Strategic Management

Balanced Scorecard – 15/16-02-2016

• Bridging tools to articulate strategic management to operation
• Main concern: excellence in execution + consistent execution of strategy by top management + sustained and steady top-line growth + customer royalty & retention + change process
• The more people in the organization, the above concerns are more significant
• Problems: unclear vision & strategy; lack of alignment; disjointed planning & process; inability to monitor, test & adapt
• Process: design (strategy fact phase, full potential ambition, choices (where to play + how to work), financial projection) – 2x 1 th  →  execution – monthly (operation planning, budget, project management) → enabler (workforce panning, performance management, training, supporting system)
• Operating rhythm – 1 year cycle: strategy & development (#1 develop - strategy development Q3 + #6 refresh - strategy refresh, all year round), Strategy performance management (#2 translate – balanced scorecard development Q3 + #4 align – organization alignment Q3), business units (#4 plan – initiatives and budget development Q4 + #5 Monitor - performance monitoring, all year round)
• Steps: Strategy formulation → strategy execution → operational management

1. Strategy development

• Strategy is change.
• Value: business as usual (operational) + strategic vision (strategic)
• Tests of strategic effectiveness: what is our strategy, what does it mean for me? What do I do differently as a result of it?
• To communicate: 7 ways 7 times to employees
• Q2: strategic fact-base (outward (market, customer, and competitive landscape) & inward looking (operational & financial strengths and weakness) - PESTEL, Porter’s 5 forces, SWOT analysis, TOAST analysis); full potential ambition (aligns leadership team around bold full potential ambition driven by leadership economics and results delivery); where to play/how to win (makes choices on where to focus expand and redefine, which leadership models to pursue, whether to play by/break the rules and core differentiation) → macro trends, market outlook, competitive landscape, point of departure/starting position
• Q3: financial projection (5-year financial plan, critical assumption planning and sensitivity analysis); implementation plan (translate strategy into action, takes multiple “potential future’)
• Alignment: full potential ambition – where to play – how to win – key strategic initiatives
• Trade off → need to focus on key strategies, check revenue potential, integrated set of activities (combination of competitive advantages)
• GSK strategy: low cost (cost efficiency) & differentiation (customers want to pay more for the added value provided)

1. Translate – balanced scorecard development

• Translate strategy into operating objectives that drive both behavior and performance
• How? The easiest way: visualize, need endurance
• Mission (why we exist) – values (what we believe in and how we behave) – vision (what we want to be) – strategy (what our competitive game plan will be) – objectives: strategy map (translate and articulate the strategy) – measures & targets: balanced scorecard (prioritize where we need to invest) – initiatives: balanced scorecard (prioritize where we need to invest) – personal objectives (focus people on contributing to strategy)
• Outcomes – outward focus (customer & financial)
• Drivers – inward focus (internal process, talent & technology)

1. Create strategic themes

Help to focus in aligning strategic decision to operation; limited to 3-5 major business thrusts; include a stream of linked objectives; may slice across all four business perspectives, but normally design will start in the internal perspective; resource allocation – provide budget for portfolio of strategic initiatives by theme

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# of themes: 3 -5 , # of strategic objective (15 - 20); KPI: 1.5 x strategic objective

Strategy Map – Strategic Objectives (Not business as usual, unless one of the critical weaknesses is BAU) – Measures – Targets – Initiatives