Balanced Scorecard Evolution: A Dynamic Approach to Strategy Execution

Book Preface

SHORTLY BEFORE WRITING THESE WORDS, I looked up at the bookshelves lining my offi ce and took in the artful panorama of colors, designs, and intriguing titles. My gaze soon fi xed upon the row dedicated to the Balanced Scorecard and strategy execution, and as I refl ected on the many titles, it wasn’t long before I realized that anyone picking up this new book would quickly arrive at two questions:

1. Why does the world need another Balanced Scorecard book?
2. How is this one different?

LOOKING BACK AND LOOKING AHEAD

To answer those questions let’s take a brief tour of the Balanced Scorecard’s history. The tool began, humbly enough, as a system for organizations to improve their ability to measure effectively. For centuries the primary measurement of business had been fi nancial. The Balanced Scorecard, while acknowledging the importance of financial yardsticks, represented a breakthrough by supplementing financial metrics with the drivers of future fi nancial success in three distinct, yet related, perspectives of performance: customer, internal process, and learning and growth. The Balanced Scorecard also requires that performance measures used by an organization be derived from its unique strategy.

Only then could strategy execution be tracked with rigor and discipline. This first‐generation Balanced Scorecard, devoted almost exclusively to improved measurement, was immensely successful and popular, helping organizations around the globe better assess the execution of strategy through a balanced set of measures spanning the Scorecard’s four perspectives.

Despite the model’s success, a number of early adopters struggled with identifying the best measures to gauge the execution of strategy and often lamented a lack of context during the selection process. To overcome these challenges and assist in identifying better indicators, some Scorecard pioneers began prefacing the discussion of measures with the broader question of “What must we do well?” in each perspective. The answer to that was known as an objective. For example, a customer perspective objective could be “Provide differentiated solutions.” As time went on, organizations began paying additional attention to objectives and many created graphical representations featuring the objectives as they fl owed through the four perspectives. These documents became known as strategy maps, and proved to be a breakthrough evolution for the Scorecard system. Once the objectives were in place on the strategy map they clearly articulated and communicated the organization’s strategy, creating an enhanced context for the measurement challenge and making it simpler to isolate metrics. For our earlier example of “Provide differentiated solutions,” the accompanying measures might then be “Time spent with customers” and “Win rate on new projects.”