objective of Increase Stakeholder

Satisfaction The first measure is for their most traditional and long-standing customers the taxpayers The measure is divided into individ-ual and business to account for the very diverse needs of the two groups

The second measure is less traditional The Treasury has a large edu-cation component It oversees the administration of various types of educational grants and funding So the customers of the education


08_047461 ch05qxp 10406 1201 PM Page 175

component of the organization have been included segmented into thestudents applying for the money and the families of the students apply-ing for the money Does this mean that other stakeholders arenrsquot im-portant Of course not but there are several reasons why these twohave been selected for scorecard display For example the governor is akey stakeholder in the organization He was the person the Treasurer re-ported to but the Treasurer didnrsquot feel the need to include governor sat-isfaction as a scorecard measure stating that ldquoif the governor isunhappy Irsquoll know it without having to look at a surveyrdquo Other stake-holder groups might be so dynamic and hard to measure that it wouldbe difficult to get meaningful usable data for them on an ongoing basisSo Treasury settled on the taxpayers and education funding recipients asthe BSC-worthy segments

It should be noted that the satisfaction surveys were conducted annuallywhile most of the rest of the Treasury numbers are collected quarterly Thisshould be avoided if at all possible the time frames for the BSC should beas consistent as you can make them It makes it much more difficult to in-terpret results if some numbers are monthly some are quarterly annualand so forth But in the case of the surveys it was very time consuming andexpensive to get the necessary data This precluded the possibility of gettingquarterly numbers The numbers were considered to be so important thatthe leadership team felt it worthwhile to keep them on the scorecard forfour successive quarters regardless of the fact that they werenrsquot changingRemembering what the satisfaction numbers were and what they wantedthem to be was critical in driving decision making

The following measure is the first lead entitled public outreach eventsThis is an excellent example of a measure that would be intended to drivea specific result A public outreach event was an event in which someonefrom Treasury would go to a local community to inform and educate thetaxpayers on the benefits of paying their taxes electronically Electronicpayment definitely could help taxpayers as electronic refunds would beprocessed more quickly and the recipients would get their money fasterSo this would be a lead measure that could drive individual customer satisfaction As an added bonus if a large percentage of taxpayers file


08_047461 ch05qxp 10406 1201 PM Page 176

electronically it eases the resource burden on the Treasury staff Notethat in the Process section there is a measure entitled percentage of re-

turns filed electronically The public outreach events if successful woulddrive this percentage higher as well This would ease the strain on a staffoverloaded by two early retirement programs which was definitely anorganizational priority

The public outreach events measure is therefore not only an exampleof how lead-lag works but also an illustration of how lead measures fora given objective may drive measures for other objectives from aroundthe scorecard A frequently asked question is ldquoDoes each objective haveto have a lead and a lag measure associated with itrdquo What has just beenillustrated is that driving relationships may come from other areas sothe answer is no

Dropping down into the Financial category the Generate Revenue

objective also provides the opportunity for analysis Two of these mea-sures GF-GP Revenue and SAF Revenue were long-standing measureswithin the organization They dealt with the funds coming in from thegeneral fund and the school fund While Treasury was responsible formanaging to these numbers they did not control these numbers Inother words it wasnrsquot up to the Treasury to increase taxes but it col-lected the additional taxes after they were raised The important pointhere is that an organization does not have to be able to control every

measure on its scorecard Executive teams are sometimes reluctant to in-clude measures on their scorecard that they cannot control particularlyif their compensation is involved But the objective of the scorecard is tomake good management decisions and if a measure as important asGF-GP Revenue measure was not a part of the Treasury scorecard thennobody would take it seriously as a management tool

The enforcement revenue measure completes the Generate Revenue ob-jective and is a good complement to the other two This measure consistedof the sum total collected through discovery audit and collectionsmdashthreethings that were within the Treasuryrsquos control Looking at these three mea-sures together gave the management team a good understanding of the revenue picture


08_047461 ch05qxp 10406 1201 PM Page 177

Another reason enforcement revenue is instructive is due to the lackof a target There are many reasons why a target might not be added toa scorecard One is simply that the category is so new that it is difficultto hazard a guess as to what a reasonable target might be so the com-pany prefers to wait until getting data to set one But that wasnrsquot theissue in this case Another possibility is that the topic is beyond the con-trol of the organization so setting a target would be pointless (Note

The GF-GP Revenue and SAF Revenue have targets even though theyare out of Treasuryrsquos control but these were set externally and includedso Treasury could see how the measures shaped up) But that wasnrsquot theissue in this case either The issue here was public perception It wouldsend a wrong message to the public for their Treasury to have a targetfor audit for example This would imply that they would keep lookinguntil they find something and then they would stop

Note the Streamline Key Processes objective in the Process sectionThe procedure Treasury decided to follow was to select a key processfrom each area that had strategic significance and put measures on theBSC The first two processes measured came from the Education depart-ment and focused on the handling of the state standardized test scoresThis came as no surprise to anyone because this process was constantlyin the public eye and scrutinized by the media The surprise came fromthe tax division The process selected was relatively obscure but had far-reaching resource implications The measure selected was sales tax delin-

quency cancellations Basically all it meant was that if a business didnrsquotpay its taxes Treasury was responsible for going out and getting themThis was called a sales tax delinquency assessment But there are severalreasons why the assessment may be issued incorrectly as the result of aninternal process issue For example the business could have changedits name and paid under the new name but the collections departmentwasnrsquot informed in time Or the business could have moved and paidfrom the new address and the collections department wasnrsquot informed intime Or the business could have been acquired and paid under the ac-quiring companyrsquos name and the collections department wasnrsquot in-formed in time If the collection agent found any of these to be true and


08_047461 ch05qxp 10406 1201 PM Page 178

that the business was paid up to date then the assessment would be can-celled The volume of these (over 27000) that occurred in the prior quar-ter convinced management that a significant portion of resources werebeing consumed that could perhaps be better used preventing incorrectassessments from being issued in the first place This is an excellent ex-ample of how the BSC process can bring issues to light that otherwisemay go unnoticed and cause problems for the organization

Note that the remainder of the objectives and measures in the Processcategory are aimed at the same process efficiency targets in the Streamline

Key Processes objective Early Out was the name of the early retirementprogram that was eliminating a healthy percentage of the workforce Themeasure for minimizing the impact of early out was simply Early Out

Management (progress versus plan) The Treasury had a managementcommittee that met regularly that was in charge of properly managing theEarly Out program This committee had developed a timeline with tightmilestones designed to minimize disruption of service as much as possi-ble during the transition A target of 48 in this case represents that ac-cording to the timeline four out of the eight milestones were to have beenachieved by the current issue of the scorecard Since 48 appears in the ac-tual column as well the initiative is on target

This isnrsquot the most revealing of measures The fact that the initiativeis on target does not indicate whether it will be ultimately successful sothere may be limited value in an activity check measure such as this Butif the objective is to give the leadership team the information they needto make good decisions and the progress of this committee is an issuethat needs frequent discussion having it on the front page wonrsquot do anydamage It is important to note however that progress of all initiativescannot be documented on the front page of the BSC If they were thescorecard would be nothing but a list of activities and meaningful in-terpretation would be next to impossible

The Learning and Growth objective also contains interesting informa-tion One of the measures is internal communication events The purposeof this measure was to reinforce certain management behaviors Manyorganizations have trouble with programs that start off riding a wave of


08_047461 ch05qxp 10406 1201 PM Page 179

interest then fizzle out once the initial excitement wears off Treasury didnot want that to happen with its Balanced Scorecard efforts It defined aninternal communication event as a communication session between amember of the executive team together with employees from multipleareas conducted specifically to discuss balanced scorecard strategicplan or budget In this way they constantly reinforced their commitmentto these topics and got a chance to hear what the workforce had to sayas well

A cynic might doubt the usefulness of the communication events mea-sure The manager in question might not be taking it seriously might doa horrible job presenting the strategic perspective due to lack of prepa-ration might refer to a regular meeting as a communication event justto meet the required number and so forth In short there are a lot ofways to monkey around with the number But something important toremember is that any measure can be tinkered with if that is the intentof the leadership team If the objective is to get out and discuss strategywith the workforce and then carry the insights gained back to the lead-ership team then this measure would be successful

This scorecard was merely a first-edition demo that was presented tothe Treasury executives Generally speaking the executive team is re-sponsible for the objectives column of the scorecard Then the executiveshand off development responsibilities to what is known as the implemen-

tation team This team includes employees from around the organizationwho have a collective understanding of the BSC perspectives as they applyto the company This group also needs to be able to figure out what tomeasure and where to go to get the data to measure it The Treasuryscorecard development was ultimately successful because their imple-mentation team was large talented dedicated and diverse

Having said this the first draft still has some areas for improvementFor example the best measure the team came up with for Provide Cus-

tomer-Friendly HR Services was training quality measured by averageevaluation score on post-class training This type of measure is notori-ously unreliable and probably destined to be replaced Employee satisfac-

tion was measured through internal focus groups versus formal survey so


08_047461 ch05qxp 10406 1201 PM Page 180

the accuracy of this measure should be called into question as well It isnot unusual for a team to struggle at first when trying to identify goodlearning and growth measures This area typically has been measured theleast especially from an executive level Trial and error is to be expected

A for-profit BSC example comes from Orion Development Groupand is illustrated in Exhibit 52 with numbers changed to protect theorganizationrsquos privacy

Format differences abound between this example and the Treasuryexample Starting on the left note that there is no separate column forperspectives they are listed inside the objectives column Also note thatinstead of having a measures column that offsets lag and lead this ver-sion has a separate column that labels each measure as one or the otherThere are data columns for actual and target just like in the Treasury ex-ample but this scorecard also includes columns for year-to-date actualsand targets The final difference is the column on the far right desig-nating an owner for each measure The purpose of the owner is to makesure that data for the measure finds it way onto the BSC This does not

mean that the owner is responsible for collecting it the responsibility issimply to make sure it gets collected The reason such emphasis is beingplaced on this point is that the owner of each measure should be a mem-ber of the executive team so the senior executive doesnrsquot have far tolook to find the accountable person if a measure isnrsquot properly preparedfor the BSC (Note The comments column of the scorecard was not pre-sented due to space restrictions)

In terms of content several measures provide interesting learningpoints A good example of the lag-lead balance can be found in the Cus-tomer perspective in the Strengthen Existing Customer Relationships

objective The lead measure of cross-sell customer visits was defined asthe number of times a person or team from the organization called onan existing customer to discuss what other Orion services might be use-ful to them Before this measure could be implemented it would be necessary to perform an analysis of existing customers the services theybuy and the potential services they would benefit from Once the poten-tial needs were established the proper expertise would be assembled to


08_047461 ch05qxp 10406 1201 PM Page 181

182

Stra

tegi

c M

easu

res

Type

Qtr

Qtr

YT

DY

TD

Ow

ner

Obj

ecti

veT

arge

tA

ctua

lT

arge

tA

ctua

l

Fin

anci

al

Mai

ntai

n st

rong

Net

pro

fitL

ag$1

00K

$53K

$300

K$3

19PK

$ po

siti

on

Incr

ease

rev

enue

Serv

ice

line

reve

nue

Lag

$200

K$1

57k

$600

K$6

57PK

Publ

ic s

emin

ar r

even

ueL

ag$3

00K

$308

k$9

00K

$980

KPK

In-h

ouse

rev

enue

Lag

$200

K$1

98k

$600

K$5

00k

PK

Cu

stom

er

Stre

ngth

en e

xist

ing

R

epea

t bus

ines

s re

venu

eL

ag$5

00K

$479

K$1

5M

$16

MB

Bcu

stom

er r

elat

ions

hips

m

ulti-

prod

uct c

usto

mer

sL

ag40

37

-4

037

B

BC

ross

-sel

l cus

tom

er v

isit

sL

ead

62

187

MD

Att

ract

new

clie

nts

New

clie

nt r

even

ueL

ag$2

00k

$184

$600

k$5

37PK

Art

icle

s pu

blis

hed

Lea

d2

-16

5SW

Man

age

univ

ersi

ty

ke

y m

arke

ts u

nder

serv

ed

Lea

d0

30

3PK

netw

ork

Lea

ds

gene

rate

d v

iase

min

ar fo

llow

up

Lea

d8

1024

22PK

Est

ablis

h O

rion

bra

ndPo

st-c

ontr

act c

lient

sat

isfa

ctio

nL

ead

95

99

95

99

MD

EX

HIB

IT5

2O

DG

Bal

ance

d Sc

orec

ard

08_047461 ch05qxp 10406 1201 PM Page 182

183

Est

ablis

h O

rion

bra

nd(c

onti

nued

)C

lient

-ini

tiat

ed p

roce

ss

Lea

d3

09

1SW

imps

Pro

cess

Impr

ove

sale

s pr

oces

ses

Exe

cuti

ve c

onta

cts

Lea

d6

818

18M

DPr

opos

al h

it r

atio

Lag

60

50

60

30

MD

Exp

and

pro

duc

t lin

es

new

pro

duc

ts

Lea

d3

49

6B

Bin

trod

uced

Dev

elop

alt

erna

tive

pu

blic

sem

inar

s of

fere

dL

ead

3028

9075

PKm

arke

ting

cha

nnel

sPu

blic

sem

inar

s w

ith

gt18

Lag

2512

7561

PKpa

rtic

ipan

tsM

arke

ting

cos

t as

Lag

25

28

25

26

PK

Stan

dar

diz

e se

rvic

e

acc

epta

ble

aud

its

Lea

d10

075

10

088

PK

del

iver

y

Lea

rnin

g amp

Gro

wth

Opt

imiz

e co

nsul

ting

c

onsu

ltan

ts c

erti

fied

Lea

d10

010

010

010

0M

Dst

aff q

ualit

ySe

min

ars

atte

nded

for

Lea

d10

230

16M

Dco

ntin

uing

ed

ucat

ion

Impr

ove

int

Dat

abas

e up

dat

ed a

nd

Lea

dye

sye

sN

A

N

ASW

com

mun

icat

ion

acce

ssib

le

08_047461 ch05qxp 10406 1201 PM Page 183

ensure the company representatives could speak intelligently to the cus-tomers about what the new services were and why they needed themThis is why the visit might necessitate a team versus an individual Thisactivity created a win-win situation even when no new services were pur-chased because it showed customers that Orion was looking out for theirneeds (versus the hit-and-run mentality of many of their competitors)When the cross-sell visits were successful in selling more service the cor-responding lag measure of percentage of multi-product customers rose

The measures for Establish Orion Brand may seem unconventionalfor that particular category but the organization felt that differentiatingitself from competitors was a key to success and tried to determine whatwould establish Orion as a breed apart Post-contract client satisfaction

was a measure created to make sure the company followed up after ser-vices were rendered to ensure complete satisfaction and maintenance ofthe gains made The thinking was that truly satisfied customers wouldnot only stick with Orion but also provide invaluable references in themarketplace And client-initiated process improvements was a measuredesigned to encourage Orion staff to listen to what customers were say-ing post-engagement and take action to improve the service deliveryprocess to make it more client-focused Again it was felt that this wouldhelp differentiate the company in the marketplace

In the Process perspective under Improve Sales Processes there is alead measure of executive contacts The company has a desire to dealwith decision makers in client organizations They feel it speeds up theprocess ensures that deliverables are clear from beginning to end andincreases the probability that necessary resources will be available forthe client to implement internal improvements Executive contacts wasa count of the new prospect companies in which the sales organizationwas able to establish the relationship with upper management versuslow or nonmanagement as the primary contact point Several potentialinitiatives were identified to increase the probability of accessing the or-ganizational leaders

The Learning and Growth perspective provides a few interesting learn-ing points as well The percentage of consultants certified reflected how


08_047461 ch05qxp 10406 1201 PM Page 184

well the organization was preparing its new people to deliver the mater-ial ldquothe Orion wayrdquo Given the aforementioned nature of its business(consultants paid by the day while maintaining separate practices on theside) this was a tremendous challengemdashbut necessary to achieve up-stream objectives The final measure was an interesting case in that it waspurely qualitative A database was being created that included up-to-dateclient information industry experience of the consulting staff and thelike Everything a traveling service provider with the company needed toknow to be successful The development of this database was a long-termproject that the Orion leadership team did not want to let slide The man-aging partner was responsible for providing a ldquoyesrdquo or ldquonordquo for the score-card each reporting period letting the rest of the leadership team knowif progress on the database had been satisfactory in the prior reportingperiod While this was definitely unscientific it ensured the leadershipteam would talk about the issue during scorecard review

BALANCED SCORECARD IMPLEMENTATION

Putting together a Balanced Scorecard is much easier once the strategymap has been created The first few columns of the BSC that deal withperspectives and objectives are already completed on the strategy mapand can easily be formatted Recalling the example from the mock strat-egy map developed in the previous chapter the left-hand side of thescorecard appears as shown in Exhibit 53

The next step is to identify and prioritize measures This is the pri-mary responsibility of the implementation team discussed early in thischapter The team should follow the process illustrated in Exhibit 54to aid in measurement identification and prioritization

The first step the team must take sounds very straightforward selectan objective to identify measures for While seemingly simple a fewbasic ground rules should help get the process off to a good start

bull Pick something simple Never start with an objective for which itwill be difficult to identify measures Objectives that are focused on


08_047461 ch05qxp 10406 1201 PM Page 185

186

Fina

ncia

lM

axim

ize

profi

tabi

lity

Incr

ease

rev

enue

Red

uce

cost

s

Cus

tom

erB

uild

str

ong

cust

rel

atio

nshi

ps

Pene

trat

e ne

w m

arke

ts

Mai

ntai

n to

p re

puta

tion

Proc

ess

Incr

ease

on-

tim

e d

eliv

ery

Acc

eler

ate

prod

uct

dev

elop

men

t tim

e

Opt

imiz

e su

pply

cha

in

Lea

rnin

gD

evel

op h

igh-

qual

ity

staf

famp

Gro

wth

Impr

ove

inte

rnal

com

m

Upg

rad

e sy

stem

s

Per

spec

tive

Stra

tegi

c L

ag M

easu

res

Tar

get

Act

ual

Com

men

tsO

bjec

tive

Lea

d M

easu

res

EX

HIB

IT5

3D

emo

Bal

ance

d Sc

orec

ard

Per

spec

tive

s an

d O

bjec

tive

s

08_047461 ch05qxp 10406 1201 PM Page 186


Select an objective

Review strategic data that led to the development of the objective

Brainstorm potential measures

Separate potential measures into lag and lead categories

Rank measures from most to least desirable based on relevanceand ease of data collection

Draw a line in each lag-lead list of measures thatdifferentiates the BSC finalists from the ldquonice-to-knowrdquo measures

Review finalists as a group to determine if any canbe removed from consideration

Define the remaining measures

Collect data to fill in for the scorecard

Present recommendations to leadership team

Doessufficient balance exist

no

no

yes

yes

Havemeasures been identified for

all objectives

EXHIBIT 54 Measurement Development

communication technology culture or any behavioral-sounding is-sues have been historically difficult to measure These should beavoided until the team has gained some experience with the processStarting with objectives like Penetrate New Markets or Increase

On-Time Delivery Percentage will get the meeting off to a good start

08_047461 ch05qxp 10406 1201 PM Page 187

bull Avoid financial objectives While there should be a person or twoon the implementation team who intimately understands finan-cials the language of finance is something not every employee un-derstands Beginning with financial objectives generally results inone or two group members doing all the talking and making all thedecisions while everyone else watches and listens It might evenbe advisable for the finance experts to identify the top financialmeasures separately fit them to the given objectives and presentthem to the rest of the team This greatly expedites the process

The second step of the process is to review the strategic data that ledto the development of the chosen objective This means that the imple-mentation team must have access to the SWOT list of issues preparedand sorted by the executive team This is very important During theprocess of naming the objectives the executives summarized dozens ofissues with very short verb-noun titles The implementation team needsto do an issue review to ensure the key points made by the executives areunderstood in each category This could also assist in brainstormingmeasures For example if an opportunity under Penetrate New Markets

was to market services throughout Canada to attract new customersthen potential BSC measures might be Canadian sales dollars numberof Canadian customers and so on

After reviewing the strategic issues under the objective the next stepis to brainstorm potential measures The most important ground rule isto follow proper brainstorming procedure In other words donrsquot evalu-ate each idea as it is mentioned Some team members have a tendency tostart commenting ldquoHow would you measure thatrdquo or ldquoThat isnrsquot reallya measurerdquo and so forth If this happens the brainstorming will take aninordinately long time There is also a risk that team members will feelcriticized and they will shut down causing you to lose the opportunityto find the best combination of measurement possibilities The facilita-tor should continue to ask for possibilities and keep the team focused ongeneration versus evaluation until a good list of possibilities is createdIdeally each measure will be listed on a sticky note and grouped on a


08_047461 ch05qxp 10406 1201 PM Page 188

flipchart page If Penetrate New Markets was the selected objective theresulting list of measures may look like the list in Exhibit 55

Once the possibilities have all been documented the next step is toseparate the measures into the lag and lead categories Recall that lagmeasures reflect outcomes or bottom-line results today Lead measuresdrive bottom-line results in the future Ground rules to help with thesorting are as follows

bull Pick the easy ones first Usually about 60 to 70 of the measureswill be easy to categorize Zero in on a few of those first and get asmany as you can categorized as quickly as possible It is importantto get the categorization rolling and make progress before boggingdown into long-winded discussion of one or two measures

bull Donrsquot obsess over the categorization The remainder of the mea-sures will be grey zone issues they could be lag or lead dependingon the team memberrsquos point of view A very important facilitationtip is to not spend more than a few minutes discussing any onemeasure If a decision cannot be reached within a few minutes andthe arguments for lag and lead both have merit write the measuretwice and move on


Newmarketsales $

Tradeshows

attended

Qualityprospect

visits

Newcustomer

satisfaction

Newcustomerhit ratio

Totalrevenue

Canadiansales

dollars

of newmarketsentered

Marketpotentialanalysis

of newcustomers

of newproducts

Goldmarkets

identified

EXHIBIT 55 Potential Measures for Penetrate New Markets

08_047461 ch05qxp 10406 1201 PM Page 189

bull Recognize when items are actually initiatives In the list of poten-tial measures provided there was an item entitled market potential

analysis This could be an example of a one-time initiative versusan ongoing measure It is common to encounter a few of theseduring each brainstorming session These ideas should not be dis-carded keep them in a separate column for later discussion Whileit is typically the responsibility of the leadership team to identifystrategic initiatives it is fine for the implementation team to rec-ommend the top few initiative opportunities that result from theirbrainstorming As an example the implementation team at theTreasury identified around 100 potential initiatives during theirmeasurement brainstorming They selected the dozen or so theyliked the most and presented these to the leadership team Roughlyhalf were approved and initiated on the spot

Following these ground rules could result in a categorization asshown in Exhibit 56

It is instructive to examine the list and discuss the categorization incase the thinking is not obvious A measure like new market sales dol-

lars is obviously a lag It is the ultimate reflection of how well the orga-nization has penetrated new markets Number of new customers isbasically the same measure but expressed in numbers versus dollars(Note There will be definitional decisions to be made when clarifyingthe number of new customers For example order to truly reflect howwell new markets have been penetrated the company may wish to re-strict the count of new customers to those only in previously unservedmarkets In other words new customers in existing markets might notcount as part of the measure)

A measure such as quality prospect visits would clearly be a lead Thereason is that this measure is not an outcome in itself so the companywould not measure this with the objective of seeing how many visitsthey could make Rather the objective would be to make the visits todrive an intended result new customer dollars number of new cus-tomers and many of the other candidates on the lag list The same logic


08_047461 ch05qxp 10406 1201 PM Page 190

would apply to trade shows attended Note that another one of the leadmeasures is number of gold markets identified Natural question Whatis a gold market The answer whatever the company wants it to be It ispossible to define a gold market as one in which a certain sales poten-tial exists is within a certain geographic region and so forth The pa-rameters can be established by the organization This could be anexcellent lead measure for two reasons It isolates the most potentiallyprofitable market opportunities and it is memorable Once the termgold markets is accepted in the organization the management team willremember to continue trying to find and exploit them because the namekeeps the measure top-of-mind

A few measures on the list are harder to classify A good example is new

customer satisfaction One argument could be to make this a lag measure


Newmarketsales $

Tradeshows

attended

Qualityprospect

visits

Newcustomer

satisfaction


Totalrevenue

Canadiansales

dollars


Lag Measures


of newcustomers

of newproducts

of Goldmarkets

identified

Initiatives Lead Measures

EXHIBIT 56 Sorted Measures for Penetrate New Markets

08_047461 ch05qxp 10406 1201 PM Page 191

because satisfaction will not be tracked until someone has already becomea customer Therefore the penetration has already been completed An-other argument could be that keeping the customer is the real issue be-cause penetration doesnrsquot occur if the customer leaves right away Both ofthese arguments have merit The important thing is not to waste an hourdiscussing and debating to determine which argument is right Pick oneafter a few minutes and move on Note the positioning of market potential

analysis classified as an initiative and placed in the separate column inthe middle

At this point the flowchart asks the question of whether a good bal-ance exists between lag and lead This is about quality versus quantityIf there are a few good scorecard candidates in both the lag and lead cat-egories then move on to the next step If not cycle back and do morefocused brainstorming on the category that needs more possibilitiesThis will almost always be the lead category as team members will nat-urally focus on lag A useful facilitation question to help identify morelead possibilities would be ldquoWhat can we do to help us penetrate newmarketsrdquo This might generate additional lead possibilities such as ad-

vertising dollars spent or product demos conducted which would thenbe added to the lead list

The next step is to rank the measures from most to least desirablebased on relevance and ease of data collection In other words this isthe time to start trying to determine which of the measures is importantenough to be on the scorecard Beginning with the lag list ask thequestion ldquoIf there were only one lag measure on the Balanced Score-card for Penetrate New Markets which one would it berdquo This ques-tion clearly establishes relevance as the primary criteria for prioritizationversus ease of data collection This is as it should be Ease of data col-lection should be used to break the tie only if two measures are tied onrelevance Once the tie is broken determine which of the remainingmeasures would go next again based on relevance Continue theprocess until all measures are ranked Repeat the process for the leadmeasures The result of this activity will look something like the list inExhibit 57


08_047461 ch05qxp 10406 1201 PM Page 192

Ground rules assisting in the ranking are as follows

bull Look for measures that are really subsets of other measures Cana-

dian sales dollars is really just a subset of the new market dollars mea-sure Having both on the scorecard wouldnrsquot be justified unless theCanadian market was deemed so important that it needed to beviewed separately In this case it was simply moved to the bottom ofthe list since it would be incorporated into the other measure anyway


New marketsales $

Number ofnew customers

New customerhit ratio

Number ofnew markets

entered

New customersatisfaction

Totalrevenue

Canadiansales $

Lag Measures

Quality prospectvisits

Number of goldmarkets identified

Trade showsattended

Number ofnew products

Lead Measures

EXHIBIT 57 Ranked Measures for Penetrate New Markets

08_047461 ch05qxp 10406 1201 PM Page 193

bull Remember other objectives may be more relevant to certain mea-

sures Total revenue was ranked very low on the lag side Thisisnrsquot because it isnrsquot an important measure and it almost certainlywould be one of the finalists for the scorecard It will probablyshow up as a high-priority measure under the Increase Revenue

objective which seems a more natural fit If the main ranking cri-terion is relevance total revenue will not be a high-ranking issueunder Penetrate New Markets new market revenue would be com-bined with existing market revenue in this measure and the abilityto interpret market penetration would be lost Likewise new cus-

tomer satisfaction might be a subset of a customer satisfaction

measure under the objective Build Strong Customer Relationships

bull Donrsquot spend a lot of time ranking after the first three or four Thenext step after the measures are ranked will be to determine whichwill be candidates for the final BSC Because there are only 20 to25 measures on a standard scorecard it is highly unlikely that anycandidates ranked below the top few for a given objective willmake the final BSC Many teams spend an inordinate amount oftime trying to decide which lag measure should go seventh on thelist and which should go eighth but since neither will make thescorecard this is an irrelevant discussion Spend time ranking thetop four or so and then do the rest quickly

The timing of the process to this point will be roughly 30 minutes perobjective This is an average the financial objectives will be muchshorter and the behavioral technology and communication issues willprobably take longer Note that the next step in the process is the ques-tion of whether measures have been identified for all objectives If the an-swer is no the team should pick another objective and repeat the processon a new flipchart page until all objectives have a set of ranked measures

Figuring 30 minutes per objective and a total of around a dozen objec-tives the measurement identification process will take roughly a full dayIt is strongly recommended that the implementation team get this done inone continuous meeting if possible If the measurement identification is


08_047461 ch05qxp 10406 1201 PM Page 194

split up into six or seven one-hour sessions no momentum is generatedand the process takes too long Plus the identification process is a greatdayrsquos work for a team that is just getting started

After each objective has ranked measures the next step of the processis to draw a line in each lag-lead list of measures that differentiates thescorecard finalists from the ldquonice to knowrdquo measures In other wordslook at the measures and decide which would be serious candidates forthe top 20 to 25 measures for the scorecard If the team felt that only thetop two measures fit this mold a line would be drawn under the secondmeasure The same process would be repeated for the lead measures Anexample is illustrated for the previously determined Penetrate New

Markets objective in Exhibit 58Drawing the lines in the locations shown would indicate that the

team felt that a total of five measures from this objective were seriouscandidates for the Balanced Scorecard Multiplying that by roughly adozen objectives would yield about 60 measures making it through thisround of prioritization This is fairly common and should be taken as asign of progress The team can typically begin with an infinite numberof possibilities and narrow it down to 50 or 60 or so in one day Thenext step is a critical one reviewing the finalists as a group to determineif any can be removed from consideration At the end of the prior stepall of the above-the-line measures should be grouped together as shownin Exhibit 59

This template contains roughly 65 measures which is representativeof what will come out of the prior step It is well worth the time to nowreview the measures to see which do not seem important enough toproceed with Ground rules for this step are as follows

bull Look for identical measures in different categories Training is aclassic example Often teams will brainstorm lead measures fortraining in several different categories In the previous exampletraining is listed as a potential measure for customer service on-time delivery performance new product development and staffdevelopment The team may wish to identify the one objective


08_047461 ch05qxp 10406 1201 PM Page 195

where these possibilities would best fit and group them under onemeasure in that spot In this case Develop High-Quality Staff

seems like a logical place for all the training measures to begrouped A top-line measure of training days could be supple-mented by a definition that only counts training in the aforemen-tioned areas if the team desired


Newmarketsales $

Tradeshows

attended

Qualityprospect

visits

Newcustomer

satisfaction


Totalrevenue

Canadiansales

dollars


Lag Measures

of newcustomers

of newproducts

of Goldmarkets

identified

Lead Measures

EXHIBIT 58 Determination of BSC Finalists

08_047461 ch05qxp 10406 1201 PM Page 196


Financialbull Maximize ROE ROI EPS EVA

profitability net profit share pricebull Increase revenue Gross revenuebull Reduce costs SGampA cost per unit

admin expense

Customerbull Build strong cust Share of account cross Value-added services

relationships sell ratio customer incentives paid prefretention market share supp cust service lost customers training

bull Penetrate new New customer $ new quality prospectmarkets customers new visits Gold market

customer hit ratio identifiedbull Maintain top New customers new Seminars held

reputation business $ Positive quality contactsmedia mentions advertising $

Processesbull Increase on-time On-time delivery Training days

delivery penalties paid reasons for lateness

bull Accelerate product New product sales on- Product developmentdevelopment time target product intros training RampD budget

cycle time new product as of sales ideasprofitability vetted ideas approved

products in pipelinebull Optimize supply Stockouts penalties preferred suppliers

chain received BIrsquos total suppliers

Learning and Growthbull Develop high- Profit per ee ee satisfaction

quality staff training days openpositions turnover

bull Improve internal Communication Survey Communication comm results events int custsupp

workshops of meet-ings intranet hits

bull Upgrade systems System downtime e-orders tech $ as of budget first callresolution techn-ology training days

Strategic Objectives Lag Measures Lead Measures

EXHIBIT 59 ldquoAbove-the-Linerdquo Measurement Candidates

08_047461 ch05qxp 10406 1201 PM Page 197

bull Look for measures that are restated versions of other measures

This is often the case Under the Build Strong Customer Relation-

ships objective there are two lag measures of customer retention

and number of lost customers One of these can be stated as an in-verse of the other so it is an open question whether both would beneeded on the scorecard This would probably represent anotheropportunity for consolidation

bull Beware of measures that sound like they will need to be expanded

to show multiple categories The objective Increase On-Time De-

livery Percentage has an associated measure of reasons for latenessIt is difficult to envision how this would fit on a scorecard withoutlisting several reasons and how often each occurred The problemis that one measure could easily expand to several and take up alarge portion of the scorecard With few exceptions it is practicallyimpossible to show multiple categories of the same measure on thefront page of a scorecard

However there is a creative way to get the information on thefront page without taking up too much space For example as-sume an organization wanted to keep track of product sales by re-gion Putting six regions on the scorecard might be impracticalHowever if the organization has targets for sales in each regionthe measure could be changed to of underperforming regions

(or number of RED regions if you would like a more memorablename) That way if the number in the actual column for the monthor quarter was a ldquo1rdquo then management would know there wasone region not performing as projected This region could be listedin the comments column so management could ask the appropri-ate questions

bull Beware of measures that are clearly annual The Build Strong Cus-

tomer Relationships objective has a market share measure at-tached In some industries this is so difficult to measure that thenumbers are only gathered annually If the measure isnrsquot needed tomake crucial decisions or not deemed important enough to keep on


08_047461 ch05qxp 10406 1201 PM Page 198

a monthly or quarterly scorecard even when it isnrsquot changing (likethe taxpayer satisfaction measures on the Treasury scorecard)then removing this one from consideration now could save timelater

bull Question whether the most senior executive needs to know the

measure to run the company properly A great prioritization tech-nique is to view the customer of the scorecard as one person notthe entire executive team The ultimate customer is the CEO orPresident When deciding whether a measure should remain on thelist determine whether the measure in question is one the CEOneeds to know to run the organization properly If it isnrsquot then re-move it from the list If the customer is viewed as the entire lead-ership team then prioritization will be much more difficult Theteam will reason that ldquothe CFO wants to see these 15 measuresand the CIO wants to see these 12 and the COO wants to see these19rdquo and the result will be that it will be impossible to determine amanageable number of measures

In the given example measures in the Learning and Growth per-spective such as number of meetings held and intranet hits may notreally be of interest to a senior executive (at least not of interest rel-ative to all the other possibilities) and could be removed

The team should spend a good deal of time applying the ground rulesand evaluating the measures The next step in the process is very timeconsuming so removing a healthy percentage of the measures at thisstage is usually time well spent The conclusion of the review couldyield the table in Exhibit 510

This diagram shows that the total number of measures has beentrimmed to under 30 This is probably on the optimistic side Usually anhour or two of analysis can help narrow the total number of possibili-ties down from the original 60 or so to around 40 or so and these arethe measurement candidates to be carried on to the measurement defin-ition phase of the process


08_047461 ch05qxp 10406 1201 PM Page 199

Measurement definition can be time consuming and frustrating but itis without question one of the most important parts of scorecard devel-opment This is the step in which the measures must be precisely clari-fied to determine what counts as part of the measure and what does notNormally during this step it becomes evident that certain measures can-not be quantified or displayed in a meaningful way leading to thembeing removed from consideration Thus the definition process can serveas another measurement screen A sample measurement definition froma state Department of Management and Budget is shown in Exhibit 511

There are several components of note in the definition Any goodmeasurement definition will need to include the following

bull Context of the measure (which strategic perspective and objective

did it come from) In the given example it is explained at the topthat this particular measure comes from the process perspectiveand from an objective entitled Deliver Quality IT Services


training days openpositions turnoverCommunication eventse-orders tech $ as ofbudget

Profit per eeLearning and GrowthbullDevelop high quality staff

bullImprove internal commbullUpgrade systems

RampD budget as of salesproducts in pipeline preferred suppliers

On-time delivery Cycle time new productprofitabilityBIrsquos

ProcessesbullIncrease on-time delivery bullAccelerate product development time

bullOptimize supply chain

Pref supplier designations quality prospect visitsGold markets identifiedSeminars held

Cross sell ratio customerretentionNew customers new cust hit Positive media mentions

CustomerbullBuild strong cust relationships

bullPenetrate new marketsbullMaintain top reputation

ROE net profitGross revenueSGampA

FinancialbullMaximize profitabilitybullIncrease revenuebullReduce costs

Lead MeasuresLag MeasuresStrategic Objectives

EXHIBIT 510 Measurement Candidates after Prioritization

08_047461 ch05qxp 10406 1201 PM Page 200

bull A paragraph explaining what counts as part of the measure and

what does not The definition paragraph is an attempt to introduceand clarify key terms and clear up any potential ambiguity Thisexample explains what a contact is what resolved means and soforth


BSC Perspective Process

Resolved on first contact Quarter 60 Year to Date 658

Example

Total TicketsTickets Resolved Resolved 1st Level

500300 60

Quarter

BSC Strategic Category Deliver Quality IT Services

Measure Percentage of ITSD Support Desk Problems Resolved on the First Contact

Definition Of the total number of contacts regarding problems received by the ITSD support desk the percent resolved on the first contact A contact is considered resolved if a user problemquestion is taken care of or a request that requires action from another unit properly handledreferred (eg on a request to order equipment the help desk would generate the order and consider the contact resolved)

Data Support desk information collected by ITSD and reported to the BSC coordinator ITSD prepares monthly reports that represent an average of the individual technician statistics The monthly reports are averaged to calculate the quarter and year to date percentages Relates to SPLAN 5C Deliver Quality IT Services

Appearing on BSC Percentage of ITSD support desk problem calls resolved on the first call mdash Quarter and YTD

24101586658

YTD

Answering problem calls on the first call minimizes customer downtime and frustration increasing customer satisfaction and aids in maximizing value to the customer

EXHIBIT 511 Sample Measurement Definition

08_047461 ch05qxp 10406 1201 PM Page 201

bull A paragraph explaining how the data will find its way onto the

scorecard The data paragraph explains who will collect the datawhere they will send it and so forth In this example ITSD willcollect the data and forward it to the BSC coordinator who will beresponsible for connecting it to strategic plan activity

bull An explanation (with an example) of how the data will be calcu-

lated and displayed on the scorecard It is very insightful to try towork through a calculation of the measure being defined even if thedata is fictitious It forces the group to think through the calculationof the number and whether it will make sense in a scorecard formatThinking through the numbers often forces modifications to thedefinition that ultimately improve the scorecard product

bull An explanation of how the measure winds through the strategy

map cause-and-effect arrows to impact the overall number-one ob-

jective of the organization Questions are inevitable when the im-plementation team makes recommendations to the executive teamThe most common question asked is ldquoWhy are we measuringthisrdquo or ldquoWhy should we care about thisrdquo The rectangular boxoutlined in black at the bottom of the definition helps the imple-mentation team prepare to answer that question The purpose ofthe box is to track the measure through its strategy map connec-tions all the way to the top objective on the map In this examplethe help desk measure was under the Deliver High-Quality IT Ser-

vices objective which was in the Process section This objectivedrove an objective in the Customer section entitled Increase Cus-

tomer Satisfaction which in turn drove the overall number-one ob-jective of Maximize Value to the Customer If it is a chore to clarifythe connection of a measure to the overall number-one objectiveit may be a sign that the measure isnrsquot really aligned with the strat-egy and needs to be modified

Measurement definition is not easy to do In fact even skilled practi-tioners will find that creating a document like the one in Exhibit 511can easily take an hour or more It is easy to see why coming into the


08_047461 ch05qxp 10406 1201 PM Page 202

definition phase with 60 measures is not a great situation This rein-forces the need to study the measurement finalists and prune out the onesthat you feel are not really serious candidates to make the final scorecard

The process for measurement definition is illustrated in Exhibit 512After selecting a measure to define a good technique is to list all the

questions that must be answered or issues that must be resolved to havea measure that is well-defined For example one of the measures for thePenetrate New Markets objective in the sample is new customer dollars

In order to define this measure properly questions that would have tobe answered include the following

bull ldquoWhat is a new customerrdquo bull ldquoHow long will a customer be considered new for scorecard

purposesrdquobull ldquoIs there a statute of limitationsrdquo (In other words if a customer

bought something many years ago and then stopped would they beconsidered new again after a certain amount of time has passed)

bull ldquoWill the dollars be recorded on the BSC in the month the contractis signed or prorated over the life of the contractrdquo

bull ldquoIs there a minimum dollar value to be considered for scorecardingpurposes or does any purchase by a customer countrdquo


Select a measure

Modify as needed

List all the questions that must be answered and issues that must be settledfor the measure to be considered well-defined

Quickly write a proposed definition paragraph

Test to see if your paragraph adequately answers all the questions

EXHIBIT 512 Measurement Definition Process

08_047461 ch05qxp 10406 1201 PM Page 203

The list of questions might be much longer but these will do for il-lustration purposes The next step is to choose one person in the groupto quickly write a proposed definition paragraph that addresses thequestions posed Notice that in the flowchart the word quickly is un-derlined highlighted and italicized It is extremely important not to tryto write something absolutely perfect the first time Experience hasshown that this will take far longer than the recommended approachInstead have someone in the group take his or her best shot at a gooddefinition quickly writing something like

New customer dollars will be counted as those dollars receivedfrom any customer that is making their first purchase ever from ourorganization The total dollar value of the purchase will be recordedon the scorecard in the time period in which the contract is signed

It is generally much easier to critique an existing paragraph than totry to write it perfectly the first time So now that the initial try has beenmade the next two steps in the process are to review the list of questionsto see if all have been answered and modify the paragraph if needed Itis instructive to keep two key questions in mind when performing thisparagraph review The first is ldquoDoes the paragraph make senserdquo Inother words would everyone in your organization who needs to under-stand the interpretation of the measure read the definition the sameway or would there be ambiguity The second key question is ldquoIs thedefinition what you want to userdquo In other words the definition mightmake perfectly logical sense but you might be able to think of a muchbetter way to define the measure

The first question on the brainstorming list was ldquoWhat is a new cus-tomerrdquo According to the hastily written first-draft definition a newcustomer is ldquoany customer that is making their first purchase ever fromour organizationrdquo Applying the two test questions it might be con-cluded that this definition makes perfect logical sense but there may bea better way to do it For example an insurance company might havelarge industrial property and casualty divisions These are totally inde-pendent product lines with separate balance sheets and underwritersand so forth They also go about customer acquisition separately In


08_047461 ch05qxp 10406 1201 PM Page 204

other words having a customer for casualty products doesnrsquot necessar-ily make the client more attractive to the property division If both di-visions are responsible for finding new customers the definition mightneed to be modified It could be changed to

New customer dollars will be counted as those dollars receivedfrom any product line customer that is making their first purchaseever from that product line The total dollar value of the purchasewill be recorded on the scorecard in the time period in which thecontract is signed

The next question is ldquoHow long will a customer be considered newfor scorecard purposesrdquo The purpose of this question is to ensure thatnew customers are not counted as new customers forever at some pointthey will become existing customers and no longer part of this measureIf the team feels that a 12-month period is sufficient before the customerwill not be considered new any more (which makes sense if this were aninsurance example since most premiums are paid and renewed annu-ally) then this could be added as shown

New customer dollars will be counted as those dollars receivedfrom any product line customer that is making their first purchaseever from that product line Customers will be counted as new fortwelve months following their initial product line purchase Thetotal dollar value of the purchase will be recorded on the scorecardin the time period in which the contract is signed

The third question asks ldquoIs there a statute of limitationsrdquo Accord-ing to the paragraph there is not The paragraph says that the customermust be making their first product line purchase ever If the team rea-sons that a customer that bought from the company several years agoand stopped should now be considered a new customer the paragraphwould need to be modified again It could be changed to read

New customer dollars will be counted as those dollars receivedfrom any product line customer that is making their first purchasein the last five years from that product line Customers will becounted as new for twelve months following their initial productline purchase The total dollar value of the purchase will berecorded on the scorecard in the time period in which the contractis signed


08_047461 ch05qxp 10406 1201 PM Page 205

The fourth question is ldquoWill the dollars be recorded on the BSC inthe month the contract is signed or prorated over the life of the con-tractrdquo This question would be obvious if it were an insurance exampleas premium is paid up front No modifications to the definition wouldneed to be made

The final question is ldquoIs there a minimum dollar value to be consid-ered for scorecarding purposes or does any purchase by a customercountrdquo This question is designed to weed out small customers if the ex-ecutive team wishes to do so Perhaps only customers giving over$50000 in business would be what the executive team wished to focuson If this were the case the final modification could be

New customer dollars will be counted as those dollars receivedfrom any product line customer that is making their first large (gt$50000) purchase in the last five years from that product line Cus-tomers will be counted as new for twelve months following their ini-tial product line purchase The total dollar value of the purchasewill be recorded on the scorecard in the time period in which thecontract is signed

This process of trial and error continues until the team has a defini-tion they feel comfortable with Some tips to aid in measurement defin-ition are as follows

bull Lists are helpful for clarification Lists can remove ambiguity Forexample if there is a measure of training days per employee it issometimes difficult for a team to precisely determine what countsas training and what does not For instance does night schoolcount What about on-the-job-training Online training And evenif the team narrows the focus to ldquoformal in-classroom trainingwith an instructorrdquo potential definition problems still abound Dothe training classes have to be tied to subjects illustrated on thestrategy map And if so who makes the determination of whethera class is relevant

A list can solve all of these problems The team can make an ac-cepted list of courses and the ambiguity is gone If an employeetakes a course on the list it counts as part of the measure If the


08_047461 ch05qxp 10406 1201 PM Page 206

course is not on the list it doesnrsquot count Case closed Anti-lists arealso helpful for clarification This means saying ldquoevery formaltraining course counts except rdquo and making the list of excludedcourses

bull Donrsquot use the word ldquoetceterardquo Using ldquoetceterardquo usually invali-dates the definition The lack of clarity introduced by the wordleaves too much interpretation to the readers of the definition

bull Determine an appropriate level of precision It is important for theteam to determine how much precision is needed for the executiveteam to make sound business decisions If it is enough for the ex-ecutives to know that there were 31 training days per employeefor example then donrsquot set up a data collection procedure designedto deliver results to a 31428 level of accuracy Making data col-lection as simple as possible is one of the keys to sustaining thescorecard over the long term

bull Remember strategy map connections When defining a measuresuch as training days per employee the team will have to decidewhat training will count One factor in this decision should be thestrategy map connections The strategy map in the last chapter hadan objective of Develop High-Quality Staff which drove Acceler-

ate Product Development Time and Build Strong Customer Rela-

tionships The team may decide that the best way to achievestrategic success is to confine the training days to those coursesthat support product development andor customer relationshipbuilding (Again this would be an excellent application of the list-ing technique)

bull Avoid long flowery non-value-added statements The goal whenwriting a definition is to be direct clear and concise Sometimesteams get into a mindset of ldquothe more we write the better off wersquollberdquo or ldquowe need to make every definition sound impressive like itwas written by a famous authorrdquo It is not uncommon to read thetraining days per employee definition and see a long-winded solil-oquy like ldquoTraining is part of the overall development plan for the


08_047461 ch05qxp 10406 1201 PM Page 207

workforce Workforce development plans are an essential part ofthe organizationrsquos career development program and contribute tothe overall health and well-being of the organizationrdquo

This sounds great but really doesnrsquot add any value to the defin-ition In fact it can detract from definition quality if readers cometo different conclusions regarding what the writers are trying tosay Readers will automatically think that they need to make sometype of decision based on the wording so they may come to inac-curate conclusions about what is being said

As previously mentioned writing a definition will take about anhour This includes time to write and critique a definition paragraphtest it out with the experts who know the subject in question (thesecould be people not on the implementation team) and review the feed-back with the team Formalizing the definition by adding the data col-lection procedures and strategy map connections will add a marginalamount of time So make sure to screen as many measures as possiblebefore getting to this phase

The next step in the measurement development process is to collectthe data to fill in on the scorecard Some of the barriers to successfuldata collection are as follows

bull No data exists Scorecard measures often involve topics that havenever been measured before In this case the team must set up a datacollection procedure from scratch including designating a collectorof the information It is generally recommended that the team set upthe procedure for presentation to the executive team but not actu-ally install the procedure until the executives formally approve themeasure (The approval process will be discussed shortly)

bull Lack of systems Sometimes the data for a given measure alreadyexist but they are scattered throughout the organization and diffi-cult to assemble One facilitator found that the information neededto simply count the precise number of customers was in 26 sepa-rate databases Sorting through all of them and editing out dupli-cations took a team of people an entire week to finish This can be


08_047461 ch05qxp 10406 1201 PM Page 208

a minor issue or major complication depending on the organiza-tion and what measures are being sought The best solution is to becareful during measurement selection to try to avoid measures thatwill require horribly complex collection

bull No discipline for data collection This is a common problemWhen asking employees to be rigorous about data collection ontopics that have never been measured before there will almost al-ways be start-up problems Even if the employees in question aresupportive of the process (which is certainly not a given) alteringtheir established routine to include collecting new data will be dif-ficult The first thing the implementation needs to have is patiencethe data collection people should be given the support needed totransition to new procedures But it should be noted that the otherthing the team needs is management support If resistance to datacollection becomes a persistent issue then management will needto reemphasize the importance of the scorecard to those who arenot complying with data collection requests

bull Difficult to make the number meaningful in a one-number BSC

format Sometimes the data collection process reveals that makingthe number meaningful in scorecard format isnrsquot possible evenafter a plausible definition has been created Perhaps the definitionsuggests creating an index that sounds great initially but upon fur-ther review is difficult to interpret meaningfully This can happenwhen administering an employee survey for example and weight-ing each question to come up with an overall score of ldquo86rdquo for thescorecard If it isnrsquot apparent what 86 means or whether it is goodor bad the number really wonrsquot help that much

bull Measure doesnrsquot reveal anything useful If a team wanted to keeptrack of the number of new products for example they mightwrite an excellent definition and assign the data collection to some-one This person might in turn realize that the way the measure isdefined there will be at most one or two new products in anygiven year This will turn the scorecard into a spectacularly unin-teresting string of zeros with an occasional 1 mixed in And since


08_047461 ch05qxp 10406 1201 PM Page 209

the new product intros happen so infrequently everybody knowsabout them anyway This means there is no real reason to take upscorecard space with the number

Navigating through these barriers can be time consuming and will al-most certainly result in altering the format of the scorecard somewhatover the course of time Initial efforts should be made to determine thedifficulty of the data collection but the team should present their rec-ommendations to the leadership team before significant time is investedThis leadership team presentation is the final step of the measurementdevelopment process The implementation team should prepare a doc-ument for the presentation that includes

bull A ldquorealrdquo scorecard that has all the measures and easily gathered

data already filled in The scorecard should be presented in the for-mat recommended by the team (In other words if the team feelsthat ldquoyear-to-daterdquo and ldquolast monthrdquo columns are needed to tellthe story properly these should be presented as well)

bull A ldquomockrdquo scorecard that is completely filled in including fictitious

targets and comments It is difficult to get a feel for the complexityof a scorecard unless you can see what a completely finished prod-uct would look like The ldquorealrdquo scorecard referenced in the priorpoint might be 50 blank due to data collection issues This mightmake adding data columns sound like a good idea But when all theblanks are filled in it could be a different story So the team shouldmake up realistic numbers for all the measurement categories thatdonrsquot have real data and make up targets as well Not only does thisprovide a good demo of what the finished product would look likebut comparing the mock scorecard to the real one gives the leader-ship team a good indication of how much work is left to be done

bull A sample measurement definition Executives will probably nothave the appetite for detail to go through each individual definitionword for word but it is a good idea to have a sample definition inthe presentation package to illustrate the format and thinking thatwent into each measure


08_047461 ch05qxp 10406 1201 PM Page 210

bull A sample chart The control charts referenced in the assessmentsection are excellent tools to aid in providing context to the score-card measures Other charts and graphs may be used to help aid ininterpretation as well Including a sample chart as a demo can beinstructive for the leadership team

bull Appendices containing the remainder of the definitions and charts

It is important to have all the detail handy to answer any questionsthat may arise

The meeting to discuss the implementation team recommendationscan easily last half a day The premeeting process of creating and de-bating the definitions usually results in the team being well-prepared toanswer any questions the executives throw at them This makes theteam sound intelligent and thorough which is confidence-inspiring forthe executives

The team should not be intimidated or have their feelings hurt if andwhen the leaders challenge their recommendations On the contrary ifthe leaders accepted the recommendations wholesale then it would bemore of a concern Unless the implementation team is extraordinarilygood and lucky they wonrsquot deliver the perfect set of measures on thefirst try Complete acceptance of the measures with no push back couldimply the leadership isnrsquot really taking the BSC seriously The executivesmight question a particular measurersquos relevance or ask ldquowhy not B ver-sus Ardquo The job of the implementation team is to forcefully present thereasoning behind the choice of each measuremdashonce If the executivespersist in wanting to drop or change a measure then the implementa-tion team should cheerfully go along It is important to remember thatthe customer of the scorecard is the leadership the job is to give them aproduct they want and will use

It is inevitable that the leaders will want scorecard modifications sothe team will need to continue to define and collect until a complete setof measures has been agreed upon At this juncture the leaders will beresponsible for target setting and initiative selection These functionsshould not be viewed as independent events If an aggressive target is


08_047461 ch05qxp 10406 1201 PM Page 211

set then aggressive initiatives need to be implemented to back it up Suc-cess with an initiative should drive positive results with the scorecardmeasures Some tips for target setting are as follows

bull Remember to use the strategy map It has been stated that targetsare often pulled out of thin air The strategy map chapter illus-trated how to use the map to make target setting a bit more logi-cal Start at the top with the number-one measure and decide whatthe target should be Then use the connections throughout the restof the diagram to set supporting targets that drive the desired num-bers at the top

bull Remember that targets donrsquot come free If a target is set with nomeans identified for execution it implies that all people have to dois try harder to achieve it In the vast majority of cases this will notbe effective The executive team is accountable for resource allo-cation to drive the achievement of targets Once the number is setthe executives should immediately think about the ldquohowrdquo of mak-ing it happen

bull Decide what happens if a target is made or missed The executivesshould make it clear who is primarily responsible for achievingeach target and what the process is going to be if the target isachieved (or not) An acceptable answer to this question is ldquonoth-ingrdquo if that is what the leadership team wants But if it doesnrsquotmake any difference whether a target is made then why bother set-ting one in the first place Usually there should be something atstake be it compensation recognition or promotion It shouldalso be determined whether compensation rules regarding targetsare hard and fast Remember that when an organization has useda scorecard for a while it generally progresses to the level of ana-lyzing why the target was missed If it was missed due to a man-agerrsquos inattention to a strategic initiative for example thecompensation ramifications might need to be different than if atarget was missed due to a factor beyond the managerrsquos control


08_047461 ch05qxp 10406 1201 PM Page 212

Once the targets are set the scorecard will be ready for use It is im-portant to remember however that the scorecard is simply an infor-mation-providing tool A good analogy is to view the scorecard like ascale when you are on a diet Stepping on a scale does not make youweigh less (unless you fiddle with the knobs) the function of the scaleis simply to tell you how you are doing The scorecard is the same wayAn organization shouldnrsquot expect to get better just because they arestepping on a strategic scale every so often In the same way that chang-ing eating habits establishing an exercise routine and so on make thediet successful execution of strategic initiatives makes a strategy suc-cessful The next section provides insights into the identification andprioritization of strategic initiatives

STRATEGIC INITIATIVES IMPLEMENTATION

The identification and prioritization of initiatives is a critical step in theprocess because it establishes what will actually get done This step isthe primary responsibility of the executive team The process is fairlystraightforward with the steps illustrated in Exhibit 513


List the strategic objectives on sticky notes in the left-hand column

Develop and approve project plans

Review the strategic data (SWOTs) that led to the development of the objective

Prioritize the initiatives to determine which need an immediate start

Brainstorm potential initiatives for each objective add implementation teamrecommendations carried over from the measurement development sessions

EXHIBIT 513 Initiative Identification and Prioritization Process

08_047461 ch05qxp 10406 1201 PM Page 213

The first step involves creating a template as shown in Exhibit 514with the objectives on the left being in a column of sticky notes on thewall or whiteboard

The next step is to review the strategic data (SWOTs) that led to thedevelopment of the objective Many of the items that were brainstormedas opportunities could be ready-made initiatives Weaknesses andthreats might suggest potential initiatives that would close gaps andstrengths might suggest initiatives that would help leverage excellentperformance In all cases it is important to refresh the executive teamrsquosmemory on the strategic issues

The next step is simply to brainstorm potential initiatives for each ob-jective The team should not restrict their thinking to only those thingsthe organization would rush right out and do tomorrow anything is fairgame at this point The team should supplement their brainstorming listby adding the implementation team recommendations carried over fromthe measurement development session As each idea is surfaced itshould be written on a sticky note and placed in the ldquoPotential Initia-tivesrdquo column of the template in the row of the objective it correspondsto For example the Develop High-Quality Staff objective could look asshown in Exhibit 515

Once potential initiatives for all objectives have been identified andlisted the executive team needs to prioritize them to determine whichneed an immediate start The reason the template is divided into threenumerical columns is to illustrate relative priority The definition ofeach column is as follows

bull 1 = urgent and important must be started right away (ie do it now)bull 2 = important but not urgent (ie do it soon)bull 3 = interesting but not an immediate priority (ie do it when you

get around to it)

It is extremely important that this be viewed on a cross-objectivebasis In other words donrsquot brainstorm potential initiatives for eachobjective and rank them individually within each objective Insteadbrainstorm initiatives for all the objectives first and then decide what


08_047461 ch05qxp 10406 1201 PM Page 214

the top-priority initiatives from the entire list should be The reason forthis is that ldquocustomer service trainingrdquo might look like a number-onepriority when compared only to the other potential initiatives in the listfor Develop High-Quality Staff but when compared to potential initia-tives from all the other objectives it clearly might not be an area thatneeds immediate attention


Strategic Objectives 1 2 3 PotentialInitiatives

Financial

bull Maximize profitability

bull Increase revenue

bull Reduce costs

Customer

bull Build strong customer relationships

bull Penetrate new markets

bull Maintain top reputation

Processes

bull Increase on-timedelivery

bull Accelerate productdevelopment time

bull Optimize supply chain

Learning and Growth

bull Develop high-quality staff

bull Improve internal comm

bull Upgrade systems

EXHIBIT 514 Strategic Initiative Template

08_047461 ch05qxp 10406 1201 PM Page 215

As the leadership team determines what the priority of each initiativeshould be the sticky note containing the objective should be removedfrom the Potential Initiatives column and placed in the properly num-bered column It is common for the leaders to start by ranking far toomany initiatives in the top-priority column This brings up a very im-portant question How many ldquo1rsquosrdquo can you have

There are two important considerations when answering this ques-tion The first considers the nature of the initiatives It might be logicallyimpossible for initiative B to begin before initiative A ends because itmay be dependent upon the results The other consideration is costEvery initiative comes with a cost people time investment in improve-ment ideas and the like The executives have to balance how muchtime effort and money can be funneled into strategic work withoutdamaging the performance of day-to-day functions This can be verydifficult to do So the answer to the number of top-priority initiativesthat can be started simultaneously is as many as you can affordmdashas long


Strategic Objectives 1 2 3 Potential Initiatives

Develop high-quality bull Benefit reviewstaff bull Hiring process analysis

bull Initiate career development program

bull Succession planning process analysis

bull Gainsharing

bull Customer service training

bull 7 hats of creative thinking training

bull Individual trainingplan development

EXHIBIT 515 Strategic Initiatives Example

08_047461 ch05qxp 10406 1201 PM Page 216

as the initiatives arenrsquot dependent on each other for success When the top-priority initiatives have all been identified the last step in theprocess is to develop project plans that nail down the specifics of execution

BALANCED SCORECARD UTILIZATION

The scorecard strategy map and initiative list should all be used to-gether when the management team is discussing strategy The scorecardwill identify the areas in which the targets are not being met and thestrategy map and list of initiatives can provide clues to the leadershipteam as to why this may be happening A predicted relationship amongobjectives may not exist For example the leadership team might havethought training would lead to product development cycle time reduc-tion but after everyone in the area received training the cycle time wasunaffected This means that either the connection on the strategy mapwas inaccurate or the training was ineffective If the training was inef-fective it could have been because of the delivery or because the em-ployees were incapable of learning the needed skills

This point is very important The tools will tell the management teamwhat is going on but they must determine why it is happening Thetools can provide clues but the managers have to know their businesswell enough to act on the clues and solve the problem correctly Aspeaker at a convention once told a story about starting a basketballteam She said that if you were starting a team you could teach some-one how to dribble better and you could teach someone to pass betterbut you couldnrsquot teach someone to be tall A player is either tall or nottall and that is a characteristic present from the time they all walk onthe court She went on to say that in many organizations there are somevery short people who are trying to play in the NBA In other wordspeople who are overmatched by the job responsibilities they have beengiven And this doesnrsquot mean they havenrsquot been trained it means thatthey simply donrsquot have what it takes to be successful in the position inwhich they have been placed


08_047461 ch05qxp 10406 1201 PM Page 217

The scorecard and strategy map are both great tools If you give greattools to good managers they become great managers If you give greattools to bad managers they remain bad managersmdashbut with tools Thescorecard simply gives bad managers another thing to mismanage So ifyour leadership team doesnrsquot truly understand your customers andprocesses and people the BSC and strategy map wonrsquot help you verymuch However if you have a strong team already these tools can helpposition your organization for true short- and long-term success


08_047461 ch05qxp 10406 1201 PM Page 218

219

c h a p t e r 6

CONCLUSIONS

The key points are as follows

bull Current trends in the business world are forcing organizations tofocus on process if they want to remain successful Many of thesetrends such as the mobility of the workforce rising customer expec-tations and the speed at which business is conducted are not likelyto stop in the near future Therefore process emphasis will continueto grow as a key component of future organizational success

bull Companies have elevated process thinking to higher and higherlevels over the years From continuous improvement to reengi-neering to process-based organizational design to process-basedcompetition the emphasis on process excellence has become an in-tegral part of management thinking and planning in successful organizations

bull A good vision statement enables an organization to have a consis-tent view of what it wants the future to look like It is impossibleto reach the desired future state if the management team cannotagree what the future state should be

bull Strategic assessment should have a large process component to itGone are the days when the focus of planning can be purely finan-cial Strategies of today must also include the process customerand learning and growth components

bull Strategy maps can provide an excellent one-page communica-tion vehicle to illustrate which processes are most critical in your

09_047461 ch06qxp 10406 1202 PM Page 219

organization as well as the customer and financial results that im-proving these processes are expected to drive

bull The Balanced Scorecard is an excellent tool to help an organizationmonitor the effectiveness of strategy and make midterm coursecorrections between iterations of the strategic planning process Italso helps reveal whether the strategy map theories of cause and ef-fect are valid which is extremely useful when trying to understandthe impact of improving key processes

The techniques and processes introduced have been proven time andagain to be effective when properly applied Good luck with your im-plementation of these principles Herersquos hoping that the fifth wave ofprocess management will be a result of your efforts

220 C o n c l u s i o n s

09_047461 ch06qxp 10406 1202 PM Page 220

221

INDEX

Adams Scott 28Airline industry

customer assessment 110 112ndash114customer feedback 50

Alpha Phi Omega mission statement 30American Airlines 110American Motors Corporation (AMC)

5 67Automation 7 8Automobile industry 2 4ndash6 8

Balanced Scorecard (BSC)data collection 192 208ndash210defined 166Department of the Treasury example

172ndash181developing 185ndash213executive team

as customer 168 169presentation to 208responsibilities 180 181 213

implementation team 180 185188 190 194 199 202 208210 211 214

leadership team 169ndash171 176 179180 185 190 199 210ndash213216ndash218

as management tool 166ndash169measurement definition 200ndash208measures identifying and prioritizing

185 187ndash199misconceptions 169ndash171origin of 166Orion Development Group example

181ndash185

as part of strategic process 27perspectives and objectives 171 174

175 180 181 184ndash186 197199ndash201

as report card 167strategic goals use in measuring

progress 169and strategy maps 127 141 165 185SWOT assessment use of 188target setting 164 167 175 178

210ndash213use of 217 218 220

Bermuda 96BMW 101Brainstorming

strategic assessment 89 91strategy map 188 190 192 195

204 214SWOT identification 35ndash42

BSC See Balanced Scorecard (BSC)Bubble production exercise 72ndash79Business Process Executive (BPE) 20ndash22Business process management See Four

waves of business processmanagement

Business Process Owner (BPO) 20 21Business process reengineering 16ndash19 219Business trends 9ndash12 219

Cayman Islands 96Champy James 16Change management 1Chrysler 4 5 67 68Coca-Cola 6Compaq 98

10_047461 bindexqxp 10406 1202 PM Page 221

Competitors and customer assessment121 122

Constraintsbubble production exercise 72ndash79identifying 79 80

Continuous improvement 7 219and business process reengineering

16 17and total quality management 14

Control charts 105ndash108Control limits 107Cross-functional aspect of strategy map

127 128 130 131 163 164Cross-functional processes 44 46 69 70

74 75 80Cross-functional teams 7Customer assessment

competitorsrsquo strengths and weaknesses121 122

importance of 219industry trends 122Kano model of quality 114ndash121purpose of 109segmentation 109ndash114

Customer expectationsairline customer system map

example 113current trends impact of 11expectations (expects) 48 49gaps 59 60in mid-1980s 8 12in mid-2000s 9 12output questions 54 55system map template 53system mapping 58

Customer needsand company vision 29 30gaps in meeting 49and management interviews 124output questions 61and product development 101product worksheet 99 102and system map analysis 114system model 48

Customer perspective 43 131ndash138157 158

Customer satisfactionand communication 152Kano model of quality See Kano model

of qualitylearning and growth assessment 122process extension example 84 85 89specs and expects 48 49

and strategy map 128 131ndash133 153and total quality management 15

Customersairline industry customer feedback 50executive team as Balanced Scorecard

customer 168 169internal customers 47as part of system map 48specifications (specs) 48surveys 49

Daimler-Chrysler 68 See also ChryslerData collection

for Balanced Scorecard 192 208ndash210and product development 101

Delaware River Port Authority(DRPA) 155

ldquoDelightersrdquo 116ndash121Dell 98Department of Management 92Department of Motor Vehicles 39Department of the Navy 13Department of the Treasury

Balanced Scorecard example 172ndash181strategy map 129 130 132 134

Dilbert 28Disney World 51 52Distribution systems 10 11Dominorsquos Pizza 68 69Doubletree Hotel 116 118Downsizing 18

Employee focus groups 43 123ndash125Employee surveys 43Enterprise creation 83 91 92 94 95Enterprise Rent-a-Car 86 87Execution phase of strategic process 27Executive team

and company vision 29as customer of Balanced Scorecard

168 169presentation of Balanced Scorecard

to 208reluctance to include measures on

Balanced Scorecard 177responsibilities 180 181 213strategic initiatives responsibility for

developing 213 214 216Expectations (expects) 48 49

Feedbackconstraint identification 80feed forward loops 51ndash53 57 59

222 Index


formal versus informal 49ndash51input questions 55output questions 54system map 49ndash51 112

Financial assessmentbudget 109control charts use of 105ndash108external factors 108 109goal of 104run chart 104 107

Financial perspective 43 131ndash139 142143 145 149 154ndash157

Flowcharts 7 26 69Focus groups 43 97 110 119ndash125Formal assessment 42ndash44 See also

Perspectives and objectivesFour Seasons Hotel 116 117Four waves of business process

management 13 14business process reengineering

16ndash19 219process-based competition 23ndash25 219process-oriented organizational design

19ndash23total quality management 6 7

13ndash17 19

Gapsgap-causing issues 61 69inputs 49 54outputs 49 54 55 59process assessment 45 82and process improvement 67 94 96process map identifying 82system map 49 50 59ndash65

Gateway 98General Electric (GE) 87General Motors (GM) 6Gildan 98Goals

strategy map 129use in measuring progress 169

Hammer Michael 16Harvard Business Review 127 166Haynes 98Honda 6Hotel DeVille 116HampR Block 91 92 94Human resources (HR)

and company vision 29inputs 47 54 55 61ndash65internal customers 47

outputs 54ndash57 59 61process improvement example 55ndash66strategy map Texas Childrenrsquos Hospital

example 138ndash140system map 47 53ndash66

IBM 9 98IBM Credit

and business process reengineering 18 19process map example 69ndash71

Implementation team 180 185 188 190194 199 202 208 210 211 214

Industry class market extension 95Industry trends and customer

assessment 122Informal assessment SWOT

identification 35ndash42Information technology (IT)

internal customers 47output 48process extension 88 89support function 53 88and system mapping 66and vision of company 29 30

Inputsgaps 49 54human resources system map 47 54

55 61ndash65and PDCI component of system

map 47Insurance process flow 81International competition 7 8Internet 8Interviews

formal feedback 49management 43 122ndash124questions 123

Japanese Union of Scientists and Engineers(JUSE) 13

Kano model of qualitycustomer assessment 114ndash121ldquodelightersrdquo 116ndash121Doubletree Hotel example 118focus groups 120 121ldquomore is betterrdquo level 116 117 119ldquomust berdquo level of customer needs and

satisfaction 114ndash116Kaplan Robert 127 166

Lag measures 189ndash199Lead measures 189ndash199

Index 223


Leadership teamBalanced Scorecard 169ndash171 176

179 180 185 190 199 210ndash213216ndash218

strategic initiatives 216SWOT identification 35 40 41

Learning and growth assessmentemployee focus groups 125future technology 125importance of 219management interviews 122ndash124purpose of 122vision 123ndash125workforce skills 125 126

Learning and growth perspective43 131ndash133 137ndash143 145ndash149151 152 160ndash162 184 199

LL Bean 92Lower Control Limit (LCL) 107

Machine-build process 84 85 95 98Management

Balanced Scorecard as management tool166ndash169

business processes See Four waves ofbusiness process management

interviews 43 122ndash124mobility of 10as part of workforce 151support of and TQM 15team 44 45vision and mission understanding of

29 30 219Market extension 83 90 91 95Matrix

process proficiency 94 97 98use of in SWOT identification 41 42

McDonaldrsquos 2 9 10Measurement

definition 200ndash208identifying and prioritizing measures

185 187ndash199Memorial Blood Center of Minneapolis

strategy map 131 132Michigan State University Vet School

strategy map 133Microsoft 6 9 31Mini Cooper 101Misconceptions of Balanced Scorecard

169ndash171Mission statements 26ndash29 33

Alpha Phi Omega 30developing 31ndash33

Microsoft 31and objectives 155

Mobilitymanagement 10workforce 7ndash10 219

Monitoring and adjusting phase ofstrategic process 27

More is better 116 117 119ldquoMust berdquo 43 47 110 114ndash121

Nixon Richard 2Norton David 127 166Not-for-profit organizations strategy map

131ndash138Nypro 91

ObjectivesBalanced Scorecard 185ndash188 197strategic initiatives 213ndash216strategy map 128ndash131

identifying 141ndash153linking 141 153ndash161

Office of Retirement Services (Michigan)20ndash23

Operationsand cross-functional aspect of strategy

map 128and human resources 55ndash66and IT 88 89

Opportunities See also Strengthsweaknesses opportunities andthreats (SWOTs)

brainstorming 38 39defined 34

Organizational structure 19ndash23Orion Development Group

Balanced Scorecard example 181ndash185customer segments 110ndash112strategy map example 135ndash138

Outputsgaps 49human resources system map example

54ndash57 59 61and PDCI component of system map

47 48

PDCI See Process-Department-Company-Industry (PDCI)

Perspectives and objectivescustomer perspective 43 131ndash138 157

158and development of Balanced Scorecard

185ndash188

224 Index


financial perspective 43 131ndash139 142143 145 149 154ndash157

formal assessment 42ndash44learning and growth perspective 43

131ndash133 137ndash143 145ndash149 151152 160ndash162 184 199

process perspective 43 131ndash134 138140 149 160 184 200

suppliers 134Plan-Do-Check-Act (PDCA) 14Plan-Do-Study-Act (PDSA) 14Process assessment

difficulties with 44 45functional versus cross-functional focus

44 45importance of 219process map See Process mapstrategic process improvement See

Strategic process improvementstrategic significance 43 45ndash66SWOT formal assessment template 43system map See System map

Process-based competition 23ndash25 219Process-Department-Company-Industry

(PDCI)as component of system map 46 47human resources system map

example 55system model components 46ndash51 55

61 63 112Process extension 83ndash91 95 96 121Process flow

cross-functional 74insurance 81

Process leveragingenterprise creation 83 91 92market extension 83 90 91process extension 83ndash90and SWOT identification 94ndash104

Process mapconstraints

bubble production exercise 72ndash79identifying 79 80

flowchart distinguished 69gaps identifying 82IBM Credit example 69ndash71and process assessment 45process-leveraging techniques 83ndash96as strategic assessment tool 71 72and SWOT identification 82 94ndash104system map distinguished 48use of 69 80work flow diagrams 79 80

Process-oriented organizational design19ndash23

Process performancehistorical background 2ndash9importance of 1 2trends impact of 9ndash12

Process perspective 43 131ndash134 138140 149 160 184 200

Process proficiency 43 90 91matrix 94 97 98proficiency class 95 96

Process-strategy link 24Product development

and business process reengineering17 18

Chrysler 4 5 67 68and data collection 101

Product worksheet 43 98 99 101 102122

Proficiency class market extensionexamples 95ndash98

Progressive Insurance 90

Reagan Ronald 6Reengineering the Corporation 16 17Run charts 104 105 107

Scorecard See Balanced Scorecard (BSC)Segmentation and customer assessment

109ndash114Smith Adam 3Sony 98Special cause 107Specialization and division of labor 3 4Specifications (specs) 48 49Statistical process control (SPC) 14Strategic assessment 33ndash44 219

brainstorming 89 91control charts 108market extension opportunities 91as part of strategic process 27 33 34and process leveraging techniques 93process maps See Process mapstrengths weaknesses opportunities and

threats (SWOTs) See Strengthsweaknesses opportunities andthreats (SWOTs)

system maps 46 52 55 66 See alsoSystem map

Strategic initiativesand Balanced Scorecard 190and cross-functional aspect of strategy

map 128

Index 225


Strategic initiatives (Cont)executive team responsibilities 213identification and prioritization of

213ndash217as part of strategic process 27and SWOT assessment 34 214and use of strategy map 164 165

Strategic objectives 128ndash132 135ndash141144ndash165

Strategic processflowchart use of 26improvement See Strategic process

improvementstrategy map See Strategy map

Strategic process improvement 67ndash104Chrysler product development example

67 68Dominorsquos Pizza example 68 69key processes identifying 69process map use of 69 See also

Process mapStrategic significance 43 45 57 60 67

75 79 82 83Strategy map

and Balanced Scorecard 127 141165 185

cause-and-effect relationship 128cross-functional aspect of 128 130 131customer perspective 131customer satisfaction 128defined 127ndash128Department of the Treasury 129 130

132 134developing 141ndash164financial perspective 131for functional area 138ndash140and goals 129learning and growth perspective 131linkage step 153 154 157 160Memorial Blood Center of Minneapolis

131 132Michigan State University Vet

School 133not-for-profit organizations 131ndash138objectives 128ndash131


origin of 127Orion Development Group 135ndash138as part of Balanced Scorecard

methodology 127 141as part of strategic process 27 127perspectives use of 131 133ndash134

process perspective 131purpose of 127and strategic initiatives 128 164 165and SWOT assessment 42Texas Childrenrsquos Hospital HR

Department 138ndash140use of 164 165 219 220

Strategy-process link 24Strengths See also Strengths weaknesses

opportunities and threats(SWOTs)

brainstorming 35ndash37defined 34

Strengths weaknesses opportunities andthreats (SWOTs)

brainstorming 35ndash42customer assessment 109ndash122defined 34financial assessment 104ndash109formal assessment 42ndash44informal assessment 35ndash42learning and growth assessment 122ndash126matrix 42opportunities defined 34process assessment 44ndash66process maps use of See Process mapand strategic initiative development

34 214strategic process improvement 67ndash104strengths defined 34and system map See System mapthreats defined 34use of in developing Balanced

Scorecard 188weaknesses defined 34

Suppliersfeedback 32 49ndash51inputs 47 54 55perspective 134and process extension 83ndash85and system map 46 47 52 56 59

61ndash66 112 113Surveys

customers 49employees 43formal 57web 102 103

SWOT See Strengths weaknessesopportunities and threats(SWOTs)

System mapairline customer system map 113basic components of model 46ndash48

226 Index


customer assessment 110ndash114customers 48 49feedback loops 49ndash53 57 59gaps 49 59ndash61 63ndash65human resources example 53ndash66inputs 47 54 55 61ndash65outputs 47 48 54 59 61and process assessment 45Process-Department-Company-Industry

(PDCI) 46ndash51 55 61 63 112process map distinguished 48suppliers 47 61ndash63SWOT identification 65 66templates 53time for completing 65use of to evaluate interactions 46

Targets setting 164 167 175 178210ndash213

Technologyimpact of in mid-2000s 9 12learning and growth assessment 125role of in mid-1980s 7 8 12

Telecommuting 10Texas Childrenrsquos Hospital Human

Resources Department strategymap 138ndash140

Threats See also Strengths weaknessesopportunities and threats(SWOTs)

brainstorming 40defined 34

Total quality management (TQM)customer satisfaction 15defined 13 14

developments in 1980s 7lack of success reasons for 16management support 15origins of 6 7 13team procedure 15 16

Treasury Department See Department ofthe Treasury

Upper Control Limit (UCL) 107

Vertical organizational structure 20Vision and mission

and learning and growth assessment123ndash125

management understanding of 29 30 219

as part of strategic process 26ndash33statements 28 29 31ndash33 219

Volvo 101

Wal-Mart 11 157Weaknesses See also Strengths

weaknesses opportunities andthreats (SWOTs)


Workforceand business process reengineering

issues 17learning and growth assessment 125 126management as part of 151mobility of 7ndash10 219

World-class process 95

Yugo 101

Index 227


Business Process Management and the Balanced Scorecard

CONTENTS

PREFACE

Chapter 1 A WORLD OF CHANGE

1970

1985

MID-2000S


Chapter 2 HOW PROCESS CAN DRIVE STRATEGY


THE SECOND WAVE BUSINESS PROCESS REENGINEERING

THE THIRD WAVE PROCESS-ORIENTED ORGANIZATIONAL DESIGN

THE FOURTH WAVE PROCESS-BASED COMPETITION

Chapter 3 THE STRATEGIC PROCESS


VISION AND MISSION






LEARNING AND GROWTH ASSESSMENT IMPLEMENTATION

SUMMARY

Chapter 4 STRATEGY MAPS

DEFINITION



SUMMARY

Chapter 5 BALANCED SCORECARD AND STRATEGIC INITIATIVES

DEFINITION




Chapter 6 CONCLUSIONS

INDEX







Ralph F Smith















2006020850


10 9 8 7 6 5 4 3 2 1






vii

CONTENTS

Preface ix







Index 221



ix

PREFACE








x Preface


1

c h a p t e r 1

A WORLD OF CHANGE








04_047461 ch01qxp 10406 1200 PM Page 1


1970




04_047461 ch01qxp 10406 1200 PM




A World of Change 3


04_047461 ch01qxp 10406 1200 PM Page 3






04_047461 ch01qxp 10406 1200 PM Page 4




A World of Change 5

04_047461 ch01qxp 10406 1200 PM Page 5


1985



04_047461 ch01qxp 10406 1200 PM Page 6




A World of Change 7

04_047461 ch01qxp 10406 1200 PM Page 7





MID-2000S



04_047461 ch01qxp 10406 1200 PM Page 8




A World of Change 9

04_047461 ch01qxp 10406 1200 PM Page 9





04_047461 ch01qxp 10406 1200 PM Page 10






04_047461 ch01qxp 10406 1200 PM Page 11



1970



1985



2005



Impact onProcesses



Customers





Processes





Technology





Workforce

Topic

Competition


04_047461 ch01qxp 10406 1200 PM Page 12

13

c h a p t e r 2








05_047461 ch02qxp 10406 1200 PM Page 13










05_047461 ch02qxp 10406 1200 PM Page 14






05_047461 ch02qxp 10406 1200 PM Page 15






05_047461 ch02qxp 10406 1200 PM Page 16






05_047461 ch02qxp 10406 1200 PM Page 17






cializationInternal

Preparation



05_047461 ch02qxp 10406 1200 PM Page 18







05_047461 ch02qxp 10406 1200 PM Page 19







05_047461 ch02qxp 10406 1200 PM Page 20




ExecutiveDirector









31 Benefit payments



Fin HRSupport


IT Reeng -ineering

CS

OP

FI

IT

OP

BPO

BPO

BPO

BPO

BPO


05_047461 ch02qxp 10406 1200 PM Page 21













05_047461 ch02qxp 10406 1200 PM Page 22








05_047461 ch02qxp 10406 1200 PM Page 23







05_047461 ch02qxp 10406 1200 PM Page 24



05_047461 ch02qxp 10406 1200 PM Page 25

26

c h a p t e r 3







VISION AND MISSION


06_047461 ch03qxp 10406 1200 PM Page 26








Vision and Mission


Strategy Map

Monitor and Adjust

Execution


06_047461 ch03qxp 10406 1200 PM Page 27






06_047461 ch03qxp 10406 1200 PM Page 28





06_047461 ch03qxp 10406 1200 PM Page 29







06_047461 ch03qxp 10406 1200 PM Page 30









06_047461 ch03qxp 10406 1200 PM Page 31









06_047461 ch03qxp 10406 1200 PM Page 32







06_047461 ch03qxp 10406 1200 PM Page 33






06_047461 ch03qxp 10406 1200 PM Page 34





ldquoPeoplerdquo



06_047461 ch03qxp 10406 1200 PM Page 35











06_047461 ch03qxp 10406 1200 PM Page 36








06_047461 ch03qxp 10406 1200 PM Page 37






06_047461 ch03qxp 10406 1200 PM Page 38









06_047461 ch03qxp 10406 1200 PM Page 39








06_047461 ch03qxp 10406 1200 PM Page 40










06_047461 ch03qxp 10406 1200 PM Page 41








Finance

Customer

Process

Technology

People


06_047461 ch03qxp 10406 1200 PM Page 42









research










06_047461 ch03qxp 10406 1200 PM Page 43







06_047461 ch03qxp 10406 1200 PM Page 44








06_047461 ch03qxp 10406 1200 PM Page 45







06_047461 ch03qxp 10406 1200 PM Page 46






06_047461 ch03qxp 10406 1200 PM Page 47







Suppliers Customers

Specs andExpects

Inputs PDCI Outputs

06_047461 ch03qxp 10406 1200 PM Page 48







Specs andExpects

Gaps


06_047461 ch03qxp 10406 1200 PM Page 49




Specs andExpects

Gaps



06_047461 ch03qxp 10406 1200 PM Page 50





Feed Forward Loop

Specs andExpects

Gaps

Feed Forward Loop




06_047461 ch03qxp 10406 1200 PM Page 51






06_047461 ch03qxp 10406 1200 PM Page 52






1 12 23 34 45 56 6


1 12 23 34 45 56 6


1234


1234


1234


1234




I1

I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1

06_047461 ch03qxp 10406 1200 PM Page 53












06_047461 ch03qxp 10406 1200 PM Page 54









06_047461 ch03qxp 10406 1200 PM Page 55





1 12 23 34 45 56 6


1 12 23 34 45 56 6


1234


1234


1234


1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1


06_047461 ch03qxp 10406 1200 PM Page 56







06_047461 ch03qxp 10406 1200 PM Page 57





1 12 23 34 45 56 6


1234


34


4


1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1







1 12 23 34 45 56 6


1234


1234


1234


1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1




06_047461 ch03qxp 10406 1200 PM Page 58






06_047461 ch03qxp 10406 1200 PM Page 59







1 12 23 34 45 56 6


1234






1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1



06_047461 ch03qxp 10406 1200 PM Page 60









06_047461 ch03qxp 10406 1200 PM Page 61








1 12 23 34 45 56 6


1234






1234


Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1



06_047461 ch03qxp 10406 1200 PM Page 62











1234






1234


Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1


06_047461 ch03qxp 10406 1200 PM Page 63



















Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1


06_047461 ch03qxp 10406 1200 PM Page 64












06_047461 ch03qxp 10406 1200 PM Page 65
















Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8







O2 O3O4

O5

O7

O8

O1



06_047461 ch03qxp 10406 1200 PM Page 66






06_047461 ch03qxp 10406 1200 PM Page 67






06_047461 ch03qxp 10406 1200 PM Page 68







06_047461 ch03qxp 10406 1200 PM Page 69





Customer

Sales Rep

Financing

Credit

BusinessPractices

Requestfinancing

Customernotified

CallIBM

Credit

Receivequote

Callcustomer

Logrequest

Sendreq tocredit

Enterdata in

computer

Checkcredit

Write results

Modifyrequest

Writeterms

Pricing

Admin

Send toBPO

Put dataon spread

sheet

Write interest

rate

Send toadmin

Typequote

FedexTo rep



06_047461 ch03qxp 10406 1200 PM Page 70






06_047461 ch03qxp 10406 1200 PM Page 71












06_047461 ch03qxp 10406 1200 PM Page 72

73

Plac

eru

ler

by

Lis

ten

bubb

le

Dip

ping

Blo

win

g

Cat

chin

g

Mea

suri

ng

Rec

ordi

ng

Dip

wan

d

Rem

ove

from

bott

le

Insp

ect

for

film

Plac

ene

arbl

ower

Plac

ew

and

bybu

bble

Pres

ent

tom

easu

rer

Rea

d

Wri

te

dow

n

Cal

l out

Cat

ch

Aim

Puck

erB

low

Insp

ect

for

film

Sele

ctbu

bble

EX

HIB

IT3

19B

ubbl

e P

rodu

ctio

n P

roce

ss M

ap

06_047461 ch03qxp 10406 1200 PM Page 73





06_047461 ch03qxp 10406 1200 PM Page 74








Dipping Dipwand

Removefrom bottle

Inspectfor film

Place nearblower

06_047461 ch03qxp 10406 1200 PM Page 75









Aim Pucker Blow

06_047461 ch03qxp 10406 1200 PM Page 76








Place wandby bubble

Present tomeasurer

Catch



Read

Call out



06_047461 ch03qxp 10406 1200 PM Page 77






06_047461 ch03qxp 10406 1200 PM Page 78








06_047461 ch03qxp 10406 1200 PM Page 79






06_047461 ch03qxp 10406 1200 PM Page 80

81

CR

M

Und

er-

wri

ting

Ris

ken

gine

erin

g

Polic

yis

suan

ce

Cla

ims

Targ

etac

coun

tG

athe

rcl

ient

info

Proo

fin

foE

nter

data

Pric

ing

Ana

lyze

risk

s

Ent

erda

taC

reat

epo

licie

sSe

nd t

ocl

ient

Rec

ord

clai

mC

heck

cove

rage

Prep

are

sub

Issu

equ

ote

Bin

dco

vera

ge

Set

rese

rves

Neg

otia

teD

ispo

se

EX

HIB

IT3

26In

sura

nce

Pro

cess

Flo

w

06_047461 ch03qxp 10406 1200 PM Page 81











06_047461 ch03qxp 10406 1200 PM Page 82









06_047461 ch03qxp 10406 1200 PM Page 83









06_047461 ch03qxp 10406 1200 PM Page 84





ShipParts


Definespecs



ShipParts


Definespecs



06_047461 ch03qxp 10406 1200 PM Page 85






06_047461 ch03qxp 10406 1200 PM Page 86






06_047461 ch03qxp 10406 1200 PM Page 87






Operations IT


projectrequest

Prioritizerequest


06_047461 ch03qxp 10406 1200 PM Page 88







Operations IT


projectrequest

Prioritizerequest


06_047461 ch03qxp 10406 1200 PM Page 89







High-Risk Drivers

Medium-Risk Drivers

Low-Risk Drivers

Market Segments


06_047461 ch03qxp 10406 1200 PM Page 90






06_047461 ch03qxp 10406 1200 PM Page 91






06_047461 ch03qxp 10406 1200 PM Page 92





06_047461 ch03qxp 10406 1201 PM Page 93







Candidate forhellip


ProcessExtension

MarketExtension

EnterpriseCreation

Comments


06_047461 ch03qxp 10406 1201 PM Page 94







06_047461 ch03qxp 10406 1201 PM Page 95





06_047461 ch03qxp 10406 1201 PM Page 96












06_047461 ch03qxp 10406 1201 PM Page 97






Candidate forhellip


ProcessExtension

MarketExtension

EnterpriseCreation

Comments











06_047461 ch03qxp 10406 1201 PM Page 98


Product Answers



c)d)


c)d)










06_047461 ch03qxp 10406 1201 PM Page 99





06_047461 ch03qxp 10406 1201 PM Page 100









06_047461 ch03qxp 10406 1201 PM Page 101




c) County newspaper



broader perspective






our market share









06_047461 ch03qxp 10406 1201 PM Page 102















06_047461 ch03qxp 10406 1201 PM Page 103






06_047461 ch03qxp 10406 1201 PM Page 104




325

275

225

$(T

hous

ands

)

175

125


Month


Jan-00


CL=18694


06_047461 ch03qxp 10406 1201 PM Page 105




Tho

usan

ds)

1550

1350

1150

950

750

550

350

150

Jan-

98 Feb

Mar Apr

May Ju

n Jul

Aug Sep

Oct

Nov Dec Fe

bM

ar AprM

ay Jun Ju

lAug Se

pO

ct Feb

Mar Apr

May Ju

n Jul

Aug

LCL=17361

CL=79662

UCL=141962

Sep

Oct

Nov Dec

Jan-

00

Jan-

99

Month


06_047461 ch03qxp 10406 1201 PM Page 106




new businessrdquo







06_047461 ch03qxp 10406 1201 PM Page 107





Tho

usan

ds)

1550

1350

1150

950

750

550

350

150

Jan-

98 Feb

Mar Apr

May Ju

n Jul

Aug Sep

Oct

Nov Dec Fe

bM

ar AprM

ay Jun Ju

lAug Se

pO

ct Feb

Mar Apr

May Ju

n Jul

Aug

LCL=17361

CL=79662

UCL=141962

Sep

Oct

Nov Dec

Jan-

00

Jan-

99

Month


06_047461 ch03qxp 10406 1201 PM Page 108








06_047461 ch03qxp 10406 1201 PM Page 109






Customer Assessment

Key Questions








Brainstorming

System maps

Kano analysis

Kano analysis




06_047461 ch03qxp 10406 1201 PM Page 110








06_047461 ch03qxp 10406 1201 PM Page 111








06_047461 ch03qxp 10406 1201 PM Page 112























Most Important Gap


FAA

Pilot union

Boeing


1

2

3

I2 I3 I4

I5

I7

I8





On-time percentage


O2 O3O4

O5

O7

O8

O1


06_047461 ch03qxp 10406 1201 PM Page 113






06_047461 ch03qxp 10406 1201 PM Page 114





Scale



Must Be

Satisfied

Neutral

Dissatisfied

06_047461 ch03qxp 10406 1201 PM Page 115







06_047461 ch03qxp 10406 1201 PM Page 116




Scale



Must Be

Satisfied

Neutral

Dissatisfied

More isBetter


06_047461 ch03qxp 10406 1201 PM Page 117







06_047461 ch03qxp 10406 1201 PM Page 118





Scale



Must Be

Satisfied

Neutral

Dissatisfied

More isBetter

Delighter


06_047461 ch03qxp 10406 1201 PM Page 119













06_047461 ch03qxp 10406 1201 PM Page 120














06_047461 ch03qxp 10406 1201 PM Page 121







06_047461 ch03qxp 10406 1201 PM Page 122











Key Questions
















06_047461 ch03qxp 10406 1201 PM Page 123





06_047461 ch03qxp 10406 1201 PM Page 124






06_047461 ch03qxp 10406 1201 PM Page 125



SUMMARY



06_047461 ch03qxp 10406 1201 PM Page 126

127

c h a p t e r 4

STRATEGY MAPS



DEFINITION


07_047461 ch04qxp 10406 1201 PM Page 127





07_047461 ch04qxp 10406 1201 PM Page 128



Strategy Maps 129

Learning andGrowth

Process

Customer

Financial















Improve

Security


07_047461 ch04qxp 10406 1201 PM Page 129











07_047461 ch04qxp 10406 1201 PM Page 130





Strategy Maps 131

07_047461 ch04qxp 10406 1201 PM Page 131






CustomerPerspective

ProcessPerspective



07_047461 ch04qxp 10406 1201 PM Page 132





Strategy Maps 133


CustomerPerspective

ProcessPerspective



07_047461 ch04qxp 10406 1201 PM Page 133





CustomerPerspective

ProcessPerspective



07_047461 ch04qxp 10406 1201 PM Page 134




Strategy Maps 135


Increase revenue





Expand productlines







Financial

Customer

Process

Learningand Growth


07_047461 ch04qxp 10406 1201 PM Page 135







07_047461 ch04qxp 10406 1201 PM Page 136











Strategy Maps 137

07_047461 ch04qxp 10406 1201 PM Page 137






07_047461 ch04qxp 10406 1201 PM Page 138



Strategy Maps 139










Services





Learning ampGrowth

Process

Financial

Customer





07_047461 ch04qxp 10406 1201 PM Page 139







07_047461 ch04qxp 10406 1201 PM Page 140





Strategy Maps 141






07_047461 ch04qxp 10406 1201 PM Page 141










07_047461 ch04qxp 10406 1201 PM Page 142








Strategy Maps 143

07_047461 ch04qxp 10406 1201 PM Page 143









07_047461 ch04qxp 10406 1201 PM Page 144






Strategy Maps 145

07_047461 ch04qxp 10406 1201 PM Page 145





























multiple locations


boost sales











07_047461 ch04qxp 10406 1201 PM Page 146






Strategy Maps 147

07_047461 ch04qxp 10406 1201 PM Page 147







07_047461 ch04qxp 10406 1201 PM Page 148





Strategy Maps 149

07_047461 ch04qxp 10406 1201 PM Page 149






07_047461 ch04qxp 10406 1201 PM Page 150







Strategy Maps 151

07_047461 ch04qxp 10406 1201 PM Page 151






07_047461 ch04qxp 10406 1201 PM Page 152






Strategy Maps 153

07_047461 ch04qxp 10406 1201 PM Page 153



Financial

Customer

Process

Learningamp Growth





Reducecosts



Upgradesystems











07_047461 ch04qxp 10406 1201 PM Page 154





Strategy Maps 155

07_047461 ch04qxp 10406 1201 PM Page 155






FinancialMaximize

profitability

Reducecosts

Increaserevenue


07_047461 ch04qxp 10406 1201 PM Page 156








Strategy Maps 157

07_047461 ch04qxp 10406 1201 PM Page 157






FinancialMaximize

profitability

Reducecosts

Increaserevenue

CustomerPenetrate



07_047461 ch04qxp 10406 1201 PM Page 158













Strategy Maps 159

07_047461 ch04qxp 10406 1201 PM Page 159





FinancialMaximize

profitability

Reducecosts

Increaserevenue

CustomerPenetrate






Process


07_047461 ch04qxp 10406 1201 PM Page 160





Strategy Maps 161

07_047461 ch04qxp 10406 1201 PM Page 161



FinancialMaximize

profitability

Reducecosts

Increaserevenue

CustomerPenetrate






Process

Learningamp Growth


Upgradesystems



07_047461 ch04qxp 10406 1201 PM Page 162









Strategy Maps 163

07_047461 ch04qxp 10406 1201 PM Page 163










07_047461 ch04qxp 10406 1201 PM Page 164






SUMMARY


Strategy Maps 165

07_047461 ch04qxp 10406 1201 PM Page 165

166

c h a p t e r 5


INITIATIVES



DEFINITION



08_047461 ch05qxp 10406 1201 PM Page 166





08_047461 ch05qxp 10406 1201 PM Page 167




08_047461 ch05qxp 10406 1201 PM Page 168








08_047461 ch05qxp 10406 1201 PM Page 169







08_047461 ch05qxp 10406 1201 PM Page 170








08_047461 ch05qxp 10406 1201 PM Page 171

172

Cus

tom

erIn

crea

se s

take

hold

erIn

d

busi

ness

taxp

ayer

80

8073

69

74

67

prio

r ye

arsa

tisf

acti

onSt

uden

tfa

mily

80

8085

85

76

74

prio

r ye

ar

Prom

ote

posi

tive

Publ

ic o

utre

ach

3927

Spec

ial c

ause

low

imag

eev

ents

Enh

ance

cus

tom

erSp

eed

of a

nsw

erin

g ph

one

500

m6

10m

CC

tim

eco

mm

unic

atio

n

cal

l mtg

qua

lity

std

s70

66

Sp

ecia

l cau

se lo

w n

ew h

ires

Wri

tten

cor

resp

ond

ence

30 d

ays

75 d

ays

His

togr

am o

n ag

ing

resp

onse

tim

e

sel

f-se

rvic

e co

ntac

ts90

87

C

omm

on c

ause

92

avg

Fina

ncia

lM

aint

ain

fina

ncia

lC

red

it r

atin

gA

AA

AA

AA

AA

SampP

Aaa

Moo

dy

inte

grit

yA

A+

Fit

chM

ater

ial a

udit

find

ings

03

Zer

o re

peat

s

Gen

erat

e re

venu

eG

F-G

Pre

venu

e-6

FY

-15

1FY

TD

-93

SA

F re

venu

e1

4FY

-19

FY

TD

5

Enf

orce

men

t rev

enue

N

A$1

122

MFY

TD

$29

54M

Man

age

bud

get

Bal

ance

d B

udge

tlt

=95

93

FY

TD

figu

re

Man

age

inve

stm

ents

Ret

urn

on in

vest

men

t8

0-7

8

Rol

ling

12 m

onth

figu

re

Proc

ess

Stre

amlin

e ke

ySt

and

ard

ized

test

TA

T10

wks

20 w

ksSp

ring

cyc

le d

own

from

28

proc

esse

sTe

st r

egis

trat

ion

accu

racy

90

55

Per

spec

tive

Stra

tegi

c L

ag M

easu

res

Tar

get

Act

ual

Com

men

tsO

bjec

tive

L

ead

Mea

sure

s

EX

HIB

IT5

1T

reas

ury

Bal

ance

d Sc

orec

ard

08_047461 ch05qxp 10406 1201 PM Page 172

173

Proc

ess

Sale

s ta

x d

elin

quen

cy c

anc

N

A27

733

402

53 n

ew is

sued

(con

tinu

ed)

Dis

tres

sed

loca

l gov

rsquotsN

A

203

new

5 r

emov

ed (D

ec 0

2)A

utho

rity

tran

s pr

og4

84

8

Min

imiz

e ea

rly

out

Ear

ly o

ut m

gmt p

rog

210

210

impa

ct

Opt

imiz

e co

ntra

ctC

ontr

act c

ompl

ianc

e10

092

m

anag

emen

t

Incr

ease

ele

ctro

nic

r

etur

ns fi

led

by

alt m

eans

80

39

CY

TD

41

capa

bilit

ies

e

lect

roni

c d

isbu

rsem

ents

33

28

$56

B p

aid

54

of $

dis

b

ele

ctro

nic

stat

e re

ceip

ts20

18

$5

3B

rcv

d 3

5 o

f $ r

cvd

Lea

rnin

gM

anag

e te

ch

key

IT p

roje

cts

on ti

me

in3

32

3amp

Gro

wth

reso

urce

sbu

dge

t

Dev

elop

pos

itiv

eE

mpl

oyee

sat

isfa

ctio

n7

04

370

em

ploy

ees

surv

eyed

cult

ure

Impr

ove

inte

rnal

Inte

rnal

com

m e

vent

s24

36co

mm

unic

atio

n

Prov

ide

cust

omer

-Tr

aini

ng q

ualit

y9

09

598

att

end

ees

42

resp

onse

sfr

iend

ly H

R s

ervi

ces

Hir

ing

cycl

e ti

me

45 d

ays

52 d

ays

Secu

rity

Impr

ove

secu

rity

Secu

rity

bre

eche

s0

0So

ftw

are

arri

ving

in Ja

n

DR

pla

ns te

sted

ap

p10

10

0

BC

pla

ns te

sted

ap

p10

10

0

08_047461 ch05qxp 10406 1201 PM Page 173






08_047461 ch05qxp 10406 1201 PM Page 174







08_047461 ch05qxp 10406 1201 PM Page 175





08_047461 ch05qxp 10406 1201 PM Page 176









08_047461 ch05qxp 10406 1201 PM Page 177






08_047461 ch05qxp 10406 1201 PM Page 178








08_047461 ch05qxp 10406 1201 PM Page 179









08_047461 ch05qxp 10406 1201 PM Page 180








08_047461 ch05qxp 10406 1201 PM Page 181

182

Stra

tegi

c M

easu

res

Type

Qtr

Qtr

YT

DY

TD

Ow

ner

Obj

ecti

veT

arge

tA

ctua

lT

arge

tA

ctua

l

Fin

anci

al

Mai

ntai

n st

rong

Net

pro

fitL

ag$1

00K

$53K

$300

K$3

19PK

$ po

siti

on

Incr

ease

rev

enue

Serv

ice

line

reve

nue

Lag

$200

K$1

57k

$600

K$6

57PK

Publ

ic s

emin

ar r

even

ueL

ag$3

00K

$308

k$9

00K

$980

KPK

In-h

ouse

rev

enue

Lag

$200

K$1

98k

$600

K$5

00k

PK

Cu

stom

er

Stre

ngth

en e

xist

ing

R

epea

t bus

ines

s re

venu

eL

ag$5

00K

$479

K$1

5M

$16

MB

Bcu

stom

er r

elat

ions

hips

m

ulti-

prod

uct c

usto

mer

sL

ag40

37

-4

037

B

BC

ross

-sel

l cus

tom

er v

isit

sL

ead

62

187

MD

Att

ract

new

clie

nts

New

clie

nt r

even

ueL

ag$2

00k

$184

$600

k$5

37PK

Art

icle

s pu

blis

hed

Lea

d2

-16

5SW

Man

age

univ

ersi

ty

ke

y m

arke

ts u

nder

serv

ed

Lea

d0

30

3PK

netw

ork

Lea

ds

gene

rate

d v

iase

min

ar fo

llow

up

Lea

d8

1024

22PK

Est

ablis

h O

rion

bra

ndPo

st-c

ontr

act c

lient

sat

isfa

ctio

nL

ead

95

99

95

99

MD

EX

HIB

IT5

2O

DG

Bal

ance

d Sc

orec

ard

08_047461 ch05qxp 10406 1201 PM Page 182

183

Est

ablis

h O

rion

bra

nd(c

onti

nued

)C

lient

-ini

tiat

ed p

roce

ss

Lea

d3

09

1SW

imps

Pro

cess

Impr

ove

sale

s pr

oces

ses

Exe

cuti

ve c

onta

cts

Lea

d6

818

18M

DPr

opos

al h

it r

atio

Lag

60

50

60

30

MD

Exp

and

pro

duc

t lin

es

new

pro

duc

ts

Lea

d3

49

6B

Bin

trod

uced

Dev

elop

alt

erna

tive

pu

blic

sem

inar

s of

fere

dL

ead

3028

9075

PKm

arke

ting

cha

nnel

sPu

blic

sem

inar

s w

ith

gt18

Lag

2512

7561

PKpa

rtic

ipan

tsM

arke

ting

cos

t as

Lag

25

28

25

26

PK

Stan

dar

diz

e se

rvic

e

acc

epta

ble

aud

its

Lea

d10

075

10

088

PK

del

iver

y

Lea

rnin

g amp

Gro

wth

Opt

imiz

e co

nsul

ting

c

onsu

ltan

ts c

erti

fied

Lea

d10

010

010

010

0M

Dst

aff q

ualit

ySe

min

ars

atte

nded

for

Lea

d10

230

16M

Dco

ntin

uing

ed

ucat

ion

Impr

ove

int

Dat

abas

e up

dat

ed a

nd

Lea

dye

sye

sN

A

N

ASW

com

mun

icat

ion

acce

ssib

le

08_047461 ch05qxp 10406 1201 PM Page 183







08_047461 ch05qxp 10406 1201 PM Page 184








08_047461 ch05qxp 10406 1201 PM Page 185

186

Fina

ncia

lM

axim

ize

profi

tabi

lity

Incr

ease

rev

enue

Red

uce

cost

s

Cus

tom

erB

uild

str

ong

cust

rel

atio

nshi

ps

Pene

trat

e ne

w m

arke

ts

Mai

ntai

n to

p re

puta

tion

Proc

ess

Incr

ease

on-

tim

e d

eliv

ery

Acc

eler

ate

prod

uct

dev

elop

men

t tim

e

Opt

imiz

e su

pply

cha

in

Lea

rnin

gD

evel

op h

igh-

qual

ity

staf

famp

Gro

wth

Impr

ove

inte

rnal

com

m

Upg

rad

e sy

stem

s

Per

spec

tive

Stra

tegi

c L

ag M

easu

res

Tar

get

Act

ual

Com

men

tsO

bjec

tive

Lea

d M

easu

res

EX

HIB

IT5

3D

emo

Bal

ance

d Sc

orec

ard

Per

spec

tive

s an

d O

bjec

tive

s

08_047461 ch05qxp 10406 1201 PM Page 186


Select an objective











no

no

yes

yes


all objectives




08_047461 ch05qxp 10406 1201 PM Page 187






08_047461 ch05qxp 10406 1201 PM Page 188






Newmarketsales $

Tradeshows

attended

Qualityprospect

visits

Newcustomer

satisfaction


Totalrevenue

Canadiansales

dollars



of newcustomers

of newproducts

Goldmarkets

identified


08_047461 ch05qxp 10406 1201 PM Page 189








08_047461 ch05qxp 10406 1201 PM Page 190





Newmarketsales $

Tradeshows

attended

Qualityprospect

visits

Newcustomer

satisfaction


Totalrevenue

Canadiansales

dollars


Lag Measures


of newcustomers

of newproducts

of Goldmarkets

identified



08_047461 ch05qxp 10406 1201 PM Page 191







08_047461 ch05qxp 10406 1201 PM Page 192





New marketsales $




entered


Totalrevenue

Canadiansales $

Lag Measures



Trade showsattended


Lead Measures


08_047461 ch05qxp 10406 1201 PM Page 193










08_047461 ch05qxp 10406 1201 PM Page 194








08_047461 ch05qxp 10406 1201 PM Page 195




Newmarketsales $

Tradeshows

attended

Qualityprospect

visits

Newcustomer

satisfaction


Totalrevenue

Canadiansales

dollars


Lag Measures

of newcustomers

of newproducts

of Goldmarkets

identified

Lead Measures


08_047461 ch05qxp 10406 1201 PM Page 196




admin expense



















08_047461 ch05qxp 10406 1201 PM Page 197













08_047461 ch05qxp 10406 1201 PM Page 198








08_047461 ch05qxp 10406 1201 PM Page 199





















08_047461 ch05qxp 10406 1201 PM Page 200






Example


500300 60

Quarter






24101586658

YTD



08_047461 ch05qxp 10406 1201 PM Page 201












08_047461 ch05qxp 10406 1201 PM Page 202











Select a measure

Modify as needed





08_047461 ch05qxp 10406 1201 PM Page 203






08_047461 ch05qxp 10406 1201 PM Page 204








08_047461 ch05qxp 10406 1201 PM Page 205








08_047461 ch05qxp 10406 1201 PM Page 206









08_047461 ch05qxp 10406 1201 PM Page 207








08_047461 ch05qxp 10406 1201 PM Page 208







08_047461 ch05qxp 10406 1201 PM Page 209









08_047461 ch05qxp 10406 1201 PM Page 210








08_047461 ch05qxp 10406 1201 PM Page 211






08_047461 ch05qxp 10406 1201 PM Page 212











08_047461 ch05qxp 10406 1201 PM Page 213






get around to it)



08_047461 ch05qxp 10406 1201 PM Page 214




Financial



bull Reduce costs

Customer




Processes




Learning and Growth





08_047461 ch05qxp 10406 1201 PM Page 215








bull Gainsharing





08_047461 ch05qxp 10406 1201 PM Page 216






08_047461 ch05qxp 10406 1201 PM Page 217



08_047461 ch05qxp 10406 1201 PM Page 218

219

c h a p t e r 6

CONCLUSIONS







09_047461 ch06qxp 10406 1202 PM Page 219





09_047461 ch06qxp 10406 1202 PM Page 220

221

INDEX












181ndash185


175 180 181 184ndash186 197199ndash201



210ndash213use of 217 218 220








































222 Index










13ndash17 19








IBM 9 98IBM Credit















Index 223



179 180 185 190 199 210ndash213216ndash218























131ndash138Nypro 91












47 48




185ndash188

224 Index




































map 128

Index 225

































226 Index


















Volvo 101







Yugo 101

Index 227



CONTENTS

PREFACE


1970

1985

MID-2000S









VISION AND MISSION







SUMMARY


DEFINITION



SUMMARY


DEFINITION





INDEX






Ralph F Smith















2006020850


10 9 8 7 6 5 4 3 2 1






vii

CONTENTS

Preface ix







Index 221



ix

PREFACE








x Preface


1

c h a p t e r 1

A WORLD OF CHANGE








04_047461 ch01qxp 10406 1200 PM Page 1


1970




04_047461 ch01qxp 10406 1200 PM Page 2




A World of Change 3


04_047461 ch01qxp 10406 1200 PM






04_047461 ch01qxp 10406 1200 PM Page 4




A World of Change 5

04_047461 ch01qxp 10406 1200 PM Page 5


1985



04_047461 ch01qxp 10406 1200 PM Page 6




A World of Change 7

04_047461 ch01qxp 10406 1200 PM Page 7





MID-2000S



04_047461 ch01qxp 10406 1200 PM Page 8




A World of Change 9

04_047461 ch01qxp 10406 1200 PM Page 9





04_047461 ch01qxp 10406 1200 PM Page 10






04_047461 ch01qxp 10406 1200 PM Page 11



1970



1985



2005



Impact onProcesses



Customers





Processes





Technology





Workforce

Topic

Competition


04_047461 ch01qxp 10406 1200 PM Page 12

13

c h a p t e r 2








05_047461 ch02qxp 10406 1200 PM Page 13










05_047461 ch02qxp 10406 1200 PM Page 14






05_047461 ch02qxp 10406 1200 PM Page 15






05_047461 ch02qxp 10406 1200 PM Page 16






05_047461 ch02qxp 10406 1200 PM Page 17






cializationInternal

Preparation



05_047461 ch02qxp 10406 1200 PM Page 18







05_047461 ch02qxp 10406 1200 PM Page 19







05_047461 ch02qxp 10406 1200 PM Page 20




ExecutiveDirector









31 Benefit payments



Fin HRSupport


IT Reeng -ineering

CS

OP

FI

IT

OP

BPO

BPO

BPO

BPO

BPO


05_047461 ch02qxp 10406 1200 PM Page 21













05_047461 ch02qxp 10406 1200 PM Page 22








05_047461 ch02qxp 10406 1200 PM Page 23







05_047461 ch02qxp 10406 1200 PM Page 24



05_047461 ch02qxp 10406 1200 PM Page 25

26

c h a p t e r 3







VISION AND MISSION


06_047461 ch03qxp 10406 1200 PM Page 26








Vision and Mission


Strategy Map

Monitor and Adjust

Execution


06_047461 ch03qxp 10406 1200 PM Page 27






06_047461 ch03qxp 10406 1200 PM Page 28





06_047461 ch03qxp 10406 1200 PM Page 29







06_047461 ch03qxp 10406 1200 PM Page 30









06_047461 ch03qxp 10406 1200 PM Page 31









06_047461 ch03qxp 10406 1200 PM Page 32







06_047461 ch03qxp 10406 1200 PM Page 33






06_047461 ch03qxp 10406 1200 PM Page 34





ldquoPeoplerdquo



06_047461 ch03qxp 10406 1200 PM Page 35











06_047461 ch03qxp 10406 1200 PM Page 36








06_047461 ch03qxp 10406 1200 PM Page 37






06_047461 ch03qxp 10406 1200 PM Page 38









06_047461 ch03qxp 10406 1200 PM Page 39








06_047461 ch03qxp 10406 1200 PM Page 40










06_047461 ch03qxp 10406 1200 PM Page 41








Finance

Customer

Process

Technology

People


06_047461 ch03qxp 10406 1200 PM Page 42









research










06_047461 ch03qxp 10406 1200 PM Page 43







06_047461 ch03qxp 10406 1200 PM Page 44








06_047461 ch03qxp 10406 1200 PM Page 45







06_047461 ch03qxp 10406 1200 PM Page 46






06_047461 ch03qxp 10406 1200 PM Page 47







Suppliers Customers

Specs andExpects

Inputs PDCI Outputs

06_047461 ch03qxp 10406 1200 PM Page 48







Specs andExpects

Gaps


06_047461 ch03qxp 10406 1200 PM Page 49




Specs andExpects

Gaps



06_047461 ch03qxp 10406 1200 PM Page 50





Feed Forward Loop

Specs andExpects

Gaps

Feed Forward Loop




06_047461 ch03qxp 10406 1200 PM Page 51






06_047461 ch03qxp 10406 1200 PM Page 52






1 12 23 34 45 56 6


1 12 23 34 45 56 6


1234


1234


1234


1234




I1

I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1

06_047461 ch03qxp 10406 1200 PM Page 53












06_047461 ch03qxp 10406 1200 PM Page 54









06_047461 ch03qxp 10406 1200 PM Page 55





1 12 23 34 45 56 6


1 12 23 34 45 56 6


1234


1234


1234


1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1


06_047461 ch03qxp 10406 1200 PM Page 56







06_047461 ch03qxp 10406 1200 PM Page 57





1 12 23 34 45 56 6


1234


34


4


1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1







1 12 23 34 45 56 6


1234


1234


1234


1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1




06_047461 ch03qxp 10406 1200 PM Page 58






06_047461 ch03qxp 10406 1200 PM Page 59







1 12 23 34 45 56 6


1234






1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1



06_047461 ch03qxp 10406 1200 PM Page 60









06_047461 ch03qxp 10406 1200 PM Page 61








1 12 23 34 45 56 6


1234






1234


Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1



06_047461 ch03qxp 10406 1200 PM Page 62











1234






1234


Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1


06_047461 ch03qxp 10406 1200 PM Page 63



















Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1


06_047461 ch03qxp 10406 1200 PM Page 64












06_047461 ch03qxp 10406 1200 PM Page 65
















Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8







O2 O3O4

O5

O7

O8

O1



06_047461 ch03qxp 10406 1200 PM Page 66






06_047461 ch03qxp 10406 1200 PM Page 67






06_047461 ch03qxp 10406 1200 PM Page 68







06_047461 ch03qxp 10406 1200 PM Page 69





Customer

Sales Rep

Financing

Credit

BusinessPractices

Requestfinancing

Customernotified

CallIBM

Credit

Receivequote

Callcustomer

Logrequest

Sendreq tocredit

Enterdata in

computer

Checkcredit

Write results

Modifyrequest

Writeterms

Pricing

Admin

Send toBPO

Put dataon spread

sheet

Write interest

rate

Send toadmin

Typequote

FedexTo rep



06_047461 ch03qxp 10406 1200 PM Page 70






06_047461 ch03qxp 10406 1200 PM Page 71












06_047461 ch03qxp 10406 1200 PM Page 72

73

Plac

eru

ler

by

Lis

ten

bubb

le

Dip

ping

Blo

win

g

Cat

chin

g

Mea

suri

ng

Rec

ordi

ng

Dip

wan

d

Rem

ove

from

bott

le

Insp

ect

for

film

Plac

ene

arbl

ower

Plac

ew

and

bybu

bble

Pres

ent

tom

easu

rer

Rea

d

Wri

te

dow

n

Cal

l out

Cat

ch

Aim

Puck

erB

low

Insp

ect

for

film

Sele

ctbu

bble

EX

HIB

IT3

19B

ubbl

e P

rodu

ctio

n P

roce

ss M

ap

06_047461 ch03qxp 10406 1200 PM Page 73





06_047461 ch03qxp 10406 1200 PM Page 74








Dipping Dipwand

Removefrom bottle

Inspectfor film

Place nearblower

06_047461 ch03qxp 10406 1200 PM Page 75









Aim Pucker Blow

06_047461 ch03qxp 10406 1200 PM Page 76








Place wandby bubble

Present tomeasurer

Catch



Read

Call out



06_047461 ch03qxp 10406 1200 PM Page 77






06_047461 ch03qxp 10406 1200 PM Page 78








06_047461 ch03qxp 10406 1200 PM Page 79






06_047461 ch03qxp 10406 1200 PM Page 80

81

CR

M

Und

er-

wri

ting

Ris

ken

gine

erin

g

Polic

yis

suan

ce

Cla

ims

Targ

etac

coun

tG

athe

rcl

ient

info

Proo

fin

foE

nter

data

Pric

ing

Ana

lyze

risk

s

Ent

erda

taC

reat

epo

licie

sSe

nd t

ocl

ient

Rec

ord

clai

mC

heck

cove

rage

Prep

are

sub

Issu

equ

ote

Bin

dco

vera

ge

Set

rese

rves

Neg

otia

teD

ispo

se

EX

HIB

IT3

26In

sura

nce

Pro

cess

Flo

w

06_047461 ch03qxp 10406 1200 PM Page 81











06_047461 ch03qxp 10406 1200 PM Page 82









06_047461 ch03qxp 10406 1200 PM Page 83









06_047461 ch03qxp 10406 1200 PM Page 84





ShipParts


Definespecs



ShipParts


Definespecs



06_047461 ch03qxp 10406 1200 PM Page 85






06_047461 ch03qxp 10406 1200 PM Page 86






06_047461 ch03qxp 10406 1200 PM Page 87






Operations IT


projectrequest

Prioritizerequest


06_047461 ch03qxp 10406 1200 PM Page 88







Operations IT


projectrequest

Prioritizerequest


06_047461 ch03qxp 10406 1200 PM Page 89







High-Risk Drivers

Medium-Risk Drivers

Low-Risk Drivers

Market Segments


06_047461 ch03qxp 10406 1200 PM Page 90






06_047461 ch03qxp 10406 1200 PM Page 91






06_047461 ch03qxp 10406 1200 PM Page 92





06_047461 ch03qxp 10406 1201 PM Page 93







Candidate forhellip


ProcessExtension

MarketExtension

EnterpriseCreation

Comments


06_047461 ch03qxp 10406 1201 PM Page 94







06_047461 ch03qxp 10406 1201 PM Page 95





06_047461 ch03qxp 10406 1201 PM Page 96












06_047461 ch03qxp 10406 1201 PM Page 97






Candidate forhellip


ProcessExtension

MarketExtension

EnterpriseCreation

Comments











06_047461 ch03qxp 10406 1201 PM Page 98


Product Answers



c)d)


c)d)










06_047461 ch03qxp 10406 1201 PM Page 99





06_047461 ch03qxp 10406 1201 PM Page 100









06_047461 ch03qxp 10406 1201 PM Page 101




c) County newspaper



broader perspective






our market share









06_047461 ch03qxp 10406 1201 PM Page 102















06_047461 ch03qxp 10406 1201 PM Page 103






06_047461 ch03qxp 10406 1201 PM Page 104




325

275

225

$(T

hous

ands

)

175

125


Month


Jan-00


CL=18694


06_047461 ch03qxp 10406 1201 PM Page 105




Tho

usan

ds)

1550

1350

1150

950

750

550

350

150

Jan-

98 Feb

Mar Apr

May Ju

n Jul

Aug Sep

Oct

Nov Dec Fe

bM

ar AprM

ay Jun Ju

lAug Se

pO

ct Feb

Mar Apr

May Ju

n Jul

Aug

LCL=17361

CL=79662

UCL=141962

Sep

Oct

Nov Dec

Jan-

00

Jan-

99

Month


06_047461 ch03qxp 10406 1201 PM Page 106




new businessrdquo







06_047461 ch03qxp 10406 1201 PM Page 107





Tho

usan

ds)

1550

1350

1150

950

750

550

350

150

Jan-

98 Feb

Mar Apr

May Ju

n Jul

Aug Sep

Oct

Nov Dec Fe

bM

ar AprM

ay Jun Ju

lAug Se

pO

ct Feb

Mar Apr

May Ju

n Jul

Aug

LCL=17361

CL=79662

UCL=141962

Sep

Oct

Nov Dec

Jan-

00

Jan-

99

Month


06_047461 ch03qxp 10406 1201 PM Page 108








06_047461 ch03qxp 10406 1201 PM Page 109






Customer Assessment

Key Questions








Brainstorming

System maps

Kano analysis

Kano analysis




06_047461 ch03qxp 10406 1201 PM Page 110








06_047461 ch03qxp 10406 1201 PM Page 111








06_047461 ch03qxp 10406 1201 PM Page 112























Most Important Gap


FAA

Pilot union

Boeing


1

2

3

I2 I3 I4

I5

I7

I8





On-time percentage


O2 O3O4

O5

O7

O8

O1


06_047461 ch03qxp 10406 1201 PM Page 113






06_047461 ch03qxp 10406 1201 PM Page 114





Scale



Must Be

Satisfied

Neutral

Dissatisfied

06_047461 ch03qxp 10406 1201 PM Page 115







06_047461 ch03qxp 10406 1201 PM Page 116




Scale



Must Be

Satisfied

Neutral

Dissatisfied

More isBetter


06_047461 ch03qxp 10406 1201 PM Page 117







06_047461 ch03qxp 10406 1201 PM Page 118





Scale



Must Be

Satisfied

Neutral

Dissatisfied

More isBetter

Delighter


06_047461 ch03qxp 10406 1201 PM Page 119













06_047461 ch03qxp 10406 1201 PM Page 120














06_047461 ch03qxp 10406 1201 PM Page 121







06_047461 ch03qxp 10406 1201 PM Page 122











Key Questions
















06_047461 ch03qxp 10406 1201 PM Page 123





06_047461 ch03qxp 10406 1201 PM Page 124






06_047461 ch03qxp 10406 1201 PM Page 125



SUMMARY



06_047461 ch03qxp 10406 1201 PM Page 126

127

c h a p t e r 4

STRATEGY MAPS



DEFINITION


07_047461 ch04qxp 10406 1201 PM Page 127





07_047461 ch04qxp 10406 1201 PM Page 128



Strategy Maps 129

Learning andGrowth

Process

Customer

Financial















Improve

Security


07_047461 ch04qxp 10406 1201 PM Page 129











07_047461 ch04qxp 10406 1201 PM Page 130





Strategy Maps 131

07_047461 ch04qxp 10406 1201 PM Page 131






CustomerPerspective

ProcessPerspective



07_047461 ch04qxp 10406 1201 PM Page 132





Strategy Maps 133


CustomerPerspective

ProcessPerspective



07_047461 ch04qxp 10406 1201 PM Page 133





CustomerPerspective

ProcessPerspective



07_047461 ch04qxp 10406 1201 PM Page 134




Strategy Maps 135


Increase revenue





Expand productlines







Financial

Customer

Process

Learningand Growth


07_047461 ch04qxp 10406 1201 PM Page 135







07_047461 ch04qxp 10406 1201 PM Page 136











Strategy Maps 137

07_047461 ch04qxp 10406 1201 PM Page 137






07_047461 ch04qxp 10406 1201 PM Page 138



Strategy Maps 139










Services





Learning ampGrowth

Process

Financial

Customer





07_047461 ch04qxp 10406 1201 PM Page 139







07_047461 ch04qxp 10406 1201 PM Page 140





Strategy Maps 141






07_047461 ch04qxp 10406 1201 PM Page 141










07_047461 ch04qxp 10406 1201 PM Page 142








Strategy Maps 143

07_047461 ch04qxp 10406 1201 PM Page 143









07_047461 ch04qxp 10406 1201 PM Page 144






Strategy Maps 145

07_047461 ch04qxp 10406 1201 PM Page 145





























multiple locations


boost sales











07_047461 ch04qxp 10406 1201 PM Page 146






Strategy Maps 147

07_047461 ch04qxp 10406 1201 PM Page 147







07_047461 ch04qxp 10406 1201 PM Page 148





Strategy Maps 149

07_047461 ch04qxp 10406 1201 PM Page 149






07_047461 ch04qxp 10406 1201 PM Page 150







Strategy Maps 151

07_047461 ch04qxp 10406 1201 PM Page 151






07_047461 ch04qxp 10406 1201 PM Page 152






Strategy Maps 153

07_047461 ch04qxp 10406 1201 PM Page 153



Financial

Customer

Process

Learningamp Growth





Reducecosts



Upgradesystems











07_047461 ch04qxp 10406 1201 PM Page 154





Strategy Maps 155

07_047461 ch04qxp 10406 1201 PM Page 155






FinancialMaximize

profitability

Reducecosts

Increaserevenue


07_047461 ch04qxp 10406 1201 PM Page 156








Strategy Maps 157

07_047461 ch04qxp 10406 1201 PM Page 157






FinancialMaximize

profitability

Reducecosts

Increaserevenue

CustomerPenetrate



07_047461 ch04qxp 10406 1201 PM Page 158













Strategy Maps 159

07_047461 ch04qxp 10406 1201 PM Page 159





FinancialMaximize

profitability

Reducecosts

Increaserevenue

CustomerPenetrate






Process


07_047461 ch04qxp 10406 1201 PM Page 160





Strategy Maps 161

07_047461 ch04qxp 10406 1201 PM Page 161



FinancialMaximize

profitability

Reducecosts

Increaserevenue

CustomerPenetrate






Process

Learningamp Growth


Upgradesystems



07_047461 ch04qxp 10406 1201 PM Page 162









Strategy Maps 163

07_047461 ch04qxp 10406 1201 PM Page 163










07_047461 ch04qxp 10406 1201 PM Page 164






SUMMARY


Strategy Maps 165

07_047461 ch04qxp 10406 1201 PM Page 165

166

c h a p t e r 5


INITIATIVES



DEFINITION



08_047461 ch05qxp 10406 1201 PM Page 166





08_047461 ch05qxp 10406 1201 PM Page 167




08_047461 ch05qxp 10406 1201 PM Page 168








08_047461 ch05qxp 10406 1201 PM Page 169







08_047461 ch05qxp 10406 1201 PM Page 170








08_047461 ch05qxp 10406 1201 PM Page 171

172

Cus

tom

erIn

crea

se s

take

hold

erIn

d

busi

ness

taxp

ayer

80

8073

69

74

67

prio

r ye

arsa

tisf

acti

onSt

uden

tfa

mily

80

8085

85

76

74

prio

r ye

ar

Prom

ote

posi

tive

Publ

ic o

utre

ach

3927

Spec

ial c

ause

low

imag

eev

ents

Enh

ance

cus

tom

erSp

eed

of a

nsw

erin

g ph

one

500

m6

10m

CC

tim

eco

mm

unic

atio

n

cal

l mtg

qua

lity

std

s70

66

Sp

ecia

l cau

se lo

w n

ew h

ires

Wri

tten

cor

resp

ond

ence

30 d

ays

75 d

ays

His

togr

am o

n ag

ing

resp

onse

tim

e

sel

f-se

rvic

e co

ntac

ts90

87

C

omm

on c

ause

92

avg

Fina

ncia

lM

aint

ain

fina

ncia

lC

red

it r

atin

gA

AA

AA

AA

AA

SampP

Aaa

Moo

dy

inte

grit

yA

A+

Fit

chM

ater

ial a

udit

find

ings

03

Zer

o re

peat

s

Gen

erat

e re

venu

eG

F-G

Pre

venu

e-6

FY

-15

1FY

TD

-93

SA

F re

venu

e1

4FY

-19

FY

TD

5

Enf

orce

men

t rev

enue

N

A$1

122

MFY

TD

$29

54M

Man

age

bud

get

Bal

ance

d B

udge

tlt

=95

93

FY

TD

figu

re

Man

age

inve

stm

ents

Ret

urn

on in

vest

men

t8

0-7

8

Rol

ling

12 m

onth

figu

re

Proc

ess

Stre

amlin

e ke

ySt

and

ard

ized

test

TA

T10

wks

20 w

ksSp

ring

cyc

le d

own

from

28

proc

esse

sTe

st r

egis

trat

ion

accu

racy

90

55

Per

spec

tive

Stra

tegi

c L

ag M

easu

res

Tar

get

Act

ual

Com

men

tsO

bjec

tive

L

ead

Mea

sure

s

EX

HIB

IT5

1T

reas

ury

Bal

ance

d Sc

orec

ard

08_047461 ch05qxp 10406 1201 PM Page 172

173

Proc

ess

Sale

s ta

x d

elin

quen

cy c

anc

N

A27

733

402

53 n

ew is

sued

(con

tinu

ed)

Dis

tres

sed

loca

l gov

rsquotsN

A

203

new

5 r

emov

ed (D

ec 0

2)A

utho

rity

tran

s pr

og4

84

8

Min

imiz

e ea

rly

out

Ear

ly o

ut m

gmt p

rog

210

210

impa

ct

Opt

imiz

e co

ntra

ctC

ontr

act c

ompl

ianc

e10

092

m

anag

emen

t

Incr

ease

ele

ctro

nic

r

etur

ns fi

led

by

alt m

eans

80

39

CY

TD

41

capa

bilit

ies

e

lect

roni

c d

isbu

rsem

ents

33

28

$56

B p

aid

54

of $

dis

b

ele

ctro

nic

stat

e re

ceip

ts20

18

$5

3B

rcv

d 3

5 o

f $ r

cvd

Lea

rnin

gM

anag

e te

ch

key

IT p

roje

cts

on ti

me

in3

32

3amp

Gro

wth

reso

urce

sbu

dge

t

Dev

elop

pos

itiv

eE

mpl

oyee

sat

isfa

ctio

n7

04

370

em

ploy

ees

surv

eyed

cult

ure

Impr

ove

inte

rnal

Inte

rnal

com

m e

vent

s24

36co

mm

unic

atio

n

Prov

ide

cust

omer

-Tr

aini

ng q

ualit

y9

09

598

att

end

ees

42

resp

onse

sfr

iend

ly H

R s

ervi

ces

Hir

ing

cycl

e ti

me

45 d

ays

52 d

ays

Secu

rity

Impr

ove

secu

rity

Secu

rity

bre

eche

s0

0So

ftw

are

arri

ving

in Ja

n

DR

pla

ns te

sted

ap

p10

10

0

BC

pla

ns te

sted

ap

p10

10

0

08_047461 ch05qxp 10406 1201 PM Page 173






08_047461 ch05qxp 10406 1201 PM Page 174







08_047461 ch05qxp 10406 1201 PM Page 175





08_047461 ch05qxp 10406 1201 PM Page 176









08_047461 ch05qxp 10406 1201 PM Page 177






08_047461 ch05qxp 10406 1201 PM Page 178








08_047461 ch05qxp 10406 1201 PM Page 179









08_047461 ch05qxp 10406 1201 PM Page 180








08_047461 ch05qxp 10406 1201 PM Page 181

182

Stra

tegi

c M

easu

res

Type

Qtr

Qtr

YT

DY

TD

Ow

ner

Obj

ecti

veT

arge

tA

ctua

lT

arge

tA

ctua

l

Fin

anci

al

Mai

ntai

n st

rong

Net

pro

fitL

ag$1

00K

$53K

$300

K$3

19PK

$ po

siti

on

Incr

ease

rev

enue

Serv

ice

line

reve

nue

Lag

$200

K$1

57k

$600

K$6

57PK

Publ

ic s

emin

ar r

even

ueL

ag$3

00K

$308

k$9

00K

$980

KPK

In-h

ouse

rev

enue

Lag

$200

K$1

98k

$600

K$5

00k

PK

Cu

stom

er

Stre

ngth

en e

xist

ing

R

epea

t bus

ines

s re

venu

eL

ag$5

00K

$479

K$1

5M

$16

MB

Bcu

stom

er r

elat

ions

hips

m

ulti-

prod

uct c

usto

mer

sL

ag40

37

-4

037

B

BC

ross

-sel

l cus

tom

er v

isit

sL

ead

62

187

MD

Att

ract

new

clie

nts

New

clie

nt r

even

ueL

ag$2

00k

$184

$600

k$5

37PK

Art

icle

s pu

blis

hed

Lea

d2

-16

5SW

Man

age

univ

ersi

ty

ke

y m

arke

ts u

nder

serv

ed

Lea

d0

30

3PK

netw

ork

Lea

ds

gene

rate

d v

iase

min

ar fo

llow

up

Lea

d8

1024

22PK

Est

ablis

h O

rion

bra

ndPo

st-c

ontr

act c

lient

sat

isfa

ctio

nL

ead

95

99

95

99

MD

EX

HIB

IT5

2O

DG

Bal

ance

d Sc

orec

ard

08_047461 ch05qxp 10406 1201 PM Page 182

183

Est

ablis

h O

rion

bra

nd(c

onti

nued

)C

lient

-ini

tiat

ed p

roce

ss

Lea

d3

09

1SW

imps

Pro

cess

Impr

ove

sale

s pr

oces

ses

Exe

cuti

ve c

onta

cts

Lea

d6

818

18M

DPr

opos

al h

it r

atio

Lag

60

50

60

30

MD

Exp

and

pro

duc

t lin

es

new

pro

duc

ts

Lea

d3

49

6B

Bin

trod

uced

Dev

elop

alt

erna

tive

pu

blic

sem

inar

s of

fere

dL

ead

3028

9075

PKm

arke

ting

cha

nnel

sPu

blic

sem

inar

s w

ith

gt18

Lag

2512

7561

PKpa

rtic

ipan

tsM

arke

ting

cos

t as

Lag

25

28

25

26

PK

Stan

dar

diz

e se

rvic

e

acc

epta

ble

aud

its

Lea

d10

075

10

088

PK

del

iver

y

Lea

rnin

g amp

Gro

wth

Opt

imiz

e co

nsul

ting

c

onsu

ltan

ts c

erti

fied

Lea

d10

010

010

010

0M

Dst

aff q

ualit

ySe

min

ars

atte

nded

for

Lea

d10

230

16M

Dco

ntin

uing

ed

ucat

ion

Impr

ove

int

Dat

abas

e up

dat

ed a

nd

Lea

dye

sye

sN

A

N

ASW

com

mun

icat

ion

acce

ssib

le

08_047461 ch05qxp 10406 1201 PM Page 183







08_047461 ch05qxp 10406 1201 PM Page 184








08_047461 ch05qxp 10406 1201 PM Page 185

186

Fina

ncia

lM

axim

ize

profi

tabi

lity

Incr

ease

rev

enue

Red

uce

cost

s

Cus

tom

erB

uild

str

ong

cust

rel

atio

nshi

ps

Pene

trat

e ne

w m

arke

ts

Mai

ntai

n to

p re

puta

tion

Proc

ess

Incr

ease

on-

tim

e d

eliv

ery

Acc

eler

ate

prod

uct

dev

elop

men

t tim

e

Opt

imiz

e su

pply

cha

in

Lea

rnin

gD

evel

op h

igh-

qual

ity

staf

famp

Gro

wth

Impr

ove

inte

rnal

com

m

Upg

rad

e sy

stem

s

Per

spec

tive

Stra

tegi

c L

ag M

easu

res

Tar

get

Act

ual

Com

men

tsO

bjec

tive

Lea

d M

easu

res

EX

HIB

IT5

3D

emo

Bal

ance

d Sc

orec

ard

Per

spec

tive

s an

d O

bjec

tive

s

08_047461 ch05qxp 10406 1201 PM Page 186


Select an objective











no

no

yes

yes


all objectives




08_047461 ch05qxp 10406 1201 PM Page 187






08_047461 ch05qxp 10406 1201 PM Page 188






Newmarketsales $

Tradeshows

attended

Qualityprospect

visits

Newcustomer

satisfaction


Totalrevenue

Canadiansales

dollars



of newcustomers

of newproducts

Goldmarkets

identified


08_047461 ch05qxp 10406 1201 PM Page 189








08_047461 ch05qxp 10406 1201 PM Page 190





Newmarketsales $

Tradeshows

attended

Qualityprospect

visits

Newcustomer

satisfaction


Totalrevenue

Canadiansales

dollars


Lag Measures


of newcustomers

of newproducts

of Goldmarkets

identified



08_047461 ch05qxp 10406 1201 PM Page 191







08_047461 ch05qxp 10406 1201 PM Page 192





New marketsales $




entered


Totalrevenue

Canadiansales $

Lag Measures



Trade showsattended


Lead Measures


08_047461 ch05qxp 10406 1201 PM Page 193










08_047461 ch05qxp 10406 1201 PM Page 194








08_047461 ch05qxp 10406 1201 PM Page 195




Newmarketsales $

Tradeshows

attended

Qualityprospect

visits

Newcustomer

satisfaction


Totalrevenue

Canadiansales

dollars


Lag Measures

of newcustomers

of newproducts

of Goldmarkets

identified

Lead Measures


08_047461 ch05qxp 10406 1201 PM Page 196




admin expense



















08_047461 ch05qxp 10406 1201 PM Page 197













08_047461 ch05qxp 10406 1201 PM Page 198








08_047461 ch05qxp 10406 1201 PM Page 199





















08_047461 ch05qxp 10406 1201 PM Page 200






Example


500300 60

Quarter






24101586658

YTD



08_047461 ch05qxp 10406 1201 PM Page 201












08_047461 ch05qxp 10406 1201 PM Page 202











Select a measure

Modify as needed





08_047461 ch05qxp 10406 1201 PM Page 203






08_047461 ch05qxp 10406 1201 PM Page 204








08_047461 ch05qxp 10406 1201 PM Page 205








08_047461 ch05qxp 10406 1201 PM Page 206









08_047461 ch05qxp 10406 1201 PM Page 207








08_047461 ch05qxp 10406 1201 PM Page 208







08_047461 ch05qxp 10406 1201 PM Page 209









08_047461 ch05qxp 10406 1201 PM Page 210








08_047461 ch05qxp 10406 1201 PM Page 211






08_047461 ch05qxp 10406 1201 PM Page 212











08_047461 ch05qxp 10406 1201 PM Page 213






get around to it)



08_047461 ch05qxp 10406 1201 PM Page 214




Financial



bull Reduce costs

Customer




Processes




Learning and Growth





08_047461 ch05qxp 10406 1201 PM Page 215








bull Gainsharing





08_047461 ch05qxp 10406 1201 PM Page 216






08_047461 ch05qxp 10406 1201 PM Page 217



08_047461 ch05qxp 10406 1201 PM Page 218

219

c h a p t e r 6

CONCLUSIONS







09_047461 ch06qxp 10406 1202 PM Page 219





09_047461 ch06qxp 10406 1202 PM Page 220

221

INDEX












181ndash185


175 180 181 184ndash186 197199ndash201



210ndash213use of 217 218 220








































222 Index










13ndash17 19








IBM 9 98IBM Credit















Index 223



179 180 185 190 199 210ndash213216ndash218























131ndash138Nypro 91












47 48




185ndash188

224 Index




































map 128

Index 225

































226 Index


















Volvo 101







Yugo 101

Index 227



CONTENTS

PREFACE


1970

1985

MID-2000S









VISION AND MISSION







SUMMARY


DEFINITION



SUMMARY


DEFINITION





INDEX




Ralph F Smith















2006020850


10 9 8 7 6 5 4 3 2 1






vii

CONTENTS

Preface ix







Index 221



ix

PREFACE








x Preface


1

c h a p t e r 1

A WORLD OF CHANGE








04_047461 ch01qxp 10406 1200 PM Page 1


1970




04_047461 ch01qxp 10406 1200 PM Page 2




A World of Change 3


04_047461 ch01qxp 10406 1200 PM Page 3






04_047461 ch01qxp 10406 1200 PM




A World of Change 5

04_047461 ch01qxp 10406 1200 PM Page 5


1985



04_047461 ch01qxp 10406 1200 PM Page 6




A World of Change 7

04_047461 ch01qxp 10406 1200 PM Page 7





MID-2000S



04_047461 ch01qxp 10406 1200 PM Page 8




A World of Change 9

04_047461 ch01qxp 10406 1200 PM Page 9





04_047461 ch01qxp 10406 1200 PM Page 10






04_047461 ch01qxp 10406 1200 PM Page 11



1970



1985



2005



Impact onProcesses



Customers





Processes





Technology





Workforce

Topic

Competition


04_047461 ch01qxp 10406 1200 PM Page 12

13

c h a p t e r 2








05_047461 ch02qxp 10406 1200 PM Page 13










05_047461 ch02qxp 10406 1200 PM Page 14






05_047461 ch02qxp 10406 1200 PM Page 15






05_047461 ch02qxp 10406 1200 PM Page 16






05_047461 ch02qxp 10406 1200 PM Page 17






cializationInternal

Preparation



05_047461 ch02qxp 10406 1200 PM Page 18







05_047461 ch02qxp 10406 1200 PM Page 19







05_047461 ch02qxp 10406 1200 PM Page 20




ExecutiveDirector









31 Benefit payments



Fin HRSupport


IT Reeng -ineering

CS

OP

FI

IT

OP

BPO

BPO

BPO

BPO

BPO


05_047461 ch02qxp 10406 1200 PM Page 21













05_047461 ch02qxp 10406 1200 PM Page 22








05_047461 ch02qxp 10406 1200 PM Page 23







05_047461 ch02qxp 10406 1200 PM Page 24



05_047461 ch02qxp 10406 1200 PM Page 25

26

c h a p t e r 3







VISION AND MISSION


06_047461 ch03qxp 10406 1200 PM Page 26








Vision and Mission


Strategy Map

Monitor and Adjust

Execution


06_047461 ch03qxp 10406 1200 PM Page 27






06_047461 ch03qxp 10406 1200 PM Page 28





06_047461 ch03qxp 10406 1200 PM Page 29







06_047461 ch03qxp 10406 1200 PM Page 30









06_047461 ch03qxp 10406 1200 PM Page 31









06_047461 ch03qxp 10406 1200 PM Page 32







06_047461 ch03qxp 10406 1200 PM Page 33






06_047461 ch03qxp 10406 1200 PM Page 34





ldquoPeoplerdquo



06_047461 ch03qxp 10406 1200 PM Page 35











06_047461 ch03qxp 10406 1200 PM Page 36








06_047461 ch03qxp 10406 1200 PM Page 37






06_047461 ch03qxp 10406 1200 PM Page 38









06_047461 ch03qxp 10406 1200 PM Page 39








06_047461 ch03qxp 10406 1200 PM Page 40










06_047461 ch03qxp 10406 1200 PM Page 41








Finance

Customer

Process

Technology

People


06_047461 ch03qxp 10406 1200 PM Page 42









research










06_047461 ch03qxp 10406 1200 PM Page 43







06_047461 ch03qxp 10406 1200 PM Page 44








06_047461 ch03qxp 10406 1200 PM Page 45







06_047461 ch03qxp 10406 1200 PM Page 46






06_047461 ch03qxp 10406 1200 PM Page 47







Suppliers Customers

Specs andExpects

Inputs PDCI Outputs

06_047461 ch03qxp 10406 1200 PM Page 48







Specs andExpects

Gaps


06_047461 ch03qxp 10406 1200 PM Page 49




Specs andExpects

Gaps



06_047461 ch03qxp 10406 1200 PM Page 50





Feed Forward Loop

Specs andExpects

Gaps

Feed Forward Loop




06_047461 ch03qxp 10406 1200 PM Page 51






06_047461 ch03qxp 10406 1200 PM Page 52






1 12 23 34 45 56 6


1 12 23 34 45 56 6


1234


1234


1234


1234




I1

I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1

06_047461 ch03qxp 10406 1200 PM Page 53












06_047461 ch03qxp 10406 1200 PM Page 54









06_047461 ch03qxp 10406 1200 PM Page 55





1 12 23 34 45 56 6


1 12 23 34 45 56 6


1234


1234


1234


1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1


06_047461 ch03qxp 10406 1200 PM Page 56







06_047461 ch03qxp 10406 1200 PM Page 57





1 12 23 34 45 56 6


1234


34


4


1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1







1 12 23 34 45 56 6


1234


1234


1234


1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1




06_047461 ch03qxp 10406 1200 PM Page 58






06_047461 ch03qxp 10406 1200 PM Page 59







1 12 23 34 45 56 6


1234






1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1



06_047461 ch03qxp 10406 1200 PM Page 60









06_047461 ch03qxp 10406 1200 PM Page 61








1 12 23 34 45 56 6


1234






1234


Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1



06_047461 ch03qxp 10406 1200 PM Page 62











1234






1234


Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1


06_047461 ch03qxp 10406 1200 PM Page 63



















Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1


06_047461 ch03qxp 10406 1200 PM Page 64












06_047461 ch03qxp 10406 1200 PM Page 65
















Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8







O2 O3O4

O5

O7

O8

O1



06_047461 ch03qxp 10406 1200 PM Page 66






06_047461 ch03qxp 10406 1200 PM Page 67






06_047461 ch03qxp 10406 1200 PM Page 68







06_047461 ch03qxp 10406 1200 PM Page 69





Customer

Sales Rep

Financing

Credit

BusinessPractices

Requestfinancing

Customernotified

CallIBM

Credit

Receivequote

Callcustomer

Logrequest

Sendreq tocredit

Enterdata in

computer

Checkcredit

Write results

Modifyrequest

Writeterms

Pricing

Admin

Send toBPO

Put dataon spread

sheet

Write interest

rate

Send toadmin

Typequote

FedexTo rep



06_047461 ch03qxp 10406 1200 PM Page 70






06_047461 ch03qxp 10406 1200 PM Page 71












06_047461 ch03qxp 10406 1200 PM Page 72

73

Plac

eru

ler

by

Lis

ten

bubb

le

Dip

ping

Blo

win

g

Cat

chin

g

Mea

suri

ng

Rec

ordi

ng

Dip

wan

d

Rem

ove

from

bott

le

Insp

ect

for

film

Plac

ene

arbl

ower

Plac

ew

and

bybu

bble

Pres

ent

tom

easu

rer

Rea

d

Wri

te

dow

n

Cal

l out

Cat

ch

Aim

Puck

erB

low

Insp

ect

for

film

Sele

ctbu

bble

EX

HIB

IT3

19B

ubbl

e P

rodu

ctio

n P

roce

ss M

ap

06_047461 ch03qxp 10406 1200 PM Page 73





06_047461 ch03qxp 10406 1200 PM Page 74








Dipping Dipwand

Removefrom bottle

Inspectfor film

Place nearblower

06_047461 ch03qxp 10406 1200 PM Page 75









Aim Pucker Blow

06_047461 ch03qxp 10406 1200 PM Page 76








Place wandby bubble

Present tomeasurer

Catch



Read

Call out



06_047461 ch03qxp 10406 1200 PM Page 77






06_047461 ch03qxp 10406 1200 PM Page 78








06_047461 ch03qxp 10406 1200 PM Page 79






06_047461 ch03qxp 10406 1200 PM Page 80

81

CR

M

Und

er-

wri

ting

Ris

ken

gine

erin

g

Polic

yis

suan

ce

Cla

ims

Targ

etac

coun

tG

athe

rcl

ient

info

Proo

fin

foE

nter

data

Pric

ing

Ana

lyze

risk

s

Ent

erda

taC

reat

epo

licie

sSe

nd t

ocl

ient

Rec

ord

clai

mC

heck

cove

rage

Prep

are

sub

Issu

equ

ote

Bin

dco

vera

ge

Set

rese

rves

Neg

otia

teD

ispo

se

EX

HIB

IT3

26In

sura

nce

Pro

cess

Flo

w

06_047461 ch03qxp 10406 1200 PM Page 81











06_047461 ch03qxp 10406 1200 PM Page 82









06_047461 ch03qxp 10406 1200 PM Page 83









06_047461 ch03qxp 10406 1200 PM Page 84





ShipParts


Definespecs



ShipParts


Definespecs



06_047461 ch03qxp 10406 1200 PM Page 85






06_047461 ch03qxp 10406 1200 PM Page 86






06_047461 ch03qxp 10406 1200 PM Page 87






Operations IT


projectrequest

Prioritizerequest


06_047461 ch03qxp 10406 1200 PM Page 88







Operations IT


projectrequest

Prioritizerequest


06_047461 ch03qxp 10406 1200 PM Page 89







High-Risk Drivers

Medium-Risk Drivers

Low-Risk Drivers

Market Segments


06_047461 ch03qxp 10406 1200 PM Page 90






06_047461 ch03qxp 10406 1200 PM Page 91






06_047461 ch03qxp 10406 1200 PM Page 92





06_047461 ch03qxp 10406 1201 PM Page 93







Candidate forhellip


ProcessExtension

MarketExtension

EnterpriseCreation

Comments


06_047461 ch03qxp 10406 1201 PM Page 94







06_047461 ch03qxp 10406 1201 PM Page 95





06_047461 ch03qxp 10406 1201 PM Page 96












06_047461 ch03qxp 10406 1201 PM Page 97






Candidate forhellip


ProcessExtension

MarketExtension

EnterpriseCreation

Comments











06_047461 ch03qxp 10406 1201 PM Page 98


Product Answers



c)d)


c)d)










06_047461 ch03qxp 10406 1201 PM Page 99





06_047461 ch03qxp 10406 1201 PM Page 100









06_047461 ch03qxp 10406 1201 PM Page 101




c) County newspaper



broader perspective






our market share









06_047461 ch03qxp 10406 1201 PM Page 102















06_047461 ch03qxp 10406 1201 PM Page 103






06_047461 ch03qxp 10406 1201 PM Page 104




325

275

225

$(T

hous

ands

)

175

125


Month


Jan-00


CL=18694


06_047461 ch03qxp 10406 1201 PM Page 105




Tho

usan

ds)

1550

1350

1150

950

750

550

350

150

Jan-

98 Feb

Mar Apr

May Ju

n Jul

Aug Sep

Oct

Nov Dec Fe

bM

ar AprM

ay Jun Ju

lAug Se

pO

ct Feb

Mar Apr

May Ju

n Jul

Aug

LCL=17361

CL=79662

UCL=141962

Sep

Oct

Nov Dec

Jan-

00

Jan-

99

Month


06_047461 ch03qxp 10406 1201 PM Page 106




new businessrdquo







06_047461 ch03qxp 10406 1201 PM Page 107





Tho

usan

ds)

1550

1350

1150

950

750

550

350

150

Jan-

98 Feb

Mar Apr

May Ju

n Jul

Aug Sep

Oct

Nov Dec Fe

bM

ar AprM

ay Jun Ju

lAug Se

pO

ct Feb

Mar Apr

May Ju

n Jul

Aug

LCL=17361

CL=79662

UCL=141962

Sep

Oct

Nov Dec

Jan-

00

Jan-

99

Month


06_047461 ch03qxp 10406 1201 PM Page 108








06_047461 ch03qxp 10406 1201 PM Page 109






Customer Assessment

Key Questions








Brainstorming

System maps

Kano analysis

Kano analysis




06_047461 ch03qxp 10406 1201 PM Page 110








06_047461 ch03qxp 10406 1201 PM Page 111








06_047461 ch03qxp 10406 1201 PM Page 112























Most Important Gap


FAA

Pilot union

Boeing


1

2

3

I2 I3 I4

I5

I7

I8





On-time percentage


O2 O3O4

O5

O7

O8

O1


06_047461 ch03qxp 10406 1201 PM Page 113






06_047461 ch03qxp 10406 1201 PM Page 114





Scale



Must Be

Satisfied

Neutral

Dissatisfied

06_047461 ch03qxp 10406 1201 PM Page 115







06_047461 ch03qxp 10406 1201 PM Page 116




Scale



Must Be

Satisfied

Neutral

Dissatisfied

More isBetter


06_047461 ch03qxp 10406 1201 PM Page 117







06_047461 ch03qxp 10406 1201 PM Page 118





Scale



Must Be

Satisfied

Neutral

Dissatisfied

More isBetter

Delighter


06_047461 ch03qxp 10406 1201 PM Page 119













06_047461 ch03qxp 10406 1201 PM Page 120














06_047461 ch03qxp 10406 1201 PM Page 121







06_047461 ch03qxp 10406 1201 PM Page 122











Key Questions
















06_047461 ch03qxp 10406 1201 PM Page 123





06_047461 ch03qxp 10406 1201 PM Page 124






06_047461 ch03qxp 10406 1201 PM Page 125



SUMMARY



06_047461 ch03qxp 10406 1201 PM Page 126

127

c h a p t e r 4

STRATEGY MAPS



DEFINITION


07_047461 ch04qxp 10406 1201 PM Page 127





07_047461 ch04qxp 10406 1201 PM Page 128



Strategy Maps 129

Learning andGrowth

Process

Customer

Financial















Improve

Security


07_047461 ch04qxp 10406 1201 PM Page 129











07_047461 ch04qxp 10406 1201 PM Page 130





Strategy Maps 131

07_047461 ch04qxp 10406 1201 PM Page 131






CustomerPerspective

ProcessPerspective



07_047461 ch04qxp 10406 1201 PM Page 132





Strategy Maps 133


CustomerPerspective

ProcessPerspective



07_047461 ch04qxp 10406 1201 PM Page 133





CustomerPerspective

ProcessPerspective



07_047461 ch04qxp 10406 1201 PM Page 134




Strategy Maps 135


Increase revenue





Expand productlines







Financial

Customer

Process

Learningand Growth


07_047461 ch04qxp 10406 1201 PM Page 135







07_047461 ch04qxp 10406 1201 PM Page 136











Strategy Maps 137

07_047461 ch04qxp 10406 1201 PM Page 137






07_047461 ch04qxp 10406 1201 PM Page 138



Strategy Maps 139










Services





Learning ampGrowth

Process

Financial

Customer





07_047461 ch04qxp 10406 1201 PM Page 139







07_047461 ch04qxp 10406 1201 PM Page 140





Strategy Maps 141






07_047461 ch04qxp 10406 1201 PM Page 141










07_047461 ch04qxp 10406 1201 PM Page 142








Strategy Maps 143

07_047461 ch04qxp 10406 1201 PM Page 143









07_047461 ch04qxp 10406 1201 PM Page 144






Strategy Maps 145

07_047461 ch04qxp 10406 1201 PM Page 145





























multiple locations


boost sales











07_047461 ch04qxp 10406 1201 PM Page 146






Strategy Maps 147

07_047461 ch04qxp 10406 1201 PM Page 147







07_047461 ch04qxp 10406 1201 PM Page 148





Strategy Maps 149

07_047461 ch04qxp 10406 1201 PM Page 149






07_047461 ch04qxp 10406 1201 PM Page 150







Strategy Maps 151

07_047461 ch04qxp 10406 1201 PM Page 151






07_047461 ch04qxp 10406 1201 PM Page 152






Strategy Maps 153

07_047461 ch04qxp 10406 1201 PM Page 153



Financial

Customer

Process

Learningamp Growth





Reducecosts



Upgradesystems











07_047461 ch04qxp 10406 1201 PM Page 154





Strategy Maps 155

07_047461 ch04qxp 10406 1201 PM Page 155






FinancialMaximize

profitability

Reducecosts

Increaserevenue


07_047461 ch04qxp 10406 1201 PM Page 156








Strategy Maps 157

07_047461 ch04qxp 10406 1201 PM Page 157






FinancialMaximize

profitability

Reducecosts

Increaserevenue

CustomerPenetrate



07_047461 ch04qxp 10406 1201 PM Page 158













Strategy Maps 159

07_047461 ch04qxp 10406 1201 PM Page 159





FinancialMaximize

profitability

Reducecosts

Increaserevenue

CustomerPenetrate






Process


07_047461 ch04qxp 10406 1201 PM Page 160





Strategy Maps 161

07_047461 ch04qxp 10406 1201 PM Page 161



FinancialMaximize

profitability

Reducecosts

Increaserevenue

CustomerPenetrate






Process

Learningamp Growth


Upgradesystems



07_047461 ch04qxp 10406 1201 PM Page 162









Strategy Maps 163

07_047461 ch04qxp 10406 1201 PM Page 163










07_047461 ch04qxp 10406 1201 PM Page 164






SUMMARY


Strategy Maps 165

07_047461 ch04qxp 10406 1201 PM Page 165

166

c h a p t e r 5


INITIATIVES



DEFINITION



08_047461 ch05qxp 10406 1201 PM Page 166





08_047461 ch05qxp 10406 1201 PM Page 167




08_047461 ch05qxp 10406 1201 PM Page 168








08_047461 ch05qxp 10406 1201 PM Page 169







08_047461 ch05qxp 10406 1201 PM Page 170








08_047461 ch05qxp 10406 1201 PM Page 171

172

Cus

tom

erIn

crea

se s

take

hold

erIn

d

busi

ness

taxp

ayer

80

8073

69

74

67

prio

r ye

arsa

tisf

acti

onSt

uden

tfa

mily

80

8085

85

76

74

prio

r ye

ar

Prom

ote

posi

tive

Publ

ic o

utre

ach

3927

Spec

ial c

ause

low

imag

eev

ents

Enh

ance

cus

tom

erSp

eed

of a

nsw

erin

g ph

one

500

m6

10m

CC

tim

eco

mm

unic

atio

n

cal

l mtg

qua

lity

std

s70

66

Sp

ecia

l cau

se lo

w n

ew h

ires

Wri

tten

cor

resp

ond

ence

30 d

ays

75 d

ays

His

togr

am o

n ag

ing

resp

onse

tim

e

sel

f-se

rvic

e co

ntac

ts90

87

C

omm

on c

ause

92

avg

Fina

ncia

lM

aint

ain

fina

ncia

lC

red

it r

atin

gA

AA

AA

AA

AA

SampP

Aaa

Moo

dy

inte

grit

yA

A+

Fit

chM

ater

ial a

udit

find

ings

03

Zer

o re

peat

s

Gen

erat

e re

venu

eG

F-G

Pre

venu

e-6

FY

-15

1FY

TD

-93

SA

F re

venu

e1

4FY

-19

FY

TD

5

Enf

orce

men

t rev

enue

N

A$1

122

MFY

TD

$29

54M

Man

age

bud

get

Bal

ance

d B

udge

tlt

=95

93

FY

TD

figu

re

Man

age

inve

stm

ents

Ret

urn

on in

vest

men

t8

0-7

8

Rol

ling

12 m

onth

figu

re

Proc

ess

Stre

amlin

e ke

ySt

and

ard

ized

test

TA

T10

wks

20 w

ksSp

ring

cyc

le d

own

from

28

proc

esse

sTe

st r

egis

trat

ion

accu

racy

90

55

Per

spec

tive

Stra

tegi

c L

ag M

easu

res

Tar

get

Act

ual

Com

men

tsO

bjec

tive

L

ead

Mea

sure

s

EX

HIB

IT5

1T

reas

ury

Bal

ance

d Sc

orec

ard

08_047461 ch05qxp 10406 1201 PM Page 172

173

Proc

ess

Sale

s ta

x d

elin

quen

cy c

anc

N

A27

733

402

53 n

ew is

sued

(con

tinu

ed)

Dis

tres

sed

loca

l gov

rsquotsN

A

203

new

5 r

emov

ed (D

ec 0

2)A

utho

rity

tran

s pr

og4

84

8

Min

imiz

e ea

rly

out

Ear

ly o

ut m

gmt p

rog

210

210

impa

ct

Opt

imiz

e co

ntra

ctC

ontr

act c

ompl

ianc

e10

092

m

anag

emen

t

Incr

ease

ele

ctro

nic

r

etur

ns fi

led

by

alt m

eans

80

39

CY

TD

41

capa

bilit

ies

e

lect

roni

c d

isbu

rsem

ents

33

28

$56

B p

aid

54

of $

dis

b

ele

ctro

nic

stat

e re

ceip

ts20

18

$5

3B

rcv

d 3

5 o

f $ r

cvd

Lea

rnin

gM

anag

e te

ch

key

IT p

roje

cts

on ti

me

in3

32

3amp

Gro

wth

reso

urce

sbu

dge

t

Dev

elop

pos

itiv

eE

mpl

oyee

sat

isfa

ctio

n7

04

370

em

ploy

ees

surv

eyed

cult

ure

Impr

ove

inte

rnal

Inte

rnal

com

m e

vent

s24

36co

mm

unic

atio

n

Prov

ide

cust

omer

-Tr

aini

ng q

ualit

y9

09

598

att

end

ees

42

resp

onse

sfr

iend

ly H

R s

ervi

ces

Hir

ing

cycl

e ti

me

45 d

ays

52 d

ays

Secu

rity

Impr

ove

secu

rity

Secu

rity

bre

eche

s0

0So

ftw

are

arri

ving

in Ja

n

DR

pla

ns te

sted

ap

p10

10

0

BC

pla

ns te

sted

ap

p10

10

0

08_047461 ch05qxp 10406 1201 PM Page 173






08_047461 ch05qxp 10406 1201 PM Page 174







08_047461 ch05qxp 10406 1201 PM Page 175





08_047461 ch05qxp 10406 1201 PM Page 176









08_047461 ch05qxp 10406 1201 PM Page 177






08_047461 ch05qxp 10406 1201 PM Page 178








08_047461 ch05qxp 10406 1201 PM Page 179









08_047461 ch05qxp 10406 1201 PM Page 180








08_047461 ch05qxp 10406 1201 PM Page 181

182

Stra

tegi

c M

easu

res

Type

Qtr

Qtr

YT

DY

TD

Ow

ner

Obj

ecti

veT

arge

tA

ctua

lT

arge

tA

ctua

l

Fin

anci

al

Mai

ntai

n st

rong

Net

pro

fitL

ag$1

00K

$53K

$300

K$3

19PK

$ po

siti

on

Incr

ease

rev

enue

Serv

ice

line

reve

nue

Lag

$200

K$1

57k

$600

K$6

57PK

Publ

ic s

emin

ar r

even

ueL

ag$3

00K

$308

k$9

00K

$980

KPK

In-h

ouse

rev

enue

Lag

$200

K$1

98k

$600

K$5

00k

PK

Cu

stom

er

Stre

ngth

en e

xist

ing

R

epea

t bus

ines

s re

venu

eL

ag$5

00K

$479

K$1

5M

$16

MB

Bcu

stom

er r

elat

ions

hips

m

ulti-

prod

uct c

usto

mer

sL

ag40

37

-4

037

B

BC

ross

-sel

l cus

tom

er v

isit

sL

ead

62

187

MD

Att

ract

new

clie

nts

New

clie

nt r

even

ueL

ag$2

00k

$184

$600

k$5

37PK

Art

icle

s pu

blis

hed

Lea

d2

-16

5SW

Man

age

univ

ersi

ty

ke

y m

arke

ts u

nder

serv

ed

Lea

d0

30

3PK

netw

ork

Lea

ds

gene

rate

d v

iase

min

ar fo

llow

up

Lea

d8

1024

22PK

Est

ablis

h O

rion

bra

ndPo

st-c

ontr

act c

lient

sat

isfa

ctio

nL

ead

95

99

95

99

MD

EX

HIB

IT5

2O

DG

Bal

ance

d Sc

orec

ard

08_047461 ch05qxp 10406 1201 PM Page 182

183

Est

ablis

h O

rion

bra

nd(c

onti

nued

)C

lient

-ini

tiat

ed p

roce

ss

Lea

d3

09

1SW

imps

Pro

cess

Impr

ove

sale

s pr

oces

ses

Exe

cuti

ve c

onta

cts

Lea

d6

818

18M

DPr

opos

al h

it r

atio

Lag

60

50

60

30

MD

Exp

and

pro

duc

t lin

es

new

pro

duc

ts

Lea

d3

49

6B

Bin

trod

uced

Dev

elop

alt

erna

tive

pu

blic

sem

inar

s of

fere

dL

ead

3028

9075

PKm

arke

ting

cha

nnel

sPu

blic

sem

inar

s w

ith

gt18

Lag

2512

7561

PKpa

rtic

ipan

tsM

arke

ting

cos

t as

Lag

25

28

25

26

PK

Stan

dar

diz

e se

rvic

e

acc

epta

ble

aud

its

Lea

d10

075

10

088

PK

del

iver

y

Lea

rnin

g amp

Gro

wth

Opt

imiz

e co

nsul

ting

c

onsu

ltan

ts c

erti

fied

Lea

d10

010

010

010

0M

Dst

aff q

ualit

ySe

min

ars

atte

nded

for

Lea

d10

230

16M

Dco

ntin

uing

ed

ucat

ion

Impr

ove

int

Dat

abas

e up

dat

ed a

nd

Lea

dye

sye

sN

A

N

ASW

com

mun

icat

ion

acce

ssib

le

08_047461 ch05qxp 10406 1201 PM Page 183







08_047461 ch05qxp 10406 1201 PM Page 184








08_047461 ch05qxp 10406 1201 PM Page 185

186

Fina

ncia

lM

axim

ize

profi

tabi

lity

Incr

ease

rev

enue

Red

uce

cost

s

Cus

tom

erB

uild

str

ong

cust

rel

atio

nshi

ps

Pene

trat

e ne

w m

arke

ts

Mai

ntai

n to

p re

puta

tion

Proc

ess

Incr

ease

on-

tim

e d

eliv

ery

Acc

eler

ate

prod

uct

dev

elop

men

t tim

e

Opt

imiz

e su

pply

cha

in

Lea

rnin

gD

evel

op h

igh-

qual

ity

staf

famp

Gro

wth

Impr

ove

inte

rnal

com

m

Upg

rad

e sy

stem

s

Per

spec

tive

Stra

tegi

c L

ag M

easu

res

Tar

get

Act

ual

Com

men

tsO

bjec

tive

Lea

d M

easu

res

EX

HIB

IT5

3D

emo

Bal

ance

d Sc

orec

ard

Per

spec

tive

s an

d O

bjec

tive

s

08_047461 ch05qxp 10406 1201 PM Page 186


Select an objective











no

no

yes

yes


all objectives




08_047461 ch05qxp 10406 1201 PM Page 187






08_047461 ch05qxp 10406 1201 PM Page 188






Newmarketsales $

Tradeshows

attended

Qualityprospect

visits

Newcustomer

satisfaction


Totalrevenue

Canadiansales

dollars



of newcustomers

of newproducts

Goldmarkets

identified


08_047461 ch05qxp 10406 1201 PM Page 189








08_047461 ch05qxp 10406 1201 PM Page 190





Newmarketsales $

Tradeshows

attended

Qualityprospect

visits

Newcustomer

satisfaction


Totalrevenue

Canadiansales

dollars


Lag Measures


of newcustomers

of newproducts

of Goldmarkets

identified



08_047461 ch05qxp 10406 1201 PM Page 191







08_047461 ch05qxp 10406 1201 PM Page 192





New marketsales $




entered


Totalrevenue

Canadiansales $

Lag Measures



Trade showsattended


Lead Measures


08_047461 ch05qxp 10406 1201 PM Page 193










08_047461 ch05qxp 10406 1201 PM Page 194








08_047461 ch05qxp 10406 1201 PM Page 195




Newmarketsales $

Tradeshows

attended

Qualityprospect

visits

Newcustomer

satisfaction


Totalrevenue

Canadiansales

dollars


Lag Measures

of newcustomers

of newproducts

of Goldmarkets

identified

Lead Measures


08_047461 ch05qxp 10406 1201 PM Page 196




admin expense



















08_047461 ch05qxp 10406 1201 PM Page 197













08_047461 ch05qxp 10406 1201 PM Page 198








08_047461 ch05qxp 10406 1201 PM Page 199





















08_047461 ch05qxp 10406 1201 PM Page 200






Example


500300 60

Quarter






24101586658

YTD



08_047461 ch05qxp 10406 1201 PM Page 201












08_047461 ch05qxp 10406 1201 PM Page 202











Select a measure

Modify as needed





08_047461 ch05qxp 10406 1201 PM Page 203






08_047461 ch05qxp 10406 1201 PM Page 204








08_047461 ch05qxp 10406 1201 PM Page 205








08_047461 ch05qxp 10406 1201 PM Page 206









08_047461 ch05qxp 10406 1201 PM Page 207








08_047461 ch05qxp 10406 1201 PM Page 208







08_047461 ch05qxp 10406 1201 PM Page 209









08_047461 ch05qxp 10406 1201 PM Page 210








08_047461 ch05qxp 10406 1201 PM Page 211






08_047461 ch05qxp 10406 1201 PM Page 212











08_047461 ch05qxp 10406 1201 PM Page 213






get around to it)



08_047461 ch05qxp 10406 1201 PM Page 214




Financial



bull Reduce costs

Customer




Processes




Learning and Growth





08_047461 ch05qxp 10406 1201 PM Page 215








bull Gainsharing





08_047461 ch05qxp 10406 1201 PM Page 216






08_047461 ch05qxp 10406 1201 PM Page 217



08_047461 ch05qxp 10406 1201 PM Page 218

219

c h a p t e r 6

CONCLUSIONS







09_047461 ch06qxp 10406 1202 PM Page 219





09_047461 ch06qxp 10406 1202 PM Page 220

221

INDEX












181ndash185


175 180 181 184ndash186 197199ndash201



210ndash213use of 217 218 220








































222 Index










13ndash17 19








IBM 9 98IBM Credit















Index 223



179 180 185 190 199 210ndash213216ndash218























131ndash138Nypro 91












47 48




185ndash188

224 Index




































map 128

Index 225

































226 Index


















Volvo 101







Yugo 101

Index 227



CONTENTS

PREFACE


1970

1985

MID-2000S









VISION AND MISSION







SUMMARY


DEFINITION



SUMMARY


DEFINITION





INDEX



Ralph F Smith















2006020850


10 9 8 7 6 5 4 3 2 1






vii

CONTENTS

Preface ix







Index 221



ix

PREFACE








x Preface


1

c h a p t e r 1

A WORLD OF CHANGE








04_047461 ch01qxp 10406 1200 PM Page 1


1970




04_047461 ch01qxp 10406 1200 PM Page 2




A World of Change 3


04_047461 ch01qxp 10406 1200 PM Page 3






04_047461 ch01qxp 10406 1200 PM Page 4




A World of Change 5

04_047461 ch01qxp 10406 1200 PM


1985



04_047461 ch01qxp 10406 1200 PM Page 6




A World of Change 7

04_047461 ch01qxp 10406 1200 PM Page 7





MID-2000S



04_047461 ch01qxp 10406 1200 PM Page 8




A World of Change 9

04_047461 ch01qxp 10406 1200 PM Page 9





04_047461 ch01qxp 10406 1200 PM Page 10






04_047461 ch01qxp 10406 1200 PM Page 11



1970



1985



2005



Impact onProcesses



Customers





Processes





Technology





Workforce

Topic

Competition


04_047461 ch01qxp 10406 1200 PM Page 12

13

c h a p t e r 2








05_047461 ch02qxp 10406 1200 PM Page 13










05_047461 ch02qxp 10406 1200 PM Page 14






05_047461 ch02qxp 10406 1200 PM Page 15






05_047461 ch02qxp 10406 1200 PM Page 16






05_047461 ch02qxp 10406 1200 PM Page 17






cializationInternal

Preparation



05_047461 ch02qxp 10406 1200 PM Page 18







05_047461 ch02qxp 10406 1200 PM Page 19







05_047461 ch02qxp 10406 1200 PM Page 20




ExecutiveDirector









31 Benefit payments



Fin HRSupport


IT Reeng -ineering

CS

OP

FI

IT

OP

BPO

BPO

BPO

BPO

BPO


05_047461 ch02qxp 10406 1200 PM Page 21













05_047461 ch02qxp 10406 1200 PM Page 22








05_047461 ch02qxp 10406 1200 PM Page 23







05_047461 ch02qxp 10406 1200 PM Page 24



05_047461 ch02qxp 10406 1200 PM Page 25

26

c h a p t e r 3







VISION AND MISSION


06_047461 ch03qxp 10406 1200 PM Page 26








Vision and Mission


Strategy Map

Monitor and Adjust

Execution


06_047461 ch03qxp 10406 1200 PM Page 27






06_047461 ch03qxp 10406 1200 PM Page 28





06_047461 ch03qxp 10406 1200 PM Page 29







06_047461 ch03qxp 10406 1200 PM Page 30









06_047461 ch03qxp 10406 1200 PM Page 31









06_047461 ch03qxp 10406 1200 PM Page 32







06_047461 ch03qxp 10406 1200 PM Page 33






06_047461 ch03qxp 10406 1200 PM Page 34





ldquoPeoplerdquo



06_047461 ch03qxp 10406 1200 PM Page 35











06_047461 ch03qxp 10406 1200 PM Page 36








06_047461 ch03qxp 10406 1200 PM Page 37






06_047461 ch03qxp 10406 1200 PM Page 38









06_047461 ch03qxp 10406 1200 PM Page 39








06_047461 ch03qxp 10406 1200 PM Page 40










06_047461 ch03qxp 10406 1200 PM Page 41








Finance

Customer

Process

Technology

People


06_047461 ch03qxp 10406 1200 PM Page 42









research










06_047461 ch03qxp 10406 1200 PM Page 43







06_047461 ch03qxp 10406 1200 PM Page 44








06_047461 ch03qxp 10406 1200 PM Page 45







06_047461 ch03qxp 10406 1200 PM Page 46






06_047461 ch03qxp 10406 1200 PM Page 47







Suppliers Customers

Specs andExpects

Inputs PDCI Outputs

06_047461 ch03qxp 10406 1200 PM Page 48







Specs andExpects

Gaps


06_047461 ch03qxp 10406 1200 PM Page 49




Specs andExpects

Gaps



06_047461 ch03qxp 10406 1200 PM Page 50





Feed Forward Loop

Specs andExpects

Gaps

Feed Forward Loop




06_047461 ch03qxp 10406 1200 PM Page 51






06_047461 ch03qxp 10406 1200 PM Page 52






1 12 23 34 45 56 6


1 12 23 34 45 56 6


1234


1234


1234


1234




I1

I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1

06_047461 ch03qxp 10406 1200 PM Page 53












06_047461 ch03qxp 10406 1200 PM Page 54









06_047461 ch03qxp 10406 1200 PM Page 55





1 12 23 34 45 56 6


1 12 23 34 45 56 6


1234


1234


1234


1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1


06_047461 ch03qxp 10406 1200 PM Page 56







06_047461 ch03qxp 10406 1200 PM Page 57





1 12 23 34 45 56 6


1234


34


4


1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1







1 12 23 34 45 56 6


1234


1234


1234


1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8



O2 O3O4

O5

O7

O8O1




06_047461 ch03qxp 10406 1200 PM Page 58






06_047461 ch03qxp 10406 1200 PM Page 59







1 12 23 34 45 56 6


1234






1234


Most Important Gap

HumanResources

Operations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1



06_047461 ch03qxp 10406 1200 PM Page 60









06_047461 ch03qxp 10406 1200 PM Page 61








1 12 23 34 45 56 6


1234






1234


Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1



06_047461 ch03qxp 10406 1200 PM Page 62











1234






1234


Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1


06_047461 ch03qxp 10406 1200 PM Page 63



















Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8





O2 O3O4

O5

O7

O8

O1


06_047461 ch03qxp 10406 1200 PM Page 64












06_047461 ch03qxp 10406 1200 PM Page 65
















Most Important Gap

HumanResources


Corp HR

Regulations


I2 I3 I4

I5

I7

I8







O2 O3O4

O5

O7

O8

O1



06_047461 ch03qxp 10406 1200 PM Page 66






06_047461 ch03qxp 10406 1200 PM Page 67






06_047461 ch03qxp 10406 1200 PM Page 68







06_047461 ch03qxp 10406 1200 PM Page 69





Customer

Sales Rep

Financing

Credit

BusinessPractices

Requestfinancing

Customernotified

CallIBM

Credit

Receivequote

Callcustomer

Logrequest

Sendreq tocredit

Enterdata in

computer

Checkcredit

Write results

Modifyrequest

Writeterms

Pricing

Admin

Send toBPO

Put dataon spread

sheet

Write interest

rate

Send toadmin

Typequote

FedexTo rep



06_047461 ch03qxp 10406 1200 PM Page 70






06_047461 ch03qxp 10406 1200 PM Page 71












06_047461 ch03qxp 10406 1200 PM Page 72

73

Plac

eru

ler

by

Lis

ten

bubb

le

Dip

ping

Blo

win

g

Cat

chin

g

Mea

suri

ng

Rec

ordi

ng

Dip

wan

d

Rem

ove

from

bott

le

Insp

ect

for

film

Plac

ene

arbl

ower

Plac

ew

and

bybu

bble

Pres

ent

tom

easu

rer

Rea

d

Wri

te

dow

n

Cal

l out

Cat

ch

Aim

Puck

erB

low

Insp

ect

for

film

Sele

ctbu

bble

EX

HIB

IT3

19B

ubbl

e P

rodu

ctio

n P

roce

ss M

ap

06_047461 ch03qxp 10406 1200 PM Page 73





06_047461 ch03qxp 10406 1200 PM Page 74








Dipping Dipwand

Removefrom bottle

Inspectfor film

Place nearblower

06_047461 ch03qxp 10406 1200 PM Page 75









Aim Pucker Blow

06_047461 ch03qxp 10406 1200 PM Page 76








Place wandby bubble

Present tomeasurer

Catch



Read

Call out



06_047461 ch03qxp 10406 1200 PM Page 77






06_047461 ch03qxp 10406 1200 PM Page 78








06_047461 ch03qxp 10406 1200 PM Page 79






06_047461 ch03qxp 10406 1200 PM Page 80

81

CR

M

Und

er-

wri

ting

Ris

ken

gine

erin

g

Polic

yis

suan

ce

Cla

ims

Targ

etac

coun

tG

athe

rcl

ient

info

Proo

fin

foE

nter

data

Pric

ing

Ana

lyze

risk

s

Ent

erda

taC

reat

epo

licie

sSe

nd t

ocl

ient

Rec

ord

clai

mC

heck

cove

rage

Prep

are

sub

Issu

equ

ote

Bin

dco

vera

ge

Set

rese

rves

Neg

otia

teD

ispo

se

EX

HIB

IT3

26In

sura

nce

Pro

cess

Flo

w

06_047461 ch03qxp 10406 1200 PM Page 81











06_047461 ch03qxp 10406 1200 PM Page 82









06_047461 ch03qxp 10406 1200 PM Page 83









06_047461 ch03qxp 10406 1200 PM Page 84





ShipParts


Definespecs



ShipParts


Definespecs



06_047461 ch03qxp 10406 1200 PM Page 85






06_047461 ch03qxp 10406 1200 PM Page 86






06_047461 ch03qxp 10406 1200 PM Page 87






Operations IT


projectrequest

Prioritizerequest


06_047461 ch03qxp 10406 1200 PM Page 88







Operations IT


projectrequest

Prioritizerequest


06_047461 ch03qxp 10406 1200 PM Page 89







High-Risk Drivers

Medium-Risk Drivers

Low-Risk Drivers

Market Segments


06_047461 ch03qxp 10406 1200 PM Page 90






06_047461 ch03qxp 10406 1200 PM Page 91






06_047461 ch03qxp 10406 1200 PM Page 92





06_047461 ch03qxp 10406 1201 PM Page 93







Candidate forhellip


ProcessExtension

MarketExtension

EnterpriseCreation

Comments


06_047461 ch03qxp 10406 1201 PM Page 94







06_047461 ch03qxp 10406 1201 PM Page 95





06_047461 ch03qxp 10406 1201 PM Page 96












06_047461 ch03qxp 10406 1201 PM Page 97






Candidate forhellip


ProcessExtension

MarketExtension

EnterpriseCreation

Comments











06_047461 ch03qxp 10406 1201 PM Page 98


Product Answers



c)d)


c)d)










06_047461 ch03qxp 10406 1201 PM Page 99





06_047461 ch03qxp 10406 1201 PM Page 100









06_047461 ch03qxp 10406 1201 PM Page 101




c) County newspaper



broader perspective






our market share









06_047461 ch03qxp 10406 1201 PM Page 102















06_047461 ch03qxp 10406 1201 PM Page 103






06_047461 ch03qxp 10406 1201 PM Page 104




325

275

225

$(T

hous

ands

)

175

125


Month


Jan-00


CL=18694


06_047461 ch03qxp 10406 1201 PM Page 105




Tho

usan

ds)

1550

1350

1150

950

750

550

350

150

Jan-

98 Feb

Mar Apr

May Ju

n Jul

Aug Sep

Oct

Nov Dec Fe

bM

ar AprM

ay Jun Ju

lAug Se

pO

ct Feb

Mar Apr

May Ju

n Jul

Aug

LCL=17361

CL=79662

UCL=141962

Sep

Oct

Nov Dec

Jan-

00

Jan-

99

Month


06_047461 ch03qxp 10406 1201 PM Page 106




new businessrdquo







06_047461 ch03qxp 10406 1201 PM Page 107





Tho

usan

ds)

1550

1350

1150

950

750

550

350

150

Jan-

98 Feb

Mar Apr

May Ju

n Jul

Aug Sep

Oct

Nov Dec Fe

bM

ar AprM

ay Jun Ju

lAug Se

pO

ct Feb

Mar Apr

May Ju

n Jul

Aug

LCL=17361

CL=79662

UCL=141962

Sep

Oct

Nov Dec

Jan-

00

Jan-

99

Month


06_047461 ch03qxp 10406 1201 PM Page 108








06_047461 ch03qxp 10406 1201 PM Page 109






Customer Assessment

Key Questions








Brainstorming

System maps

Kano analysis

Kano analysis




06_047461 ch03qxp 10406 1201 PM Page 110








06_047461 ch03qxp 10406 1201 PM Page 111








06_047461 ch03qxp 10406 1201 PM Page 112























Most Important Gap


FAA

Pilot union

Boeing


1

2

3

I2 I3 I4

I5

I7

I8





On-time percentage


O2 O3O4

O5

O7

O8

O1


06_047461 ch03qxp 10406 1201 PM Page 113






06_047461 ch03qxp 10406 1201 PM Page 114





Scale



Must Be

Satisfied

Neutral

Dissatisfied

06_047461 ch03qxp 10406 1201 PM Page 115







06_047461 ch03qxp 10406 1201 PM Page 116




Scale



Must Be

Satisfied

Neutral

Dissatisfied

More isBetter


06_047461 ch03qxp 10406 1201 PM Page 117







06_047461 ch03qxp 10406 1201 PM Page 118





Scale



Must Be

Satisfied

Neutral

Dissatisfied

More isBetter

Delighter


06_047461 ch03qxp 10406 1201 PM Page 119













06_047461 ch03qxp 10406 1201 PM Page 120














06_047461 ch03qxp 10406 1201 PM Page 121







06_047461 ch03qxp 10406 1201 PM Page 122











Key Questions
















06_047461 ch03qxp 10406 1201 PM Page 123





06_047461 ch03qxp 10406 1201 PM Page 124






06_047461 ch03qxp 10406 1201 PM Page 125



SUMMARY



06_047461 ch03qxp 10406 1201 PM Page 126

127

c h a p t e r 4

STRATEGY MAPS



DEFINITION


07_047461 ch04qxp 10406 1201 PM Page 127





07_047461 ch04qxp 10406 1201 PM Page 128



Strategy Maps 129

Learning andGrowth

Process

Customer

Financial















Improve

Security


07_047461 ch04qxp 10406 1201 PM Page 129











07_047461 ch04qxp 10406 1201 PM Page 130





Strategy Maps 131

07_047461 ch04qxp 10406 1201 PM Page 131






CustomerPerspective

ProcessPerspective



07_047461 ch04qxp 10406 1201 PM Page 132





Strategy Maps 133


CustomerPerspective

ProcessPerspective



07_047461 ch04qxp 10406 1201 PM Page 133





CustomerPerspective

ProcessPerspective



07_047461 ch04qxp 10406 1201 PM Page 134




Strategy Maps 135


Increase revenue





Expand productlines







Financial

Customer

Process

Learningand Growth


07_047461 ch04qxp 10406 1201 PM Page 135







07_047461 ch04qxp 10406 1201 PM Page 136











Strategy Maps 137

07_047461 ch04qxp 10406 1201 PM Page 137






07_047461 ch04qxp 10406 1201 PM Page 138



Strategy Maps 139










Services





Learning ampGrowth

Process

Financial

Customer





07_047461 ch04qxp 10406 1201 PM Page 139







07_047461 ch04qxp 10406 1201 PM Page 140





Strategy Maps 141






07_047461 ch04qxp 10406 1201 PM Page 141










07_047461 ch04qxp 10406 1201 PM Page 142








Strategy Maps 143

07_047461 ch04qxp 10406 1201 PM Page 143









07_047461 ch04qxp 10406 1201 PM Page 144






Strategy Maps 145

07_047461 ch04qxp 10406 1201 PM Page 145





























multiple locations


boost sales











07_047461 ch04qxp 10406 1201 PM Page 146






Strategy Maps 147

07_047461 ch04qxp 10406 1201 PM Page 147







07_047461 ch04qxp 10406 1201 PM Page 148





Strategy Maps 149

07_047461 ch04qxp 10406 1201 PM Page 149






07_047461 ch04qxp 10406 1201 PM Page 150







Strategy Maps 151

07_047461 ch04qxp 10406 1201 PM Page 151






07_047461 ch04qxp 10406 1201 PM Page 152






Strategy Maps 153

07_047461 ch04qxp 10406 1201 PM Page 153



Financial

Customer

Process

Learningamp Growth





Reducecosts



Upgradesystems











07_047461 ch04qxp 10406 1201 PM Page 154





Strategy Maps 155

07_047461 ch04qxp 10406 1201 PM Page 155






FinancialMaximize

profitability

Reducecosts

Increaserevenue


07_047461 ch04qxp 10406 1201 PM Page 156








Strategy Maps 157

07_047461 ch04qxp 10406 1201 PM Page 157






FinancialMaximize

profitability

Reducecosts

Increaserevenue

CustomerPenetrate



07_047461 ch04qxp 10406 1201 PM Page 158













Strategy Maps 159

07_047461 ch04qxp 10406 1201 PM Page 159





FinancialMaximize

profitability

Reducecosts

Increaserevenue

CustomerPenetrate






Process


07_047461 ch04qxp 10406 1201 PM Page 160





Strategy Maps 161

07_047461 ch04qxp 10406 1201 PM Page 161



FinancialMaximize

profitability

Reducecosts

Increaserevenue

CustomerPenetrate






Process

Learningamp Growth


Upgradesystems



07_047461 ch04qxp 10406 1201 PM Page 162









Strategy Maps 163

07_047461 ch04qxp 10406 1201 PM Page 163










07_047461 ch04qxp 10406 1201 PM Page 164






SUMMARY


Strategy Maps 165

07_047461 ch04qxp 10406 1201 PM Page 165

166

c h a p t e r 5


INITIATIVES



DEFINITION



08_047461 ch05qxp 10406 1201 PM Page 166





08_047461 ch05qxp 10406 1201 PM Page 167




08_047461 ch05qxp 10406 1201 PM Page 168








08_047461 ch05qxp 10406 1201 PM Page 169







08_047461 ch05qxp 10406 1201 PM Page 170








08_047461 ch05qxp 10406 1201 PM Page 171

172

Cus

tom

erIn

crea

se s

take

hold

erIn

d

busi

ness

taxp

ayer

80

8073

69

74

67

prio

r ye

arsa

tisf

acti

onSt

uden

tfa

mily

80

8085

85

76

74

prio

r ye

ar

Prom

ote

posi

tive

Publ

ic o

utre

ach

3927

Spec

ial c

ause

low

imag

eev

ents

Enh

ance

cus

tom

erSp

eed

of a

nsw

erin

g ph

one

500

m6

10m

CC

tim

eco

mm

unic

atio

n

cal

l mtg

qua

lity

std

s70

66

Sp

ecia

l cau

se lo

w n

ew h

ires

Wri

tten

cor

resp

ond

ence

30 d

ays

75 d

ays

His

togr

am o

n ag

ing

resp

onse

tim

e

sel

f-se

rvic

e co

ntac

ts90

87

C

omm

on c

ause

92

avg

Fina

ncia

lM

aint

ain

fina

ncia

lC

red

it r

atin

gA

AA

AA

AA

AA

SampP

Aaa

Moo

dy

inte

grit

yA

A+

Fit

chM

ater

ial a

udit

find

ings

03

Zer

o re

peat

s

Gen

erat

e re

venu

eG

F-G

Pre

venu

e-6

FY

-15

1FY

TD

-93

SA

F re

venu

e1

4FY

-19

FY

TD

5

Enf

orce

men

t rev

enue

N

A$1

122

MFY

TD

$29

54M

Man

age

bud

get

Bal

ance

d B

udge

tlt

=95

93

FY

TD

figu

re

Man

age

inve

stm

ents

Ret

urn

on in

vest

men

t8

0-7

8

Rol

ling

12 m

onth

figu

re

Proc

ess

Stre

amlin

e ke

ySt

and

ard

ized

test

TA

T10

wks

20 w

ksSp

ring

cyc

le d

own

from

28

proc

esse

sTe

st r

egis

trat

ion

accu

racy

90

55

Per

spec

tive

Stra

tegi

c L

ag M

easu

res

Tar

get

Act

ual

Com

men

tsO

bjec

tive

L

ead

Mea

sure

s

EX

HIB

IT5

1T

reas

ury

Bal

ance

d Sc

orec

ard

08_047461 ch05qxp 10406 1201 PM Page 172

173

Proc

ess

Sale

s ta

x d

elin

quen

cy c

anc

N

A27

733

402

53 n

ew is

sued

(con

tinu

ed)

Dis

tres

sed

loca

l gov

rsquotsN

A

203

new

5 r

emov

ed (D

ec 0

2)A

utho

rity

tran

s pr

og4

84

8

Min

imiz

e ea

rly

out

Ear

ly o

ut m

gmt p

rog

210

210

impa

ct

Opt

imiz

e co

ntra

ctC

ontr

act c

ompl

ianc

e10

092

m

anag

emen

t

Incr

ease

ele

ctro

nic

r

etur

ns fi

led

by

alt m

eans

80

39

CY

TD

41

capa

bilit

ies

e

lect

roni

c d

isbu

rsem

ents

33

28

$56

B p

aid

54

of $

dis

b

ele

ctro

nic

stat

e re

ceip

ts20

18

$5

3B

rcv

d 3

5 o

f $ r

cvd

Lea

rnin

gM

anag

e te

ch

key

IT p

roje

cts

on ti

me

in3

32

3amp

Gro

wth

reso

urce

sbu

dge

t

Dev

elop

pos

itiv

eE

mpl

oyee

sat

isfa

ctio

n7

04

370

em

ploy

ees

surv

eyed

cult

ure

Impr

ove

inte

rnal

Inte

rnal

com

m e

vent

s24

36co

mm

unic

atio

n

Prov

ide

cust

omer

-Tr

aini

ng q

ualit

y9

09

598

att

end

ees

42

resp

onse

sfr

iend

ly H

R s

ervi

ces

Hir

ing

cycl

e ti

me

45 d

ays

52 d

ays

Secu

rity

Impr

ove

secu

rity

Secu

rity

bre

eche

s0

0So

ftw

are

arri

ving

in Ja

n

DR

pla

ns te

sted

ap

p10

10

0

BC

pla

ns te

sted

ap

p10

10

0

08_047461 ch05qxp 10406 1201 PM Page 173






08_047461 ch05qxp 10406 1201 PM Page 174







08_047461 ch05qxp 10406 1201 PM Page 175





08_047461 ch05qxp 10406 1201 PM Page 176









08_047461 ch05qxp 10406 1201 PM Page 177






08_047461 ch05qxp 10406 1201 PM Page 178








08_047461 ch05qxp 10406 1201 PM Page 179









08_047461 ch05qxp 10406 1201 PM Page 180








08_047461 ch05qxp 10406 1201 PM Page 181

182

Stra

tegi

c M

easu

res

Type

Qtr

Qtr

YT

DY

TD

Ow

ner

Obj

ecti

veT

arge

tA

ctua

lT

arge

tA

ctua

l

Fin

anci

al

Mai

ntai

n st

rong

Net

pro

fitL

ag$1

00K

$53K

$300

K$3

19PK

$ po

siti

on

Incr

ease

rev

enue

Serv

ice

line

reve

nue

Lag

$200

K$1

57k

$600

K$6

57PK

Publ

ic s

emin

ar r

even

ueL

ag$3

00K

$308

k$9

00K

$980

KPK

In-h

ouse

rev

enue

Lag

$200

K$1

98k

$600

K$5

00k

PK

Cu

stom

er

Stre

ngth

en e

xist

ing

R

epea

t bus

ines

s re

venu

eL

ag$5

00K

$479

K$1

5M

$16

MB

Bcu

stom

er r

elat

ions

hips

m

ulti-

prod

uct c

usto

mer

sL

ag40

37

-4

037

B

BC

ross

-sel

l cus

tom

er v

isit

sL

ead

62

187

MD

Att

ract

new

clie

nts

New

clie

nt r

even

ueL

ag$2

00k

$184

$600

k$5

37PK

Art

icle

s pu

blis

hed

Lea

d2

-16

5SW

Man

age

univ

ersi

ty

ke

y m

arke

ts u

nder

serv

ed

Lea

d0

30

3PK

netw

ork

Lea

ds

gene

rate

d v

iase

min

ar fo

llow

up

Lea

d8

1024

22PK

Est

ablis

h O

rion

bra

ndPo

st-c

ontr

act c

lient

sat

isfa

ctio

nL

ead

95

99

95

99

MD

EX

HIB

IT5

2O

DG

Bal

ance

d Sc

orec

ard

08_047461 ch05qxp 10406 1201 PM Page 182

183

Est

ablis

h O

rion

bra

nd(c

onti

nued

)C

lient

-ini

tiat

ed p

roce

ss

Lea

d3

09

1SW

imps

Pro

cess

Impr

ove

sale

s pr

oces

ses

Exe

cuti

ve c

onta

cts

Lea

d6

818

18M

DPr

opos

al h

it r

atio

Lag

60

50

60

30

MD

Exp

and

pro

duc

t lin

es

new

pro

duc

ts

Lea

d3

49

6B

Bin

trod

uced

Dev

elop

alt

erna

tive

pu

blic

sem

inar

s of

fere

dL

ead

3028

9075

PKm

arke

ting

cha

nnel

sPu

blic

sem

inar

s w

ith

gt18

Lag

2512

7561

PKpa

rtic

ipan

tsM

arke

ting

cos

t as

Lag

25

28

25

26

PK

Stan

dar

diz

e se

rvic

e

acc

epta

ble

aud

its

Lea

d10

075

10

088

PK

del

iver

y

Lea

rnin

g amp

Gro

wth

Opt

imiz

e co

nsul

ting

c

onsu

ltan

ts c

erti

fied

Lea

d10

010

010

010

0M

Dst

aff q

ualit

ySe

min

ars

atte

nded

for

Lea

d10

230

16M

Dco

ntin

uing

ed

ucat

ion

Impr

ove

int

Dat

abas

e up

dat

ed a

nd

Lea

dye

sye

sN

A

N

ASW

com

mun

icat

ion

acce

ssib

le

08_047461 ch05qxp 10406 1201 PM Page 183







08_047461 ch05qxp 10406 1201 PM Page 184








08_047461 ch05qxp 10406 1201 PM Page 185

186

Fina

ncia

lM

axim

ize

profi

tabi

lity

Incr

ease

rev

enue

Red

uce

cost

s

Cus

tom

erB

uild

str

ong

cust

rel

atio

nshi

ps

Pene

trat

e ne

w m

arke

ts

Mai

ntai

n to

p re

puta

tion

Proc

ess

Incr

ease

on-

tim

e d

eliv

ery

Acc

eler

ate

prod

uct

dev

elop

men

t tim

e

Opt

imiz

e su

pply

cha

in

Lea

rnin

gD

evel

op h

igh-

qual

ity

staf

famp

Gro

wth

Impr

ove

inte

rnal

com

m

Upg

rad

e sy

stem

s

Per

spec

tive

Stra

tegi

c L

ag M

easu

res

Tar

get

Act

ual

Com

men

tsO

bjec

tive

Lea

d M

easu

res

EX

HIB

IT5

3D

emo

Bal

ance

d Sc

orec

ard

Per

spec

tive

s an

d O

bjec

tive

s

08_047461 ch05qxp 10406 1201 PM Page 186


Select an objective











no

no

yes

yes


all objectives




08_047461 ch05qxp 10406 1201 PM Page 187






08_047461 ch05qxp 10406 1201 PM Page 188






Newmarketsales $

Tradeshows

attended

Qualityprospect

visits

Newcustomer

satisfaction


Totalrevenue

Canadiansales

dollars



of newcustomers

of newproducts

Goldmarkets

identified


08_047461 ch05qxp 10406 1201 PM Page 189








08_047461 ch05qxp 10406 1201 PM Page 190





Newmarketsales $

Tradeshows

attended

Qualityprospect

visits

Newcustomer

satisfaction


Totalrevenue

Canadiansales

dollars


Lag Measures


of newcustomers

of newproducts

of Goldmarkets

identified



08_047461 ch05qxp 10406 1201 PM Page 191







08_047461 ch05qxp 10406 1201 PM Page 192





New marketsales $




entered


Totalrevenue

Canadiansales $

Lag Measures



Trade showsattended


Lead Measures


08_047461 ch05qxp 10406 1201 PM Page 193










08_047461 ch05qxp 10406 1201 PM Page 194








08_047461 ch05qxp 10406 1201 PM Page 195




Newmarketsales $

Tradeshows

attended

Qualityprospect

visits

Newcustomer

satisfaction


Totalrevenue

Canadiansales

dollars


Lag Measures

of newcustomers

of newproducts

of Goldmarkets

identified

Lead Measures


08_047461 ch05qxp 10406 1201 PM Page 196




admin expense



















08_047461 ch05qxp 10406 1201 PM Page 197













08_047461 ch05qxp 10406 1201 PM Page 198








08_047461 ch05qxp 10406 1201 PM Page 199





















08_047461 ch05qxp 10406 1201 PM Page 200






Example


500300 60

Quarter






24101586658

YTD



08_047461 ch05qxp 10406 1201 PM Page 201












08_047461 ch05qxp 10406 1201 PM Page 202











Select a measure

Modify as needed





08_047461 ch05qxp 10406 1201 PM Page 203






08_047461 ch05qxp 10406 1201 PM Page 204








08_047461 ch05qxp 10406 1201 PM Page 205








08_047461 ch05qxp 10406 1201 PM Page 206









08_047461 ch05qxp 10406 1201 PM Page 207








08_047461 ch05qxp 10406 1201 PM Page 208







08_047461 ch05qxp 10406 1201 PM Page 209









08_047461 ch05qxp 10406 1201 PM Page 210








08_047461 ch05qxp 10406 1201 PM Page 211






08_047461 ch05qxp 10406 1201 PM Page 212











08_047461 ch05qxp 10406 1201 PM Page 213






get around to it)



08_047461 ch05qxp 10406 1201 PM Page 214




Financial



bull Reduce costs

Customer




Processes




Learning and Growth





08_047461 ch05qxp 10406 1201 PM Page 215








bull Gainsharing





08_047461 ch05qxp 10406 1201 PM Page 216






08_047461 ch05qxp 10406 1201 PM Page 217



08_047461 ch05qxp 10406 1201 PM Page 218

219

c h a p t e r 6

CONCLUSIONS







09_047461 ch06qxp 10406 1202 PM Page 219





09_047461 ch06qxp 10406 1202 PM Page 220

221

INDEX












181ndash185


175 180 181 184ndash186 197199ndash201



210ndash213use of 217 218 220








































222 Index










13ndash17 19








IBM 9 98IBM Credit















Index 223



179 180 185 190 199 210ndash213216ndash218























131ndash138Nypro 91












47 48




185ndash188

224 Index




































map 128

Index 225

































226 Index


















Volvo 101







Yugo 101

Index 227



CONTENTS

PREFACE


1970

1985

MID-2000S









VISION AND MISSION







SUMMARY


DEFINITION



SUMMARY


DEFINITION





INDEX

business process management and the balanced scorecard

Documents