Balance Scorecard Framework

The balanced scorecard is a strategic planning and management system that is used extensively in business, industry and non-profit organizations worldwide to align business activities to the vision and strategy of the organization

The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback to both the internal business processes and external outcomes in order to continuously improve strategic performance and results. Balance scorecard is linking strategy and operation

Balance Scorecard framework is consist of a strategy map and four perspective of the balance scorecard.

Strategy map is a visual framework for integrating the organization’s objectives with the four perspectives of a Balanced Scorecard.
The four perspectives of balance scorecard are :

1. Financial perspective : Describes the tangible outcomes of the strategy in traditional financial terms.

2. Customer perspective : Defines the value proposition for targeted customers.

3. Internal process perspective : Identifies the critical core processes that are expected to have the greatest impact on the strategy.

4. Learning and growth perspective : Identifies the intangible assets that are most important to the strategy.

Here is some illustration of the architecture of balance scorecard

check this Balance Scorecard presentation slide

Business Model Canvas

Business model is basically a mental model and concept of set of strategies and investments a company should pursue, so that they can be integrated into a congruent whole, thus enabling company to gain a competitive advantage and achieve superior profitability and profit growth.

To be able understand the business model, instead of doing a mental model it is better if the company can sketch the business model. Sketching the business model can help the owner and the executive of the company to understand the strategies that the company want to pursue. The sketch will give a clear picture of the business and help the executives to plan a strategy to achieve the goals.

Whenever we want to sketch or draw something, we need a canvas to draw on. In this case we need the BUSINESS MODEL CANVAS. Business model canvas is a set of drawing blocks that build a business model. There are 9 blocks that use as a representative to build the model, which are :

1.       Customer  segment

2.       Value proposition

3.       Channels

4.       Customer relationships

5.       Revenue streams

6.       Key resources

7.       Key activities

8.       Key partners

9.       Cost structure

Every block is a representative of the key factor that should be consider when build a business model. Each building block has connection to others that linking each other  as a system. This canvas is use to sketch the business model, from defining customer segment until breaking down the cost structure.

A complete business model will encompasses the totality of how company will :

1. Select its customer.
2. Define and differentiate its product and service.
3. Create value for its customers.
4. Acquire and keep customers.
5. Provide value-added product and services.
6. Deliver the products and services to the market.
7. Configure its resources.
8. Achieve and sustain a high level of profitability.
9. Grow the business over time.

The Formal Strategy Making Process

People think that strategy is the output of the formal planning process and most of the thinking and planning process is done by the top management. This opinion has basic reality but that’s not the whole story. Valuable strategies often emerge from deep within the organization with the input from the team who are constantly tackling problems on the ground, this could be the manager, executives or section head, etc.

The formal strategy planning has 5 main steps:

1.     Select the corporate vision, mission and values and goals/objectives.

Vision is a statement of some desired future state, mission is the reason for existence- what an organization does, and values is a statement of key values that an organization committed to.

2.     Opportunities and threats

Analyze the external competitive environment to identify opportunities and threats.

3.     Strengths and weakness

Analyze the organization’s internal environment to identify its strengths and weakness.

4.     Select a set of action that :

·         Build on the organization’s strengths and fix its weakness- in order to take advantage of external opportunities and counter external threats.

·         Consistent with the organization’s vision, mission, values and goals/objectives.

·         Congruent and constitute a viable business model.

5.     Implement by aligning the organization’s people and activities with the action plan/strategies.

The main task is to analyzing the organization external and internal environment then selecting the appropriate action that constitutes strategy formulation. But the hardest part is the implementation, which is taking actions consistent with the selected strategies of the company at the corporate level, allocating roles and responsibilities among managers, allocating resources, designing reward systems.

Some organizations go through a new cycle of the strategic planning process every year. This does not necessarily mean that managers choose a new strategy each year. In many instances, the result is simply to modify and reaffirm a strategy and structure already in place. The strategic plans generated by the planning process generally look ahead for a period of one to five years, with the plan being updated or rolled forward every year. In most organizations, the results of annual strategic planning process are used as input into the budgetary process for the coming year so that strategic planning is used to allocate resources within the organization.