The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment

If you have not already read Kaplan and Norton's The Balanced Scoreboard, I presume to suggest that you do so prior to reading this book. However, this sequel is so thoughtful and well-written that it can certainly be of substantial value to decision-makers in any organization (regardless of size or nature) which is determined to "thrive in the new business environment." Research data suggest that only 5% of the workforce understand their company's strategy, that only 25% of managers have incentives linked to strategy, that 60% of organizations don't link budgets to strategy, and 85% of executive teams spend less than one hour per month discussing strategy. These and other research findings help to explain why Kaplan and Norton believe so strongly in the power of the Balanced Scorecard. As they suggest, it provides "the central organizing framework for important managerial processes such as individual and team goal setting, compensation, resource allocation, budgeting and planning, and strategic feedback and learning." After rigorous and extensive research of their own, obtained while working closely with several dozen different organizations, Kaplan and Norton observed five common principles of a Strategy-Focused Organization:1. Translate the strategy to operational terms2. Align the organization to the strategy3. Make strategy everyone's job4. Make strategy a continual process5. Mobilize change through executive leadershipThe first four principles focus on the the Balanced Scorecard tool, framework, and supporting resources; the importance of the fifth principle is self-evident. "With a Balanced Scorecard that tells the story of the strategy, we now have a reliable foundation for the design of a management system to create Strategy-Focused Organizations."After two introductory chapters, the material is carefully organized and developed within five Parts, each of which examines in detail one of the aforementioned "common principles": Translating the Strategy to Operational Terms, Aligning the Organization to Create Synergies, Making Strategy Everyone's Job, Making Strategy a Continual Process, and finally, Mobilizing Change Through Executive Leadership. Kaplan and Norton then provide a "Frequently Asked Questions" section which some readers may wish to consult first. There are many pitfalls to be avoided when designing, launching, and implementing the program which Kaplan and Norton present. These pitfalls include lack of senior management commitment, too few individuals involved [or including inappropriate individuals at the outset], keeping the scoreboard at the top, too long a development process (when, in fact, the Balanced Scorecard is a one-time measurement process), treating the Balanced Scorecard as an [isolated] systems project, hiring consultants lacking sufficient experience with a Balanced Scorecard, and introducing the Balanced Scorecard only for compensation. When organizations experience one or more of these pitfalls, their key e

This book has been on my shelves for 2 months before i read it. I know this is an important work, but I initially think it will only be suitable to large corporations.After reading it i realize that this can ultimately be apiled to small/med size companies. Companies with revenue of less than 500K USD/year revenue can reap similar benefit compare to the fortune 500 companies by implementing it.The samples shown in the book make it easier for the reader to copy and adapt for their own organisation. Most samples are derived from the big-companies (typical harvar business book ;-))), but we can adapt it to our (small company) needs.Focus on chapter 3, about STRATEGY MAP. this is most important. And the GENERIC STRATEGY MAP can be appleid to most organisation with minimum of ajustments. COPY and ADAPT. we can not afford to hire the expensive consultants, so we have to be our own consultant. And this book is a good guide.Most small companies do not even have VISION, MISSION etc statements. But the balance scorecard helps us focus on strategy, objectives, measures, target and INITIATIVES that are measurable, in a more descreptive ways. This is in a sense a HOW-TO book about strategy, and about measurements.I've decided to use the sytem for our company sam-design.com which now has 58 people, and sell the intangibles (designs). We won Andersen Consulting (Accenture now) award of ENTERPRISE-50 (awards for most promising small and medium size companies in Indonesia) last November. We think that the strategy describe in the book will boost our company's growth despite the slowdown of the internet.I started to read the book with much skeptism but ended up recommending it to many friends, write a review about it for local magazine and promoting the idea of strategy based on balance scorecard. ( I did read the original balance scorecard book which was published in 96, interested in the idea for a while but did not implement any of it).So for the small companies out there, go and get the book, this is not only for the big-boys....

The Strategy-Focused OrganizationBuilding on their Balanced Scorecard approach, Kaplan and Norton have developed an impressive framework in The Strategy-Focused Organization for the implementation of strategy. They have found that 90% of strategic initiatives fail due not to formulation but to implementation difficulties. Successful implementation of strategy requires all parts of an organizations to be aligned and linked to the strategy, while strategy itself must become a continual process in which everyone is involved. The Balanced Scorecard, originally seen by the authors as a measurement tool, is now presented as a means for implementing strategy by creating alignment and focus. Financial measures report on lagging financial indicators. The Balanced Scorecard aims to report on the drivers of future value creation. The book shows in detail how this is done from four perspectives: Financial, customer, internal business perspective, and learning and growth (these are outlined on p.77). These four perspectives produce a highly detailed framework when combined with the five principles of a strategy-focused organization: 1: Translate the strategy to operational terms. 2: Align the organization to the strategy. 3: Make strategy everyone's everyday job. 4: Make strategy a continual process. 5: Mobilize change through executive leadership. Absorbing every detail of this book will require many hours. The sheer detail of this complex system requires considerable attention, perhaps more than some readers can muster, but clearly distinguishes this work from many books full of business fluff. The style tends to be turgid and pedantic while being admirably complete. Readers can grasp the essence of the book's central points by reading only Chapter 1 (Creating the Strategy-Focused Organization), Chapter 3 (Building Strategy Maps), and Chapter 8 (Creating Strategic Awareness). Skip quickly through the chapters in Part Two: Aligning the Organization to Create Synergies. This section is the least engaging of the five. The balanced scorecard approach to strategy will appeal to those with a systematizing frame of mind. The book is filled with complex diagrams of corporate processes consisting of interrelated boxes and forces. This approach is extremely detailed and complex. It requires a major commitment and effort. Though the authors claim it can be implemented by smaller organizations, this will be more challenging than for large companies who can commit a team full time to working out the details. Much of the value of the approach may lie not so much in following through on completely working out the balanced scorecard but on absorbing the lessons regarding organizational integration across silos and the importance of clarity about mission, strategy, and goals. The balanced scorecard is one way to achieve and implement this clarity but not the only way. Another would be continual reiteration of these (as in Confessions of An Extraordinary Executive). So

The Strategy-Focused Organization clearly deserves more than fivestars. It is one of the ten most important business books of the pastdecade. The book successfully outlines an enormous improvement incommunications practices for making important changes in for profitand nonprofit organizations. The communications stall is the most prevalent onein most organizations. Application of the authors' ideas can bringabout a significant improvement in our society. This book is aninterim report on the application of the authors' concept, theBalanced Scorecard (introduced in 1992 and described in the book ofthe same name, published in 1996). The purpose of the book is toprovide "a roadmap for those who wish to create their ownStrategy-Focused Organization . . . [by employing the BalancedScorecard]." If you don't know what the Balanced Scorecard is,let me briefly describe it for you. A Balanced Scorecard adds severalimportant measures to the ones normally found in the accountingsystem, designed to measure those areas where performance mostdirectly and powerfully affects strategic position. Such areasinclude innovation, organizational learning, effectiveness in keytasks, and performance with key audiences like customers. Themeasures are chosen to reflect the systematic effects of how theorganization's overall value and performance are improved, and aredisplayed in a Strategy Map that communicates those ideas to one andall. In doing so, the Balanced Scorecard is the applied solution tomany of the issues raised about how to establish a learningorganization in Peter Senge's The Fifth Discipline. Most newbusiness concepts do not last long enough to warrant a study on theireffectiveness. The ones that do, like reengineering a few years ago,usually display more problems than successes. The Balanced Scorecardconcept is the exception. The results have been very positive foralmost all those who have employed it. The key seems to lie inhaving everyone in the organization have a more complete understandingof what the organization is trying to accomplish. As such, theauthors have actually uncovered something much more significant than astrategy communications process. Harvard Business School Professorand accounting guru (Activity-Based Costing) Bob Kaplan and consultantDavid Norton have uncovered a best practice in how to communicate anyimportant message in an organization. Although the book does notaddress that latter point, discerning readers will quickly spot it.Presumably the authors will too at some point, and a future book willbegin to address this important application. The focus of thisbook is on how Balanced Scorecard "adopting companies used [it]. . . to implement new strategies." The finding is that with"their new focus, alignment, and learning, the organizationsenjoyed nonlinear performance breakthroughs." This is quiteremarkable because organizations have reported in the past thatimplementing new strategies is one of the most difficult tasks

At first, I was afraid that this book was going to go down the same path that it seems every business book is treading these days: innovate, empower, repeat. However, while the authors of this outstanding work may occasionally sound like their guru colleagues, their book is far more intellectually sound, vastly more detailed, and ultimately far more useful than the flimsy writing that dominates the business shelves.Kaplan and Norton have done their homework. For every suggestion, they provide a wealth of examples, and they are intellectually honest enough to discuss all the evidence, including that which may run against them. As a result, I have great faith in the soundness of their conclusions. Absolutely a must-read for anyone interested in the evolution of business strategy.