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DAVE NORTON IN SEPTEMBER – MAKING STRATEGY A CORE STATE OF THE ART COMPETENCE

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create value                                                                  Dave Norton says,  

“Behind every story of shareholder value, there is another story of value creation. That is the real story of strategy execution.”

Having had the privilege today to proof read the delegate materials for the upcoming Dave Norton Progress Conference on the 11th September, I cannot resist offering a little sneak preview of the 100 plus slides he has prepared for his South African audience.

In essence, he says, strategy must be a core competence and his presentation shows you precisely what you need to accomplish to make it a core state of the art competence. You can be assured of rich content with case studies and real life applications relevant to both the Private and Public sectors. His content flows seamlessly, offering delegates a deliberate journey through which they can contextualise their strategy execution efforts. And behind every success he shares with you he also tells the story of how the value was created.

THE STRATEGY MANAGEMENT VACUUM

First and foremost he will show how management systems have STILL not changed to keep up with the way the world has changed.  This is what he calls a Strategy Management Vacuum. He goes on to reveal his research into why strategies continue to fail and offer solutions to overcome this sadly, prevalent reality.

MAKING INTANGIBLE TANGIBLE

I was fascinated by his take on intangible assets and how describing your strategy begins by understanding the value the intangibles offer. He cites Apple, General Electric, IBM and others and will illustrate how Tom Stewart’s thinking in respect of how knowledge that exists in an organisation creates differential advantage. Dave remarks, “A good strategy focusses on the processes and people that have greatest impact on customer satisfaction.”

CLOSING THE STRATEGIC PERFORMANCE GAP WITH CAUSE AND EFFECT LOGIC

Dave has prepared a prolific set of strategy maps, scorecards and themes that have been applied within leading organisations. He asserts that your strategic theme is critical to create change and value.

“Intangible assets are bundled”, he says. “One initiative is not enough to execute strategy. You require a portfolio of several initiatives that are interdependent and cannot be treated on a stand- alone basis.” And again, he provides real management tools to show you how to include specific ways to define your strategic architecture, create robust strategy maps and tailor relevant strategy themes. In particular he provides delegates with specific Balanced Scorecards to show how they consistently fill the strategy management vacuum

LEADERSHIP IMPERATIVES FOR EFFECTIVE STRATEGY EXECUTION

Dave also says, “It is not a simple process for a CEO to mobilize transformation.” But his content goes on to provide tried and tested leadership essentials for certain success. He shows what is required in terms of left and right brain thinking to build your effective strategy management systems and why leadership issues are most often the dominant barrier to effective strategy execution. Just one barrier cited is how politics, in 89% of cases, is the major factor that prohibits the successful execution of strategy. Enter Dave’s right brain change management techniques and priorities, with ways to break down silos, get politics out of the way and cascade the strategy and scorecards to all key executives, business units and departments with appropriate accountability.

What follows on from there are the left brain change management tools that he has observed and that have been shown to achieve desired results.

MAKING STRATEGY EVERYONE’S JOB

Dave illustrates how Hilton Hotels did just this by linking their Balanced Scorecard to education, personal goals, incentive compensation and communication. Looking forward to how he will unpack this for us on the day.

SETTING TARGETS & FUNDING THE STRATEGY

Be prepared for prolific content and techniques to define your measures and targets and determine adequate funding.

SUCCESSFUL HUMAN CAPITAL DEVELOPMENT ATTRIBUTES

An annual survey of CEO’s Presidents and Chairman showed that Human Capital Development is the most important issue facing senior management. “People driven strategies counter slow markets and economic conditions. The Balanced Scorecard Hall of Fame shows that successful strategy execution begins with Human Capital Development”, he says. And then goes on to share the results of Public & Private sector results whilst showing you which are the key Human Capital Value Multipliers. He will also show us how to develop competency profiles for each essential strategic job family and in particular how to determine the gaps between individual and group level.

THE CHERRY ON THE TOP: BUILDING YOUR EFFECTIVE OFFICE OF STRATEGY MANAGEMENT: THE EVOLUTIONARY PROCESS

As he insists that strategy is a core competence and that managing strategy is a whole new ball game very different to managing functions, he will show you why new organisation approaches are needed to facilitate cross-functional alignment. He defines the responsibilities of the office of strategy management and suggests the best practices in terms of conducting your meetings and reviews to keep your strategy on course including frequency and structure.

This blog barely scratches the surface or even does justice to what Dave Norton has in store for delegates on the 11th September, but hopefully provides you with some ideas to provoke and challenge your thinking in respect of your strategy execution efforts.

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Dr David Norton is the co-creator of the Balanced Scorecard and leading global practitioner in applying the Balanced Scorecard in both the Private and Public Sector. Together with Professor Robert Kaplan, he has been acclaimed by Harvard Business Review for his significant contribution to the management profession in the past 75 years. More recently Thinkers 50 have ranked them in their Hall of Fame alongside Tom Peters, Kenichi Ohmae, Warren Bennis, Howard Gardner, Henry Mintzberg, Charles Handy, Philip Kotler and Ikujiro Nonaka for their mammoth contribution to business management and leadership.

On the 11th September 2014 Dr Norton will present a full day seminar in Johannesburg on EXECUTING STRATEGY IN A NEW ECONOMY – Balanced Scorecard Essentials.

WHY STRATEGIES FAIL? DEVISING A STRATEGY EXECUTION SYSTEM FOR CERTAIN SUCCESS

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“If you can’t measure it, you can’t manage it. If you can’t manage it, you can’t improve it.”
Kaplan and Norton (and many others)

According to Professor Robert Kaplan and Dr Dave Norton, companies that effectively execute their strategy evidence an impressive 50-150% increase in value. Those that don’t continue to battle the odds of success.

The People Barrier

The People Barrier

The desktop research around strategy execution speaks volumes:
• Fortune Magazine cites that “….less than 10% of strategies effectively formulated are effectively executed”
• Harvard Business Review states that “…the prize for closing the strategy- performance gap is huge : increasing performance by at least 50% for most organisations”
• Bossidy & Charan in their book “Execution” cite that “…in the majority of cases – 70% – of the problem isn’t bad strategy [thinking] but bad execution [action]”
• Chris Zook in his book “Profit from the Core” states that “….more than 2/3 of companies had targets that exceeded 9% real growth; yet less than 1 company in 10 achieved this level of profitable growth.”
What desktop research is showing us is that companies that fail to forecast and target success, will generally miss the target. In plain English, the same adage holds true “what gets measured gets done”. And yet despite innumerate measures, companies STILL fail to hit their targets and achieve strategic goals and objectives – and the question “why?” has to be hot on the tail of this statement.

REAL RESEARCH TO UNDERSTAND WHY?

Why is successful strategy execution so difficult to achieve?

Kaplan and Norton have dedicated a lifetime of study to understanding the field of strategy and execution. Why do some companies succeed while others fail even when both have seemingly impressive leadership teams? Is it the thinking, or is it the action? Is it really around metrics or is strategy driven by culture and behaviour change?
The Balanced Scorecard didn’t just ‘appear’ in the halls of Harvard. It evolved as one of the best ways to combat the Four Barriers to Strategy Execution. Kaplan and Norton’s research has identified four key themes, or barriers, that appear to interfere with successful strategy implemenation. Their research also supports that a startling 80-90% of companies FAIL when it comes to strategy execution. Here’s what they found:
1. The People Barrier: only 25 % of managers have incentives directly linked to strategy implementation.
2. The Vision Barrier: only 5% of the work-force actually understand the strategy the organisation intends to execute.
3. The Management Barrier: a staggering 85 % of executive teams spend less than an hour per month discussing strategy.
4. The Resource Barrier: alarmingly more than 60% of organisations fail to link their strategy to a live budget.

The ongoing frustration of wanting to achieve something great often outstrips the company’s ability to implement their thinking. The results can be devastating and leaders can quickly lose credibility having promised and communicated one thing, yet fail to implement on the other hand. While the perception of leadership integrity remains challenged, its important to make clear that often the thinking is in tact, but it’s the execution that is poor.

WHAT TO DO?

The temptation for any business is to try to ‘nail’ all four barriers in one go. That alone may be a strategy, but will probably result in continuing poor execution. Perhaps a better strategy is to target one barrier at a time, and over time, with the goal of eliminating them totally. As each barrier becomes a strategy in and of itself, over time, each barrier will be diluted if not eliminated completely. And, when that happens, the strategic thinking has a chance to surface over the traditional mindsets and restrictions that inhibit success.

THE 10-20% EXECEPTION VS THE 80-90% NORM

Those organisations that enjoy an impressive 50 – 150% increase in value have a formal process for strategy execution. Through this lens they have commonly identified what we can today call the “conventional wisdom” of stratgy execution:
1.FINANCIAL: They recognise that financial indicators are lag indicators and only measure the tangible outcomes of the strategy.
2.CUSTOMER: They revere the customer value proposition and define them as their source of value.
3.PROCESSES: They acknowledge that strategic processes create value for customers and shareholders.
4.LEARNING & GROWTH: They know that aligned intangible assets drive improvement in the strategic process.

ENTER, KAPLAN & NORTON’S 6 STAGE CLOSED LOOP MANAGEMENT SYSTEM FOR SUCCESSFUL EXECUTION

This is how Kaplan and Norton deliberately ensure you overcome the Four Barriers to successful strategy execution.
1. DEVELOP THE STRATEGY: Formulate your mission, vision & values – all the fundamentals. Keep in mind Google’s mission – “To organise the world’s information and make it universally accessible and useful.” And that of Bill Gates: “To put a PC on every person’s desk.’

2. TRANSLATE THE STRATEGY: This means having to create strategy maps and themes with measures and targets, assigning portfolios and providing funding to ensure that you overcome the Vision Barrier.

3. ALIGN THE ORGANISATION: This includes all business units, support units and employees. Ensure you overcome the People Barrier through initiatives that support strategy execution. Never under-estimate the investment required and the power of appropriate change management and communication in strategy execution.

4. PLAN THE OPERATIONS – Devise resource and capacity plans as well as key process improvements that will be required to make sure the Resource Barrier does not hinder the success of your strategy.

BOTTOM LINE : EXECUTE, MONITOR & LEARN

Make sure you properly review your strategy and operations to overcome the management barrier. TEST and review the profitability, devise hypotheses in terms of cause and effect and be alert to emerging strategies, new opportunities and risks. ADAPT where necessary.
This strategy execution system coupled with leaders who affirm their fundamental goals and purpose with quantifiable outcomes, Norton and Kaplan have continuously shown how much value you can derive by implementing strategy maps and balanced scorecards. This is why they have been acknowledged by Harvard Business Review for creating one of the most significant management tools in the past 75 years.
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Dr David Norton is the co-creator of the Balanced Scorecard and leading global practitioner in applying the Balanced Scorecard in both the Private and Public Sector. Together with Professor Robert Kaplan, he has been acclaimed by Harvard Business Review for his significant contribution to the management profession in the past 75 years. More recently Thinkers 50 have ranked them in their Hall of Fame alongside Tom Peters, Kenichi Ohmae, Warren Bennis, Howard Gardner, Henry Mintzberg, Charles Handy, Philip Kotler and Ikujiro Nonaka for their mammoth contribution to business management and leadership.

On the 11th September 2014 Dr Norton will present a full day seminar in Johannesburg on EXECUTING STRATEGY IN A NEW ECONOMY – Balanced Scorecard Essentials.

CUSTOMER CENTRIC METRICS RESCUE RETAILER FROM STRATEGIC ECCENTRICS:

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CUSTOMERS TAKE CARE OF THE PROFITS – HOW INTIMATE ARE YOU WITH YOUR CUSTOMERS?

Tom Peters has long argued the case for Customer Centricity. At the 2011 Progress Conference he said; “The magic formula that business has revealed is to treat their customers like guests and their employees like people.” So what is his 2013 take on strategy and leadership? Think of this as “Tom Peter’s Balanced Scorecard”.

Leaders “Do” People

You take care of the people.

The people take care of the service.

The service takes care of the customer.

The customer takes care of the profit.

The profit takes care of the reinvestment.

The reinvestment takes care of the future.

Now, hold that thought.

In The Execution Premium, Dr Dave Norton and Professor Robert Kaplan evidence the magic of Tom’s winning formula. The book cites a case study of how a large retailer, Store 24, turned around their failed strategy by applying what their CEO Bob Gordon, called their Customer Intimacy programme as a key scorecard metric.

The Store 24 strategy, which was called “Ban Boredom”, seemed like a great idea and a sure fire way to differentiate them from their competitors. The original “Ban Boredom” plan was an exciting strategy providing an entertaining atmosphere with fun promotions and frequent themes. This gave store managers permission and discretion to find ways to execute on the strategy. They dressed up in costumes consistent with themes and holidays and activated imaginative promotions with great displays.

NOT EVERYONE WANTS “DISNEY” MAGICAL MOMENTS – CUSTOMER CENTRIC METRICS SAVED THE DAY

Unfortunately this “Disney” approach had an adverse effect. It seemed that while executed with good intentions, the result was failing on the customer intimacy metric.

It was most fortunate that this strategy was predicated on their “customer intimacy” programme. And by getting “up close and personal” with their customers, they were able to quickly abandon the “Ban Boredom” Programme after two years and replace it with a new strategy.

What their “customer intimacy” programme showed was that the customers valued their traditional strengths of good product selection, quick service and a clean environment. They did not value, AT ALL, the experience they were trying to create. Customers were unhappy with the inattentive store employees dressed in costumes and distracted by the ever-changing displays in store.

METRICS ARE KING

You get what you measure! It’s an old adage and one that could not have been truer for Store 24. Using the Balanced Scorecard approach, the retailer was able to assess customer satisfaction quickly. Not only were they able to change direction quickly, they were also able to identify interesting elements for a comeback strategy.

COMEBACK STRATEGY – “CAUSE YOU JUST CAN’T WAIT”

Their comeback strategy, called “Cause, you just can’t wait”, was wholly based on customer feedback. They realised that flawless execution was essential and further research showed the negative relationship between low skilled employees and operating profit. They were able to show consistently that strategy implementation was only effective when done at stores with high skill crews. They realised, too, that the ability for them to implement their come-back strategy relied heavily on employee satisfaction.

BACK TO TOM!

Which brings us right back to Tom Peters, “Treat your customers like guests and your employees like people. You take care of the people. The people take care of the service. The service takes care of the customer. The customer takes care of the profit.” Most readers will acknowledge that this is very much the Disney leadership model – the difference, however, is that it doesn’t mean that every customer wants a “Disney moment”. What does ring true is that if you get the people right, the service will follow. Get that right, and the profits are a natural result.

Having acknowledged the metrics, Store 24 brought back their traditional strengths as a key driver of their customer value proposition and replaced the “fun, entertaining experience” strategy with speed and efficiency as their new value proposition.

BALANCED SCORECARD WINS THE DAY

Had Store 24 not had a Balanced Scorecard in place, they may well have pursued their quirky “Ban Boredom” idea for many more years, with inexperienced and dissatisfied store crews having “fun” at the expense of their customer and profits. Scorecard metrics not only determine how organisations measure up on people, products, processes and resultant profits; they also provide a direct link to customer satisfaction.

Dave Norton urges companies to use an “employee-customer-profit value chain model” as their main management system.

Are you measuring the right things? Do you scrutinise the “employee-customer-profit value” cause and effect relationships? If you did, what might that value chain reveal and offer you in terms of a new strategic opportunity with a high execution premium?

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Dr David Norton is the co-creator of the Balanced Scorecard and leading global practitioner in applying the Balanced Scorecard in both the Private and Public Sector. Together with Professor Robert Kaplan, he has been acclaimed by Harvard Business Review for his significant contribution to the management profession in the past 75 years. More recently Thinkers 50 have ranked them in their Hall of Fame alongside Tom Peters, Kenichi Ohmae, Warren Bennis, Howard Gardner, Henry Mintzberg, Charles Handy, Philip Kotler and Ikujiro Nonaka for their mammoth contribution to business management and leadership.

On the 11th September 2014 Dr Norton will present a full day seminar in Johannesburg on EXECUTING STRATEGY IN A NEW ECONOMY – Balanced Scorecard Essentials.

STRATEGIC EXECUTION “SUCC-ESSentials”

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CREATING YOUR UNIQUE STRATEGY AND EVEN MORE DISTINCTIVE SCORECARD TO ACHIEVE UNPRECEDENTED SUCCESS.  

Today Strategy is EVERYBODY’S EVERYDAY job

Inside OR Outside Strategic Thinking

What do the world’s most acclaimed thought leaders have to say about strategy execution and why so many strategies fail to achieve their desired results? Professor Michael Porter, Dr Gary Hamel, Michael Hammer, Professor Robert Kaplan, The late CK Prahalad, Dave Ulrich, Ram Charan, Dr Dave Norton and Tom Peters’ thinking on Strategy Execution.

Tom Peters offers his 2 golden rules to guide your strategy – Rule # 1:  You can’t beat Walmart on Price. Rule # 2: You can’t beat China on cost. In essence he says, “You can’t be remarkable by following someone else who is remarkable.”

Inside OR Outside Strategic Thinking

Michael Porter is globally acclaimed for his strategic insights and in particular his  5 Competitive Forces that Shape Strategy. This model calibrates the attractiveness of an industry and benchmarks your outcome against that of your competitors to shape your new strategy. This is external analysis that on its own, fails to consider the internal factors, processes and people needed to execute and achieve your desired success. This does not imply that Michael Porter is a non-believer in internal strategic triggers as he also notes, “Operational effectiveness and strategy are both essential to superior performance… but they work in different ways.”

Dr Gary Hamel argues that some of the best strategies come from employees within their organisations. This inside-out strategy is based on the premise that they are close to technologies, processes and customers. The late CK Prahalad studied and believed in co-creating unique value with your customers; an outside- in approach. Professor Dave Ulrich is obsessed with designing strategy from the Outside-in with customers defining your future HR strategy. Michael Hammer’s business process re-engineering has been applied by many organisations to improve internal processes that deliver superior performance.

P’s & Ham 

In this instance, Peters, Prahalad & Porter’s insights offer you an external approach to shape strategy while Gary Hamel & Michael Hammer’s insights recognise the significance of internal processes. That said, they all acknowledge that these management interventions and ideas cannot stand alone. Michael Hammer has long been acclaimed for his innovative approach to improving internal capabilities and yet he concurs, “High performance operating systems are necessary but not sufficient for enterprise success.”

Today Strategy is EVERYBODY’S EVERYDAY Job

Ram Charan says that in the majority of cases (70%) the real problem isn’t bad strategy – strategies most often fail because they are not executed well.

With this wealth of wisdom and thought leadership, why are companies still failing to execute strategy?

Inside AND Outside Strategic Execution

Professor Robert Kaplan and Dr Dave Norton say that while there is a plethora of great strategic implementation tools out there, companies fail to integrate external and internal triggers that measure the cause and effect hypotheses in respect of the 4 key drivers of value in their business. A successful scorecard will show you how improvement in one area may be achieved at the expense of another. It breaks down silos and has a key shared understanding among all employees.

You can’t use a rugby scorecard for a cricket match |The “what to measure” dilemma

Traditionally people have tracked their performance against established standards and then taken corrective action. Exclusive reliance on financial measures as a management system was causing businesses to do the wrong things. These traditional measures offered lag indicators as they only reported on outcomes. Your scorecard should provide you with lead indicators – drivers of future financial performance. In a recent interview Norton confirmed that companies still rely too heavily on the quarterly report and use this as the life-cycle in their organisations.

A good balanced scorecard should tell your visionary strategy story

Norton and Kaplan confirm that companies also fail to execute their strategy when they fail to create a unique scorecard that is discernible and relevant to their business. Your strategy should be distinctive to your “do-well” existing and future capabilities. On Kaplan’s visit to South Africa in 2012, he was asked why companies, who widely publicise and communicate their scorecards, so liberally, do not fall prey to prying predatory competitors.  He said, that in all of his years observing Balanced Scorecard interventions, he has failed to see competitors achieve success by simply adopting another company’s scorecard. Your scorecard becomes your organisations’ unique DNA, it captures the hearts and minds of the people who co-create it. Nicola Tyler, the CEO of Business Results Group and sought after strategic facilitator, has long argued that the closer a person is to the origination of an idea the more likely they are to act on it.

And if your strategy and your scorecard are not unique and distinctive, remember Tom Peter’s earlier words, “You cannot be remarkable by following someone else who is remarkable.”

July 2014

In 2014, BRG & GIBS will present Dave Norton – Live and in Person: Executing Strategy: Balanced Scorecard Essentials. The 2014 programme includes the latest findings and experiences in strategy, measurement, leadership, human capital and cross functional priorities and solutions with tried and tested Balanced Scorecard essentials. In a recent interview Dave Norton highlighted that although he is comforted and assured of the effectiveness of the Balanced Scorecard by the 100 plus companies in The Balanced Scorecard Hall of Fame who have evidenced success using the Balanced Scorecard correctly and in its entirety; there are still 100’s of companies out there just doing it wrong.”

Dr Dave Norton has most recently been honoured by Thinkers 50 in their Hall of Fame sharing this acclaim with Tom Peters, Warren Bennis, Howard Gardner, Charles Handy, Philip Kotler, Henry Mintzberg, Kenichi Omae, Ikujiro Nonaka and his colleague Professor Kaplan, for their mammoth contribution to business management and leadership. Harvard Business Review recognised the Balanced Scorecard as one of the most influential management ideas in the past 75 years.

Public Sector Strategy Execution Essentials

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Applying the Balanced Scorecard to deliver value for a “public sector version” of “shareholder value”.   

Public Sector

Radical Transformation

RADICAL TRANSFORMATION  

In Kaplan and Norton’s book they discuss triggers of a transformational strategy. This is what Kaplan and Norton say about transformational strategy, in their latest book The Execution Premium. “The trigger of a transformational strategy can be negative, such as a burning platform of a failed strategy or the appointment of new leaders.  New leaders are frequently summoned to deal with burning platforms, but leadership changes have become the norm in all organisations, including the public sector, where new leaders are appointed after elections.”

So what now for the South African public sector after the 5th democratic election? In President Zuma’s inauguration speech he has promised radical transformation. This is what he said. “we will move into industrialisation and strengthening the role of the state of the economy….the government would concentrate on better execution of land restitution and job employment, especially for the youth… to achieve this the performance of the state has to improve.. we have to eradicate corruption and inefficiencies in the public service…. And we are determined to succeed.”

This is what Dr Norton says

The change of administration is an ideal time to introduce a Balanced Scorecard (BSC). The new leadership has a new vision and new strategies.  However, research shows that directions are not enough to create results.  90% of organizations fail to execute their strategies.  The issue for a new administration is not only a new strategy.  It’s about executing that new strategy!

The BSC requires an organization to translate that strategy into a set of related objectives, measures, targets and initiatives.  The “strategy map” can then be cascaded to all departments and all levels of the organization.  It can be communicated to employees and citizens and can be used as a basis for budgeting and human capital development.

The change of administration is the best of times.  Citizens are excited about the new directions but are cynical about the likelihood for success.  The BSC provides a way to “put your money where your vision is by creating a Strategy Focused Organization that brings together the energies of the citizens on a set of shared objectives, measures and results?

THE BRAZILIAN CNI STRATEGIC VISION AND PLAN TO REVERSE DECADES OF POOR PERFORMANCE

What can we learn from Kaplan and Nortons’ Strategy Execution Model and Balanced Scorecard used by the Brazilian Confederation of National Industries to achieve their bold economic plans for growth.

The Confederation of Local Industries (CNI) is an association of private sector organisations seeking to improve the competitiveness of Brazilian Industry. A member of their board suggested that they use the Balanced Scorecard to push an agenda for growth. They wanted to reverse the continued poor performance of the Brazilian economy over the past decades.

What transpired was one of the most innovative and complex applications of theme-based strategy maps. CNI recognised that implementing the national strategy would require the co-operation of a broader audience. They quickly realised they would need to change their structure to deliver on the strategy map objective to build stronger coalitions with various stakeholders such as government ministers and entrepreneurs. What they also acknowledged was that their strategy map goals were beyond their own control, but were determined to do their best. Their assertion is that the strategy map process will certainly increase the probability of implementation with better social and economic outcomes.

ADDRESSING AN UNFAVOURABLE CLIMATE FOR DOING BUSINESS IN BRAZIL

From the outset CNI acknowledged that a key to generate sustained economic growth was to address the climate which was unfavourable to investments, discouraged business persons and created obstacles for generating jobs to finance social expenses and services for society. As recently as last week it is still reported that the Brazilian government continues to make it difficult for businesses to operate within the onerous constraints.

CNI’S VISION FOR A PUBLIC SECTOR VERSION OF “SHAREHOLDER VALUE”.

This was about 5 tangible results or high level objectives for the public sector version of shareholder value.

  1. Economic growth reaching annual levels of 5,5% by 2010 and 7 % by 2015.
  2. More jobs and income for the citizens.
  3. An increase in the quality of life.
  4. A decrease in social and regional inequalities.
  5. Expansion of businesses that generate sustainable value.

How did they measure up….In 2010, the financial world fell in love with Brazil with 7,5% increase in output that year. Tens of millions of people were entering the middle class and in 2013, they raked in $ 65 billion US in direct foreign investment, 4th highest in the world, according to the United Nations Conference on Trade & Development. But behind this all was what CNI largely anticipated and that was the bureaucratic headache of doing business in Brazil, something they call custo Brazil  – a combination of the longer time and higher costs that come in doing business there. This is still a largely prevailing problem inhibiting growth. Despite all this foreign investors are seeing the value of doing business in Brazil and recognise they have to be there.

MEASURING KEY BUSINESS OUTCOMES TO ACHIEVE DESIRED RESULTS – PRIVATE SECTOR CONTRIBUTION

With their belief that the private sector was the key to sustained economic growth and for Brazil to achieve the desired results, their strategy map indicated a clear market positioning for Brazilian companies, measured against several business outcomes.

  1. Competitive and quality products.
  2. Innovative products and services.
  3. Products and services with higher aggregate value.
  4. Recognition of Brazilian brands.
  5. Accelerated growth of industrial output.
  6. Increased participation by Brazil growth in trade.

CNI DEFINED THE 5 DRIVERS TO ACHIEVE THEIR STRATEGY

  1. Expansion of the industrial base.
  2. International insertion.
  3. Management & productivity.
  4. Innovation,
  5. Social & Environmental responsibility.

CNI ACNOWLEDGED THE SET OF ENABLERS TO LEVERAGE ECONOMIC GROWTH

  1. Infrastructure
  2. Resource availability
  3. Entrepreneurial leadership
  4. Institutional & regulatory environment
  5. Education & health

NOW, THIS IS WHERE THE BALANCE COMES IN…

According to Dave Norton, this overall architecture by itself was not enough to achieve execution. What was required was another level of detail. This was a set of strategic objectives for each of their themes, in particular, a measure to see the cause and effect relations between them. This logic clearly defines the set of activities and their interrelationships required to execute the theme.

INNOVATION THEME – CAUSE & EFFECT CASE IN POINT

By example, The CNI Innovation theme was designed to create country- level results including, economic growth, more jobs and income and expansion of businesses to generate value with products and services with a higher aggregate value. These outcomes also need to be linked to the enablers including innovation programs and learning & development enablers.

This succinct description of their Economic Development Strategy enabled the leaders for the first time, to clearly communicate their desired direction for the country and the specific requirements to achieve results from their strategy execution process.

SOURCE | The Execution Premium – Robert S Kaplan and David P Norton 2008

In 2014, BRG & GIBS will present Dave Norton – Live and in Person: Executing Strategy: Balanced Scorecard Essentials. The 2014 programme includes the latest findings and experiences in strategy, measurement, leadership, human capital and cross functional priorities and solutions.

Dr Dave Norton has most recently been honoured by Thinkers 50 in their Hall of Fame sharing this acclaim with Tom Peters, Warren Bennis, Howard Gardner, Charles Handy, Philip Kotler, Henry Mintzberg, Kenichi Omae, Ikujiro Nonaka and his colleague Professor Kaplan, for their mammoth contribution to business management and leadership. Harvard Business Review recognised the Balanced Scorecard as one of the most influential management ideas in the past 75 years.

 

HOW TO MEASURE THE EFFECTIVENESS OF YOUR INNOVATION STRATEGY | “ROH-PEE-D’EE” TECHNIQUES FOR YOUR BALANCED SCORECARD METRICS

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In the words of Oscar Hammerstein from the legendary musical The Sound Of Music he recommends;; “When you read you begin with ABC and when you sing you begin with Doh-Re-Mi” – when it comes to Innovation, Dr Dave Norton suggests “when you measure innovation you begin with Roh-pee-d’ee.”

STRATEGIC MEASUREMENT CONTEMPLATIONS FOR INNOVATION METRICSYOUR INNOVATION STRATEGY

If innovation ranks as a key strategic objective it will surely be one of your key metrics on your Balanced Scorecard. Some of the measures to consider are as follows:

  1. A ratio of number of new ideas per 100 employees.
  2. Percent of new ideas selected for funding.
  3. A ratio of revenue or net profit from new ideas divided by the average cost of implementation of ideas.
  4. Aggregate ROI of new ideas implemented.

The most important step is to define your intended results for your innovation. This should be ONE of a number of intentions. An essential Balanced Scorecard principle should be applied here. Your intention or OBEJCTIVE should be concise and defined by a quantitative outcome and time frame.

  1. Intended financial performance.
  2. Increased number of new ideas.
  3. Improved quality of ideas.
  4. New markets / customers.
  5. New products / services. etc…

NARROW IT DOWN | BSC ESSENTIAL

These may be good measures, but fall short in terms of a second key Balanced Scorecard principle. Best practice scorecards only have 1 – 2 performance measures per objective which makes it imperative to select the most meaningful measure for your innovation objective. Your selection criteria could consider the following:

  1. Which of these measures can you influence the most?
  2. Which of these measures will make a notable difference in respect of behavioural change?
  3. Can you access the data easily and accurately?
  4. Can you start from where you are; with what you have?
  5. Can you establish meaningful targets and thresholds?
  6. Will your measure work at both an enterprise and business unit level?
  7. What baseline will you use to determine a known value; your historical performance or industry norm?
  8. Use this measure during all stages of the innovation process.

Once this thinking is applied you should be in a position to select one and not more than two metrics for your Innovation Scorecard.

[pronounced ROH-PEE-D’EE]  RoPDE™ = RETURN ON PRODUCT DEVELOPMENT EXPENSE | ROBUST KPI

Traditional ROI measures, such as discounted cash flow analysis are often owned by the finance team and rarely resonate with the other stakeholders and most often result in weak alignment.

RoPDE™ is a comprehensive KPI for measuring the performance of product/service innovation and development.

How do you calculate RoPDE™?

RoPDE = (GM – PDE)

               PDE

Where GM = Gross Margin and PDE = Product Development Expense

 Here are some RoPDE™ key guidelines;

  1. Establish your thresholds comparatively using Operating Income, EBIT or EBITDA.
  2. Chart your enterprise thresholds by fiscal periods.
  3. Derive your data using standard accounting data.
  4. Apply this at both enterprise level and as a business unit strategic measure.
  5. Apply it at any stage gate or product life cycle process.

When you start at the very beginning, be it in ideation, evaluation and selection of innovation you can evaluate the opportunities using RoPDE™. As your innovation progresses you can compare actual revenue and product development expenses relative to your expected financial performance.

SOURCE: www.balancedscorecard.org/whitepapers  How do I Measure Innovation by Gail Perry and Mark Malinoski

In 2014, BRG & GIBS will present Dr Dave Norton – Live and in Person: Executing Strategy: Balanced Scorecard Essentials. The 2014 programme includes the latest findings and experiences in strategy, measurement, leadership, human capital and cross functional priorities and solutions.

Dr Dave Norton has most recently been honoured by Thinkers 50 in their Hall of Fame sharing this acclaim with Tom Peters, Warren Bennis, Howard Gardner, Charles Handy, Philip Kotler, Henry Mintzberg, Kenichi Omae, Ikujiro Nonaka and his colleague Professor Kaplan, for their mammoth contribution to business management and leadership. Harvard Business Review recognised the Balanced Scorecard as one of the most influential management ideas in the past 75 years.