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Strategic Dreams Often Turn Into Nightmares IfCompanies Start Engaging In Expensive And

Distracting Restructurings. Its Far More Effective ToChoose A Design That Works Reasonably Well,Then Develop A Strategic System To Tune The

Structure To The Strategy



How to Implement a New Strategy

without Disrupting Your

OrganizationRobert S. Kaplan and David P. Norton

Presented By:Miloni Sanghrajka

Afiya Khan



History

Since early times. Corporations have alwaysmatched their structures to their strategies

19th Century: Centralized key functions likeoperations, sales and finance

Decades Later: Business Units structured aroundproducts and geographical markets

These 2 models worked for a long time

But problems cropped up in the last quarter of thetwentieth century

Need for new models to unlock corporate value



This led to : Matrix Structure But this was also difficult as managers operating at a

matrix intersection had to juggle the dictates of 2masters

BPR of 1990s : Corporations organized around itsvarious processes

Virtual / Networked Organizations : operating acrosstraditional boundaries

Velcro Organization : Company capable of beingpulled apart and reassembled in new ways torespond to changing opportunities



Need for New Models

Advantage today, lies with how companies use theirintangible assets like Knowledge Workers, R&D andIT

Globalization is forcing companies to revisit many

assumptions about the control and management ofphysical and intangible assets



Kaplan and Norton believe that Structural Change isnot always the right tool

Companies do not need to find a perfect structure fortheir strategy

Choose an organizational structure that workswithout major conflicts and then design a customizedstrategic system to align that structure with thestrategy



What kind of system??

Management System is the set of processes andpractices used to align and control an organization

Historically companies relied on financial systemonly

Later on TQM was adopted as new system

As per Kaplan and Norton,

“Balanced scorecard (BS) is the best way toalign strategy and structure”



A balanced scorecard –based system provides both a

template and a common language for assembling

and communicating information about value creation. BS + Strategy map helps to identify & measure

sources of value creation

Perspectives

Financial

Learning& growth

Process

Customer

Ex. GE

Ex. Media General,McDonalds

Ex. GE

Ex. Cannon



Strategic themes

Alignment of corporate and business unit strategiesi.e “dual citizenship”

Strategic theme used to describe entire enterprise

value proposition



Dupont’s Engineering Polymers

Strategic Themes



About DuPont

In 2000, $2.5 billion sales Employed- 4500 people

30 facilities in the world



Royal Canadian Mounted Police

Strategic Themes



About Royal Canadian Mounted Police

(RCMP)

Public Sector enterprise

23000 employees

C$ 3.3 billion annual budget

RCMP operates at four level

International

National

Provincial

Local



Zack’s vision

Zacardelli (Zack) - New Commisioner: 2001

Vision

“The RCMP could become a strategically focused

organization of excellence”

Challenge

“Getting all RCMP units scattered across enormouslandmass to align and contribute to corporate levelstrategies”



Need for strategic themes in RCMP??

Diverse units Limited political freedom to experiment with

structural change

Budgetary constraints

Increasing crime rates



Plan of action

Senior level project team

Five corporate level strategic themes

Mission: “Safe homes, Safe communities”



Five corporate level strategic themes

1. Reduce the threat and impact of organized crime2. Reduce the threat of terrorist activity in Canada

and abroad

3. Reduce and prevent youth involvement in crime,both as offenders and as victims

4. Effectively support international operations

5. Contribute to safer, healthier aboriginal

communities

Mission: “Safe homes, Safe communities”



Implementation

The RCMP developed a separate strategy map foreach theme, with its own initiatives, targets, andmeasures

One senior manager One theme

Strategy map & score card & strategic theme

Corporate Level Strategy

Local Level Strategy

Ten Objective + Normal policing responsibilities



Modification in themes

Ex.In northwest,

Low threat of terrorist activities Strategy map doesnot contain this theme

Ex.

In Toronto, contribution to aboriginal community not aneed but reduction in organized crime



Benefits of using corporate level strategy

Promotes co-operation & integration amongindependent policing units

Encourages sharing of lessons learned and best

practices

The public’s level of satisfaction with the force has

risen since 2003 to 2005



Ricoh Co. Ltd

Communicating Strategy



About Ricoh

Manufactures and Sells copying machines and otherinformation processing products – Digital Cameras

Founded in 1936 and Headquartered at Tokyo

In 2000, Net Sales: US$ 6.5 bn

Number of Employees: More than 12000



Why Balanced Scorecard?

Lack of Growth in Japanese economy made it crucialfocus the organization on Medium-term strategies

Ricoh introduced scorecards for its 51 business unitsin October 1999

Intention: Create a Management Style emphasizingstrategy implementation



Perspectives Used

Financial Perspective Customer Perspective

Process Perspective

Learning and Growth Perspective

Environmental Safeguard



Perspective Strategic Goal

Performance Management andPerformance Evaluation Criteria

Lag PerformanceIndicator

Lead PerformanceIndicator

Financial

Increased Business

Value

Increased Sales

Increased Efficiencyof Assets

Increased Free

Cash Flow

Increased SalesGrowth

R&D investmentrate based in sales

Supply Sales Rate

Sale of NewProducts

Number of

Employees forDeveloping a New

Product

P f M t d







Financial

Increased BusinessValue

Increased Sales

Increased Efficiencyof Assets

Increased FreeCash Flow

Increased SalesGrowth

R&D investmentrate based in sales

Supply Sales Rate

Sale of NewProducts

Number ofEmployees for

Developing a NewProduct

Customer

Increased MarketShare of Major

Customers

Increased ColorProducts

Sustained andIncreased

Market ShareMedium and High

Speed ColorProducts

CustomerSatisfaction

Sales power of newproducts vsCompetition







EnvironmentSafeguard

Keep the balancebetween

environmentalsafeguard and

business

Rate of UsingRecycle Parts



Process of Evaluating

Each Business Unit - every 6 months

Committee of 7 senior managers (includes President

of Ricoh) – examines performance on lag indicators

This evaluation has a direct impact on the bonus forthe heads of business units



Consequences of introducing BSC

All business units achieved their strategies

Relations between top management and businessunits were improved

Ricoh’s President came to a better understanding of

the business logic of each business unit

Top Management understood the stage ofdevelopment for each unit and strategic imperativesfor all business units



Evaluation

BSC was used successfully for 18 months

This should be combined with the Management byObjectives which will result in strengthening of the

strategy implementation



Electric Utility Inc

Expansive Global Cosmetics Group



Market Share and Success of BSC



There are many organizations that use only thebasis of BSC and then have it tailormade to suit theirrequirements

Hence it is difficult to measure the impact ofscorecard use of business results

Scorecards are used for a larger turn – around effort,

linked to advent of a new CEO, changes in strategyetc



Impressions of managers who have used BSC

Enthusiastics

Adopted scorecard as a formatfor change Extended their use of BSC

patiently over a number ofyears

They believe BSC to be an

integral part in their successstory

Failures

BSC did not work for thesemanagers BSC use was discontinued or

petered out Initial discussions seem to be

useful – but over a period of

years it fails Very expensive exercise BSC provide excuses to

managers rather than improvedfocus



Final Evaluation

BSC is designed with the realization that traditionalfinancial measures are not adequate to measure

Hence, customers, processes and learning andgrowth perspectives were added

This provided management with a broaderperspective and focus on long term objectives

Primary Benefit: BSC assists to focus everyone’s

attention towards the future

BSC enables the organizations to introduce newgovernance and renew the processes (so that theynow focus on strategy)



Corporate scorecards and strategy maps

organized around strategic theme

Helps realize enormous value of their portfolio ofassets, people & skills

No rigors of replacing one rigid structure withanother

Flexible approach

Uncovers opportunities for value creation

Communicating corporate priorities to local units



Thank You

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