Strategy Maps for Strategy Development

21 04 2009

The Strategy Map is one of the more interesting tools in terms of Strategy Development.  I know most people want to describe it as a Strategy Execution tool, but I see it as a great check to the overall health of your strategy?

  • Do you cover things other than the financial outcomes in terms of your strategic objectives?
  • Do you consider the customer voice, or desire?
  • Do you know where you are in your strategy lifecycle?

Some people like to design complex strategy maps that take months and months to develop with strategic objectives to cover all contingencies.  The font becomes too small, and the word optimize shows up too much.  

What if we took a different tact?  What if we use the Strategy Map as a santiy tool, to test the strategies to make sure they are top of mind and easy to digest?  Instead of creating too many objectives, we focus on clairty of thought.  We use the tool to make sure the organization can understand what we are doing and to then use the map to define the initiatives and performance measures that align their department with the overall corporate goals?





Scorecard or Fact sheet

10 04 2009

A common Scorecard design is to list a bunch of business facts – how many customers, total square feet, total employees, inputs, etc.  While these can be important business facts that executives need to know, they may not be manageable numbers.  By adding them to the scorecard, they take up valuable real estate and misdirect focus.  

As you are thinking through your scorecard design, take some time to consider if an item is a REAL KPI, or just a business fact.  Then design the scorecard to focus on objectives with potential links to business fact report(s).





Initiative Performance Indicators (IPIs)

8 04 2009

I made the argument that Key Performance Indicators and Key Risk Indicators are really the same thing, yet a nuanceworth discussion is initiative management.  We launch new factories, new products, training programs, marketing material, etc all the time, yet often do a sub-optimal job managing the project.  And execution waters down further as we try to manage the portfolio.

Even though initiatives are different than performance indicators, we need to account for their management within the same framework.  We need to understand our objectives, the priorities, resource constraints, milestones, etc in order to more proactively manage the business to achieve more strategic goals.  We need to enhance our ability to discuss our progress to our goals (both annual and strategic) and how all the KPIs and Initiatives are working together to achieve the end.





Scorecard Layout

26 03 2009

As you design your scorecard, you should consider the story it tells and the goal of the process. One of my favorite starts to a project began with this opening line from the client…

“I know we are doing it wrong, just be gentle when you tell us how bad…”

In this specific case, they were trying to build a cube for slicing and dicing within the Scorecard environment.  (And in all fairness to my client he had inherited this design and was trying to figure out how to use it).  They ended up with multiple depths of scorecards along a number of different dimensions.  Analysis was very difficult as that was not the purpose of the tool.  In the end we built a cube for this and found a management report that was perfectly designed for a scorecard.  This report walked through KPIs for new customers, existing customer purchases, average deal sizes, average debt.

Often a great place to start with Scorecarding is to find an existing management report.  Now the tool can easily be integrated into the management process.





Scorecards & Dashboards

16 03 2009

These are two terms that the BI world uses interchangably. The only thing they should have in common is that they both can visually display data.

Defined:

  • Scorecards are tools that help facilate discussions around strategy and operational performance management. The indicators (KPIs) should foster discussions about corporate direction, resource allocation, priorities, and initiatives. 
  • Dashboards should be used for tactical discussion triggers, like inventory orders, technical support, phone coverage, etc. 

What should be happening with these tools is a far more structured use for each (and throw in reporting as well). All too often these tools are used without discipline which leads to mulitple versions of the truth, lack of focus, red herrings, miscommunication, and ultimately a waste of time and energy.

IT and business users need to work together to better understand what each tool can provide, when that tool will be used, how it will be used, how it will NOT be used, and who should be using them.





Efficiency vs. Effectiveness KPIs

13 03 2009

Key Performance Indicators (KPIs) should be measures of risk to annual goals or strategic objectives.  If we can keep this list of KPIs minimal, we stand a much greater chance of keeping the organizational focus on improving key processes.

To derive these KPIs we need to understand the organizational inputs, outputs, and desired outcomes.  While this is a little academic, it is a good way to start to organize and define your KPIs. Outputs / Inputs are measures of efficiency, while Outcomes / Inputs are measures of effectiveness.  By overlapping the organizational or departmental focus we can align and define these KPIs to make sure they are driving the desired behaviors.  

Tradionally Sales and Marketing goals are to be effective, thus revenue per head, or win percentage are better measures.  While finance and IT are generally geared for efficiency withcost per order, or IT spend per target are more common.  

KPI design is far more difficult than people expect and is often unique to the environment as strategies, objectives, and priorities vary organization to organization.





External & Market Indicators

25 02 2009

One item most organizations struggle with is leveraging external indicators. Early last year, the price of gas created a chain reaction. Most companies cost of goods sold increased to where they were forced to raise their prices as their margins eroded.  

Even if we do that, we typically do not have a systematic way to incorporate the learning into a business process. What we would need is the ability to understand the external indicators, know of potential sources for the information, and work these into ongoing environmental scans.  

What is the value of understanding how the consumer price index impacts your revenues? What happens if you were able to move before your customer in terms of supply chain interruption? In some cases, this could mean millions to your top or bottom line. There are a number of organizations that knew the market was struggling in 2008, but did nothing to prepare.  And a number of those names will never be the same (GM, AIG, Circuit City, etc).

When is the last time you did a formal environmental scan, discussed the results, and put new actions into place?