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CUSTOMER CENTRIC METRICS RESCUE RETAILER FROM STRATEGIC ECCENTRICS:

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.

Public Sector Strategy Execution Essentials

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

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.

USING THE BALANCED SCORECARD TO DEFINE THE BIG DATA THAT WILL OFFER THE BIGGEST IMPACT ON YOUR STRATEGY AND COMPETITIVE ADVANTAGE

The Balanced Scorecard can drive your big data strategy to overcome data analysis paralysis; Dr Dave Norton and Professor Dave Ulrich affirm that big data is of no use unless it offers leaders insights relevant to their strategy.

In 2012, Big Data made the cut as the new form of economic currency. The world’s brightest and best thought leaders in Davos acknowledged big data as an economic agent as strong as gold, oil or money itself.

Gartner defines big data as follows; “high volume, velocity and variety information assets that demand cost effective, innovative forms of information process for enhanced insight and decision making.

So with the prediction that nearly 3 billion people will be online pushing the data created and shared to nearly 8 “zettabytes”, how do companies decide which data will offer them the insights and choices to determine their strategy and leverage their competitive advantage?

So what does this mean for leaders in business?

Although there is strong argument that algorithms will rule over instinct Dr Dave Norton, renowned for his balanced approach to measure the effectiveness of business methodology, strongly urges a combination of left and right brain thinking where leaders blend their intuitive insights with structured disciplined methodologies including using big data to test the relationships of their hypotheses and assess how this will enable transformational change. On his recent visit to South Africa, Professor Dave Ulrich recognised the value of information as a fundamental capability, but highlighted further that this capability is less about the information and more about insight and impact. He says leaders need to collect data to make informed choices. This is key to overcoming “data analysis paralysis”.

Dr Dave Norton and Professor Dave Ulrich concur that the data mined must offer relevant insights. Bill Schmarzo, the moniker “Dean of Big Data” and Author of Big Data: Understanding How Data Powers Big Business, suggests that your Balanced Scorecard could define your navigation choices in terms of which information is relevant to your strategy.

To illustrate this, he aligned his big data requirements with his Balanced Scorecard key metrics. This is his big data determinant on one key metric.

Metric: Secure 87.M in New Accounts

Big Data Impact Examples:

  1. Improve forecasting model predictability by modelling each individual deal (and components of the deal) taking into consideration sales team selling capacity (number and strength of deals in their forecast), sales team behavioural tendencies (selling products vs solutions), industry product buying trends and sales team track record with similar new name accounts
  2. Leverage text mining capabilities to analyse the call notes captured by the account development organisation to assess strength of industry solution opportunity; benchmark every NNA opportunity against similar successful and unsuccessful NNA engagements.
  3. Measure the effectiveness of sales and marketing campaigns to drive new NNA opportunities into the pipeline
  4. Flag any change in the sales team comments that might indicate a change in deal status.

SOURCE: Big Data and The Balanced Scorecard Framework | Bill Schmarzo Part 1,11 & 111 December 2013

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.

SA continues to face the triple challenge of chronic high unemployment, poverty and inequality.

Q & A with Professor Dave Ulrich – January 2014

Nicola Tyler, CEO of Business Results Group asks Dave Ulrich how South African HR  professionals should respond to the challenges of industrial action and widespread retrenchment.

NT: SA continues to face the triple challenge of chronic high unemployment, poverty and inequality. One of the biggest challenges facing HR professionals in South Africa has been large scale industrial action and resultant widespread retrenchment. What is your advice to HR professionals faced with these challenges?

DU: The challenges of unemployment, poverty, and inequality are complex and long term.  They will not have easy solutions, or they would have been done.  Industrial actions where employee’s anger results in unionization efforts is clearly understandable; then so is management’s reaction to squelch the employee reaction.  This leads to a vicious circle of employee vs. management action and reaction, then government gets involved as an arbitrator which sometimes only complicates the vicious circle.

Naively and ideally, the solutions to long term problems require a shift in mindset from individual to collective action.  Labour, management, government, and academia need to find ways to cooperate to build both an overall economy and organizations that win.  A rising economic tide will help both individual employees and organization managers succeed.  This requires a spirit of cooperation where both sides focus on solving shared problems more than receiving short term gains.  Mandela’s brilliant life and message of personal forgiveness needs to be translated to a country wide message of cooperation.  Cooperation comes when each party looks beyond short term self-interest to longer term shared interest and is willing to sacrifice some in the short term to create a long term gain.   This is not easy.

Such cooperation may begin within teams and divisions of large companies where HR professionals can be the facilitators between employees and managers to find common ground.   When HR knows the longer term business goals, customer requirements, and business strategy, they can help each group see that their long term shared interest are more important than short term self-interest.

In particular, when HR sits in on management meetings, they should make sure that the employee voice and point of view is shared and heard.  When HR visits with employees, they should ensure that management’s perspective is understood.  As a credible activist, HR professionals earn credibility with both employees and management by finding common ground and working together to make progress.

HR professionals can become the architect of talent, leadership, and culture that may help one leader at a time, one team at a time, one department at a time, and one organization at a time.  By so doing, HR professionals eventually build a groundswell of support for innovative ideas and practices.

Business Results Group and GIBS will be bringing Dave to South Africa to present his 13 milestones for HR to transcend the way the deliver measurable value to their organisations. In JHB on 27 May and Cape Town on 28 May. For further information visit www.theprogressconference.com.

Professor Dave Ulrich

Dave has consulted and done research with over half of the Fortune 200. His honours exude a consistent track record of global influence and authority in human resources and business management.  His research is based on collective feedback from over 60 000 line managers and HR professionals on the competencies required to improved business performance.

An accomplished and celebrated educator Dave is sought after the world over to present his findings and educate businesses. He has published over 200 articles and book chapters and over 25 books which he has co-authored with numerous fellow thought leaders.