Balanced Scorecard: Luis Mamani, Systems Engineer, MBA, PMP

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Balanced

Scorecard
Strategic choices and capabilities

Luis Mamani, Systems Engineer, MBA, PMP

Session 3
Who is the
customer?

First, we must IDENTIFY SOMETHING


THAT CUSTOMERS TRULY NEED.
Then, find the real benefits customers
are looking for.
Second, WE MUST VALIDATE which are our
CAPABILITIES to accomplish it.

In order to bring a product or service that provides a


real value for customers.
“People don’t want a quarter-inch
drill, they want to buy a quarter-
inch hole”
Theodore Levitt, 1962
1
How to win 3
Linking the
strategy to
capabilities 4
2
Strategic
The strategic
perspectives
corporate
goals
How to win
Session 1
HOW TO
IDENTIFY
WHAT
CUSTOMERS
TRULY NEED?
Positive outcomes
that customers want
to achieve

Jobs that
Gains customers are
Customer Jobs to be
trying to get
CUSTOME done
profiling R done

Pains Functional
Negative outcomes Emotional
that customers want Social
to avoid
Gain Increase or
creators maximize
benefits that
customer
Value Products expects
and VALUE
mapping services
MAP

Pain Release or
relievers minimize
customer pains
Create products and services Supported on a value proposition
that customers want that make sense to customers

FIT
The elements
of value
pyramid
Products and services deliver
fundamental elements of value that
address different needs.

The more elements provided, the


greater customers' loyalty and the
higher the company's sustained
revenue growth
HOW CAN WE
COMMUNICATE
AND ENGAGE
CUSTOMERS
WITH OUR
OFFERING?
A value proposition is a PROMISE OF VALUE to be delivered,
communicated, and acknowledged. It is also a belief from
the customer about how value (benefit) will be delivered,
experienced and acquired.

"Strategy is based on a differentiated customer value proposition. Satisfying


customers is the source of sustainable value creation.“
Kaplan and Norton
Value proposition
Unique mix of products,
It results from the
services, benefits, offered to
strategic analysis
customers, which make the (result of external
difference in the market. analysis)

It is the reason given to the


customer to buy and consume
the offered product or service.
PROMISE
Some value propositions…
“Friendliness, “The ultimate driving “Warmth and excellent
cleanliness, machine" customer service.
consistency, and Personalized attention,
convenience” Assortment of
Products. Online
attention”
WHAT ARE THE
CAPABILITIES
REQUIRED TO
PROVIDE THE
VALUE
PROPOSITION?
Required capabilities
depend on the
COMPETITIVE Product leadership
(the best product)
STRATEGY that
value proposition is
related to
Customer intimacy
Cost leadership
(the best service or
(the lowest cost)
solution)
COST LEADERSHIP PRODUCT CUSTOMER
LEADERSHIP INTIMACY
Doing things well
No waste Creativity, ability to commercialize Service tailored, personalized
No rework innovative ideas very quickly, Advice
Process excellence continuously seek new solutions. Development of solutions.

 High level of efficiency in operations.  The efforts are focused on invention,  Very good understanding of the
 Integrated information systems: product development and market client's business processes
process operations at low cost and exploitation.  Development of relationships with the
high speed.  Tasks are structured around the client is highly valued.
 Customer service without errors. creation of products  Sales focused on customer portfolios.
 Strict adherence to standards and  Focus on the selection, development,  Culture: promotes the development of
control techniques. motivation, guidance and retention of specific solutions instead of general
 Culture: rejects waste and rewards talented staff. ones. "If the client wants it, it is done
efficiency.  Culture: promotes imagination and and it will go well"
creativity within.
COST LEADERSHIP PRODUCT CUSTOMER
LEADERSHIP INTIMACY
“McDonalds stands for “The ultimate driving “Warmth and excellent customer
friendliness, cleanliness, machine" service. Personalized attention
consistency, and convenience” Assortment of Products. Online
attention”

 The company is engaged in an  Representation of status and  Organizational culture.


extensive utilization of economies of achievement.  Strong brand.
scale to achieve the cost advantage.  Effective design and features
 The company is famous for the speed integrated to each model of the brand.
of customer service without  Competitive post-sales service.
compromising the quality of the
service.
 Product tastes almost all over the
world due to the use of the same
ingredients in the same quantities and
application of the standardized ways
of cooking around the globe.
Competitive
advantage

Thus, we must have


specific strong
Lower cost Differentiation
capacities to compete advantage advantage

without
disadvantages
The best
The best
customer
features and
intimacy service
functionalities
or solution
WHAT DOES
MEAN
COMPETITIVE
ADVANTAGE?
A COMPETITIVE ADVANTAGE is
WHAT MAKES AN ENTITY'S GOODS
OR SERVICES SUPERIOR to all of a
customer's other choices.

this approach works fine for any organization, country, or


individual in a competitive environment.
Competitive advantage model
DISTINCTIVE
RESOURCES CAPACITIES
CAPABILITIES
 Customer database, full  Advanced Analytics  Deep customer knowledge
records Development  Timely understanding of
 Partnerships with social  Integration with external industry trends
networks platforms
 Financial capability  Faster delivery
 Good reputation  Data based culture
 Big Data platform
 Experienced data scientists VALUE
PROCESSES
DIFFICULT TO
INPUT IMITATE
PEOPLE
Why capabilities-driven
strategy works?

Source: Strategic&
Remember,
customers do not Customers buy products or
necessarily buy a services that satisfies their
competitive need or gives them value...
advantage so we HAVE to work in a
strategy to achieve it!
Examples
IKEA
Distinctive capabilities
IS THE WORLD’S o Deep understanding of how customers live at home
LEADING FURNISHING o Price conscious and stylish product design
o Efficient, scalable, and sustainable operations
BRAND. o Customer-focused retail design

IKEA delivers value through


providing functional and
stylish home furnishing at
very low prices with a high
level of customer engagement.
STARBUCKS
Distinctive capabilities
HAS ONE OF WORLD’S o Stewardship of a globally available consumer experience
MOST ICONIC BRAND o Distinctive delivery of product and service
o Design and development of a premium product line
AND IS KNOWN FOR THE o Recruiting and managing a cadre of dedicated employees
AMBIENCE IN ITS RETAIL
STORES.

STARBUCKS is the purveyor


of the “third place” for
conviviality – a center for
human activity after home and
work
APPLE
Distinctive capabilities
HAS CONSISTENTLY o Consumer insight
RANKED AS THE MOST o Intuitively accessible design
o Technological integration
WORLD’S INNOVATIVE o Breakthrough integration
COMPANY.

APPLE form the hub of a


single digital system that
enable customers to easily
manage media production,
consumption and
communication
AMAZON
Distinctive capabilities
IS THE WORLD’S o Retail interface design
LARGEST ONLINE o Back-end supply chain management
o Rapid and effective online merchandising
RETAILER. o Customer-relationship management
o Advanced technological innovation
AMAZON gives people a
seemingly endless variety of
products and services in a
one-stop online shopping
experience
The strategic
corporate goals
Session 2
Are the QUANTIFIERS of
the strategy’s success along
the STRATEGIC
STRATEGIC HORIZON
CORPORAT
E GOALS They are the quantified
WINNING ASPIRATIONS
and the roots of any TARGET
TREE
GROWTH
STRATEGIC
CORPORAT PROFITABILITY
E GOALS
SUSTAINABILITY
s i n
ce s e
u c ra t
o s rp o ls
le t co go a
g g gic
tr u a te
s s str
n ie e
p a thr e
o m se
C he
t
Source: HBR – Managing the right tension
3 basic tensions
The whole
Profitability Short term vs
organization
vs Growth Long term
vs The parts

It requires analyzing the It requires a review of the


business model, what will management model, how It requires the review of the
be offered to the customer the company handles organizational model,
and how the costs that will performance and structure, culture, people.
support it will be configured investments.
3 basic Profitability
The common

tensions
bond is customer
vs Growth
benefit

The common bond More progress The common bond


on one front
are sustainable usually comes at are resources and
earnings the expense of
progress on
capabilities
another

The whole
Short term vs
organization
Long term
vs The parts
How could we achieve these strategic corporate goals?

SHORT TERM, FOCUS ON


RESULTS AND LESS ON
PERFORMANCE, AND AT THE
SAME TIME, BUILDING THE
BASIS FOR THE LONG TERM
Even if there will
be strategic
tension in
companies, it is
necessary to work
in current and
next competitive
advantages
We can't delay the
investment into
our next
Competitive
Advantage for
later (when we'll
see that our
current one has
reached its limits)
Linking the
strategy to
capabilities
Session 3
Define the
STRATEGIC CORPORATE GOALS 1 strategic
corporate
goals

STRATEGIC CHOICES 2
Define the strategic
choices

Determine the
3 capabilities system
to support the
CAPABILITIES SYSTEM strategic choices
Strategic choices
STRATEGIC CHOICES is about the intersections of two
critical dimensions: “where to play” and “how to win”

COMPETITIVE FACTORS MARKET BOUNDARIES


(HOW TO WIN) (WHERE TO PLAY)

HOW TO WIN WHERE TO PLAY


A distinctive way to win (less Geography, customer segments, channel,
structural, not categorical) product categories, stages of production

VALUE PROPOSITION SECTOR (INDUSTRY)


More than CRITICAL SUCCESS FACTORS SEGMENT
Strategic choices
COMPETITIVE FACTORS MARKET BOUNDARIES
(HOW TO WIN) (WHERE TO PLAY)

 Improving customer products &  Improving market targeting


processes  Focusing on customer convenience
 focusing on customer experience  Extending the market integration
 Extending the transaction control  Leveraging corporate resources
 Leveraging unique advantages or  Creating new markets
complements
 Creating disruption or new value

The mix of STRATEGIC CHOICES define a Each major product/service line of a company
STRATEGIC POSITIONING requires a specific strategic choice mix (CF+MB).
Because they may be different for each product
(don’t forget Critical Success Factors to define service line.
Strategic Choices)
STRATEGIC CORPORATE GOALS

STRATEGIC CHOICES

Capabilities that Capabilities that


support the support the
COMPETITIVE CRITICAL SUCCESS CAPABILITIES SYSTEM
ADVANTAGES FACTORS fulfillment required to support the
STRATEGIC CHOICES
Growth Profitability Sustainability

COMPETITIVE FACTORS MARKET BOUNDARIES


(HOW TO WIN) (WHERE TO PLAY)

The CAPABILITIES
CUSTOMER SYSTEM represents the
KEY PARTNERS SALES CHANNELS
RELATIONSHIP
essentials capabilities
required to support the
MANAGEMENT TOOLS AND STRATEGIC
KEY ACTIVITIES POSITIONING
SYSTEMS INSTRUMENTS

ORGANIZATION AND RESOURCES KNOWLEDGE AND INFORMATION

COMPETENCES AND SKILLS ATTITUDES AND BEHAVIORS


Sistema de capacidades basado en
Cadena de valor
•Recibir •Transformar las •Recolectar
•Informar de los
P/S Mantener en

Va
•Almacenar entradas en •Almacenar •Inducir la funcionamiento
salidas los P/S después
•Diseminar •Productos y •Distribuir la compra de P/S
de ser vendido y
entradas salida •Facilitar la
servicios entregado
compra de P/S

Nota: es clave
Logística Logística Marketing y
Operaciones Servicio
conocer la entrante saliente ventas
CADENA DE
VALOR de la
empresa. Sólo
así se podrán
detectar Adquisiciones: Gestión de RRHH: Desarrollo tecnológico: Infraestructura:
Adquisición de recursos Reclutar, contratar, Determinar lo necesario Legal, planificación,
necesidadespara
y la firma entrenar, desarrollar, para transformar la finanzas, asuntos públicos,
problemas. compensar, despedir entradas y salidas aplicando aseguramiento de la
personal tecnología calidad, relaciones
gubernamentales, gerencia
general
Strategic
perspectives
Session 4
4 perspectives
Financial
What financial objectives must be met to satisfy investors? Results
Customers
How should the client be satisfied to meet the financial
objectives?

Processes
What internal business processes should be excellent to satisfy
customers and investors?
Levers
Capacity
(within the
What competencies and capacity must be achieved to meet the
objectives? organization)
The perspectives and the strategic plan
Mission
Vision

Financial

Customers

Processes

Capacity

Values
The Perspectives and the strategic
objectives
Financial Increase profit

Customers Bring the best service experience

Processes Increase the effectiveness of operations

Capacity Improve the organization and practices

Strategic objectives:

Related to business
Aligned to organization vision and mission
The Perspectives and the Balanced
Scorecard
BALANCED SCORECARD

Financial

Customers

Processes

Capacity

Dashboard
Teams of 4 or 5 people

Strategy exercise about:

• Value proposition
• Competitive advantages

Examples
• Strengths and weaknesses of internal capabilities system (optional)

Maximum 5 minutes of exposure and 5 minutes of comments.

It has to be an innovative, agile presentation ... and everyone participates!


End of session!
Source: LinkedIn, Where do our strategic objectives come from? by Mihai Ionescu

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