Dynamic Balanced Scorecard
The concept of the Balanced Scorecard is so widely known that explaining it would be just a loss of time. Everyone in business heard the term and many of you have tried to implement it. There is a number of successful implementation but a lot larger number of failures. The search for root cause of failures often leads to the core of the whole concept. The culprit is the Strategy map. Do not panic, please. It was not you incompetence that led you to wrong strategy map. The problem is in methodology described in respective literature!
Does the picture on the right look familiar? It shows traditional bottom-up logic of the traditional Balanced Scorecard. The picture is divided into four sections, separating four BSC perspectives. The first problem is the division. Is there any real company where finances could be separated from other elements of the business? Definitely not - even the most distant perspective - so called learning and growth is heavily dependent on finance. No research-development activity can be completed or eve started without proper funding but here we go - nothing like that is in the picture. Company elements are in reality connected and form feedbacks. But there no sign of feedback is in the traditional structure.
Everyone knows that there is always a delay between the cause and its effect. Do you see anything telling us that between A and B is a delay? Me neither.
Every action taken in this world has intended and unintended (or unwanted) consequences. Supporting one activity causes lack of support for other activities, support of one group causes hatred of other groups. All I see in traditional Strategy map a chain of positive (or wanted) consequences of our decisions and support. Where is the rest of the story? Am I saying the hidden part is not important?
If you feel the traditional method as confusing or potentially dangerous, do not be disappointed. There is a way out of this. If you choose to go dynamic. What does it mean? Here's the dynamic Balanced Scorecard in a nutshell as created by Dr. Marek Susta:
- If you like BSC perspectives, keep it.
- Do not try to draw Strategy map as you saw it in BSC literature.
- Create dynamic strategy map instead. Example is in the picture below.
- Create dynamic computer model of your strategy. If you need a proper software, look here. Even the cheapest version will do.
- Simulate your strategy under different scenarios. Model elements with the highest predicative value will become your Key Performance Indicators. If you have the software but do not have a clue how to start building your strategic model, we'll teach you how.
- Use simulation results to set your financial and non-financial goals.
- Add user interface - build a strategic simulator of your company, communicate and teach others how the strategy works and where is their place in it.
And there you have it! No rules of thumb and without a hunt for soft variables. Effective and effective. Do you have any questions? All you have to do is ask.