“Oh, So That’s What You Meant!” Using Scorecards To Simplify Strategy

We see it all the time – strategies that are meant to align and energize people distract and confuse them instead. Creating a screening scorecard that anyone can use is a big help.

The trouble with the term “strategy” is that it has so often come to mean anything important. So we have strategic procurement, strategic human resources, strategic you-name-it. Or strategies masquerade as goals in disguise.  “Our strategy is to be the #1 or #2 operator in every market we serve” is one of those.  Or, as Roger Martin has often pointed out, the opposite of the stated strategy would be ridiculous.  “Our strategy is to be customer-centric” is an example – what’s the opposite of that – our strategy is to ignore our customers?

Strategy, in a definition I really like that was developed by Don Hambrick and Jim Frederickson, is a central, integrated concept of how we are going to achieve our objectives. Good strategies imply choices.  Good strategies pull you and your people into the future and ideally provide the grist for an alignment of interests throughout your organization.  Unfortunately, this is seldom what happens in real life.  What sounded so great at the all-hands town hall often deteriorates into meaningless confusion at the level at which people are making often-quite significant strategic choices.

One simple antidote to this is to translate the grand strategy statement into scorecards that spell out what good looks like for your strategy, and conversely what it doesn’t look.  A scorecard lets people see the logic behind your strategic choices throughout the organization and act in accordance.  The screening statements implicit in the scorecard make it crystal clear which opportunities are desirable and which aren’t and allow ideas to be mapped against the same set of criteria.  The magic is not the scores – the magic is the thought process behind them.

 

Kone:  A case study

Perhaps an example would be useful here.  I was working with the Kone Corporation shortly after Matti Alahuhta, a legendary business leader in Finland, came to Kone as its CEO in 2005. I’d worked with Matti at Nokia throughout its glory years. Kone at the time was struggling a bit with growth – in the elevator business, the traditional model had been to accept relatively thin margins on new elevators and benefit from a long tail of service revenue keeping the elevators running nicely for decades to follow.  I helped to facilitate a strategy rethink that Alahuhta later referenced as pivotal in his early time there.  While the outcomes will sound like common sense, believe me, the conversations leading up to them were often quite heated!

We ultimately settled on a new focus for the strategy, which was to improve the lifetime value of a building to its owners (rather than to fight primarily for the new elevator installation business). The strategy statement at the close of the initial retreat was, “Kone is going to triple its profits by 2010 by providing innovative products and services that improve the lifetime value of a building to its owners.” This was a big shift in strategy and implied a major corporate transformation.

We defined five strategic initiatives that would be the pillars of the transformation effort:

1. Deploy insightful behavioral segmentation of customers to match the service to customer jobs to be done;
2. To create a modularized technology platform that would facilitate the introduction of innovative products and services;
3. Become operationally excellent by investing in creating global processes for quality management, end-to-end logistics, sourcing and a global IT infrastructure;
4. Explore adjacency growth opportunities, for instance, in facilitating facility management;
5. Undertake regional initiatives to expand operations in fast-growth markets and turn around some that were problematic.

Something to note here is that there were not dozens of initiatives – these were the ones that then translated into a set of gap statements.  A gap statement is basically something that says, “we are going to go from our current state of performance to our future state of performance by such and such a time without experiencing a drop in something or other.”

What we then did was convert these broad strategic pillars into a set of scorecards.  For example, the phrase “improve the lifetime value of a building to its owners” was translated into the following 2 scorecard elements

 

Dimension	Exceptional if…	Acceptable if…	Unfavorable if…
	Score of 9	Score of 3	Score of 1 or negative
Gives the customer an edge	Measurable, significant positive impact on customers’ bottom line	Appreciated by customer, but impact is modest	Neutral for customer
Is innovative	Brings significantly better new features or processes to the market; disruptive	Involves improvements to features or processes, but not dramatic ones	No change to features or processes

 

From that exercise, we came up with 14 total scorecard dimensions, which Kone used to make choices about the investments it would use to bring this new strategy to life.  A couple of years after this retreat, the vision was further refined into the phrase, “KONE delivers the best people flow experience.”  Today, the vision has further evolved into “sustainable success with customers.”  Although the vision has evolved, you can trace the initial set of ideas to those early insights about changes in the competitive marketplace.

And Matti?  He left the CEO role “at the top” in 2014 after delivering strong performance and setting the company up for continued strong growth.

 

Creating your own screening scorecards

Here’s a process that teams can use. First, find a time when everyone can be together – virtually these days. Next, have everyone identify two initiatives or ideas they were involved with developing recently, one which was a good strategic fit and which they were happy with, and the other which in the wisdom of hindsight they’d have preferred not to be involved with.  Then identify the factors, up to five, that made the difference between the two.  We call the positive ones “rockets” and the negative ones “anchors” (building on the terminology built by our good friends over at SolveNext).  Then go around the room and collect all the rockets – document them.  Next, the anchors.

Next, identify the common themes that emerge.  These are candidates for the “dimension” portion of your scorecard document.  For instance, with a major Jamaican insurance company I worked with, a big theme was that it was trusted by aspirational customers. A resulting dimension had to do with the concept of trust (high scores for trust-building, low ones for trust risking) and the nature of the customer (high scores if the idea could help them achieve their goals, low scores if it didn’t do this for the customer).

Of course, this exercise will illuminate your past strategy.  Include perhaps some assumptions about potential future dimensions that may be important.

So build up your scorecard.  The next exercise is the most fun – working as a team, score a few actual projects that the organization is working on.  You’ll probably find that the scorecard needs to be adjusted, which is fine.

At the end of the exercise, what you’ll have is a set of statements that take your grand strategy statements and make it absolutely clear what good (and bad) looks like.  And that clarity can be incredibly energizing!

** Content originally posted by Thought Sparks **