S I M U L A T I O N

M A R K E T I N G M G T.

As soon as he said- “Money isn’t Everything” - I knew we were in trouble

S I M U L A T I O N

M A R K E T I N G M G T. It is important to focus on the means used to achieve the ends … …..not just on the ends themselves…

To only focus on traditional financial accounting measures (such as ROI, ROE, EPS…) …..does not give mgt the whole picture….

S I M U L A T I O N

M A R K E T I N G M G T.Performance needs to be judged thru mix of both financial & non-financial measures….

As - nonnon--financialfinancial measures are driversdrivers of financial outcomes

Will Make $$$ - if sell product

Will sell product if consumer wants, knows about , can get, & LIKES

product

To achieve “above’ everyone must effectively do their job

To effectively do job must know what to do

Organizations Often Have A Gap Organizations Often Have A Gap Between Strategy and ActionBetween Strategy and Action

Strategy Is a Step In a ContinuumMISSION

Why we exist

VALUESWhat’s important to us

VISIONWhat we want to be

STRATEGYOur game plan

STRATEGIC OUTCOMES

SatisfiedSHAREHOLDERS

Delighted CUSTOMERS

Efficient and EffectivePROCESSES

Motivated & PreparedWORKFORCE

The Balanced Scorecard Is A The Balanced Scorecard Is A Bridge To Close That GapBridge To Close That Gap

Strategy Is a Step In a ContinuumMISSION

Why we exist

VALUESWhat’s important to us

VISIONWhat we want to be

STRATEGYOur game plan

BALANCED SCORECARDImplementation & Focus

STRATEGIC INITIATIVESWhat we need to do

STRATEGIC OUTCOMES

SatisfiedSHAREHOLDERS

Delighted CUSTOMERS

Efficient and EffectivePROCESSES

Motivated & PreparedWORKFORCE

PERSONAL OBJECTIVESWhat I need to do

S I M U L A T I O N

M A N A G E M E N T

S I M U L A T I O N

M A N A G E M E N T

Strategic Thinking- the ten big ideas Strategic Thinking- the ten big ideas

9 9. Metrics that matter

Balanced score card- a system that attempts to balance financial performance w/ consideration of customer's perspective, learning & growth perspective, & internal business process perspective

1992 1996 2000

Balanced Scorecard HistoryBalanced Scorecard History

Measurement and

Reporting

Alignment and Communication

Enterprise-wide Strategic

Management

Articles in Harvard Business Review: “The Balanced Scorecard —

Measures that Drive Performance” January - February 1992

“Putting the Balanced Scorecard to Work” September - October 1993

“Using the Balanced Scorecard asa Strategic Management System” January - February 1996

1996 2000

Acceptance and Acclaim: “The Balanced

Scorecard” is translated into 18 languages

Selected by Harvard Business Review as one of the “most important management practices of the past 75 years.“

9©2002 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved.

Balanced Scorecard Hall of Fame Implemented Strategies and Achieved Breakthrough Results… Fast

Saatchi & Saatchi

+ $2b

ATT Canada

+ $7b

Chemical Bank• 99% Merged Target

Asset Retention

UPS

Southern Garden Wells Fargo

Cigna

+ $3b

Brown & Root• #1 in growth &

profitability

City of Charlotte Duke Children’s

Mobil• Last to first• Cash flow +$1.2b• ROI 6% --> 16%

Hilton Hotels

• Least Cost Producer

3 years

• Customer Satisfaction • Market Revenue Index

• Revenues 9%• Net Income

33%

• # Customers450%

• Best Online Bank

• Customer Satisfaction = 70% • Public Official Award

• Customer Satisfaction #1• Cost/Case 33%

3 years

2-5 years 3 years

3-5 years 3 years

3 years 2 years

3 years 3 years

2-5 years

2 years

S I M U L A T I O N

M A N A G E M E N T

What is measured gets noticed

What is noticed gets acted on

What is acted on

gets improved

Today …

~ 70% of Fortune 1,000 companies utilize a Balanced Balanced ScorecardScorecard to help manage performance—

because…..

S I M U L A T I O N

M A N A G E M E N T

Perspectives Encompass all Respective Functional Domains

S I M U L A T I O N

M A N A G E M E N T

S I M U L A T I O N

M A N A G E M E N T

For Each Perspective:

Financial…Objectives Measures Targets Initiatives Responsibility Budget1.2.3.

Customer… Business Processes…Learning & GrowthObjectives Measures Targets Initiatives Responsibility Budget1.2.3.

S I M U L A T I O N

M A N A G E M E N T

Basic Scorecard Terminology(Southwest Airlines Example)

Objectives

• Fast ground turnaround

Objectives:What the

strategy is trying to achieve

Targets• 30 Minutes• 90%

TargetsThe level of performance

or rate of improvemen

t needed

• Cycle time optimization

InitiativesKey action programs

required to achieve targets

InitiativesMeasures• On Ground

Time• On-Time

Departure

MeasuresHow

performance is measured

against objectives

Strategic Theme: Operating Efficiency

Profits and RONAFinancial

Learning

Ground crew alignment

Lowest prices

Fewer planes

Customer

Internal

Fast ground turnaround

Strategy Map

On-time Service

Attract & Retain More Customers

Grow Revenues

S I M U L A T I O N

M A N A G E M E N T

• % Ground crew trained

• % Ground crew stockholders

A Complete Scorecard is a Program for Action

Objectives Measures

• # Customers• FAA On Time

Arrival Rating• Market Survey

• On Ground Time

• On-Time Departure

Strategic Theme:Operating Efficiency

Initiatives

• Cycle time optimization

• Ground crew training

• ESOP

•Customer loyalty program• Quality management

Targets

•30% +/yr•20% •5% • 12% growth

• Ranked #1• Ranked #1

• 30 Minutes• 90%

• yr. 1 70%yr. 3 90%yr. 5 100%

• Profitability

• Grow Revenues

• Fewer planes• More

Customers • Flight is on -

time• Lowest prices• Fast ground

turnaround

• Ground crew alignment

Strategic Theme: Operations Excellence

Profits and RONAFinancial

Learning

Ground crew alignment

Fewer planes

Customer

Internal

Fast ground turnaround

Attract & Retain More Customers

Grow Revenues

Lowest prices

On-time Service

16©2002 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved.

The Complete Balanced Scorecard Strategy Map

Improve Shareholder ValueProductivity Strategy Revenue Growth Strategy

Improve Cost Structure

Increase Asset Utilization

Enhance Customer Value

Create Value from New Products &

Services

Human, Information, and Organizational Capital

Shareholder ValueROCE

Cost per Unit Asset Turnover Customer Profitability

New Revenue Sources

Price

Financial Perspective: the drivers of shareholder value

Product/Service Attributes

Strategic Competencies

Strategic Technologies

Climate for Action

(Processes that Produce and Deliver Products

& Services)

(Processes that Enhance Customer

Value)

Operations Theme Customer Management

ThemeInnovation Theme Regulatory and

Society Theme

Customer Value Proposition

Quality

Low Total Cost

Customer Solutions

Product Leader

Customer Satisfaction Customer Acquisition Customer Retention

Time Function Service Relations Brand

Relationship Image

� Market and Account ShareCustomer Perspective: the differentiating value proposition

Internal Perspective: how value is created and sustained

Learning & Growth Perspective: role for intangible assets – people, systems,

climate and culture

(Processes that Create New

Products and Services)

(Processes that Improve the Environment

and Communities)

17©2002 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved.

Increase ROE to 12%Revenue Growth Strategy Productivity Strategy

New Sources of Non-Gasoline Revenue

Increase Customer Profitability Through

Premium Brands

Become Industry Cost Leader

Maximize Use of Existing Assets

ROCENet Margin (vs. industry)

Non-Gasoline Revenue & Margin

Volume vs. Industry Premium Ratio

Cash Expense (cpg) vs. Industry

Cash Flow

Speedy Purchase

Clean Safe Quality Product Trusted Brand

Friendly Helpful Employees

Financial Perspective

Customer Perspective

Help Develop Business

Skills

More Consumer Products

Recognize Loyalty

Share of Targeted Segment

Mystery Shopper Score

Dealer Profit Growth

Dealer Satisfaction

Differentiators

“Delight the Consumer” “Win-Win Dealer Relations”

Basic

Create Non-Gasoline

Products & Services

“Build the Franchise” “Increase Customer Value” “Achieve Operational Excellence” “Be a Good Neighbor”

Improve Environmental,

Health and Safety

Understand Consumer

Segments

Best-In-Class Franchise

Teams

Improve Hardware

Performance

Improve Inventory

Management

On-SpecOn-Time

Industry Cost Leader

New Product Acceptance Rate Environment

Incidents Safety Incidents Dealer Quality

Rating

Yield Gap Unplanned

Downtime

Inventory Levels

Run-Out Rate

Activity Cost vs. Competition

Internal Perspective

A Motivated and Prepared Workforce

• Aligned• Personal Growth

Climate for Action• Functional Excellence• Leadership Skills• Integrated View

Competencies

• Process Improvement

Technology

Personal BSC Employee Feedback

Strategic Skill Coverage Ratio

Systems Milestones

Learning & Growth Perspective

Mobil NAM&R Strategy Map

S I M U L A T I O N

M A N A G E M E N TCapstone's

Balanced Scorecard

S I M U L A T I O N

M A N A G E M E N T

S I M U L A T I O N

M A N A G E M E N T

S I M U L A T I O N

M A N A G E M E N T

Additional – AFTER-the-FACT Tools for Managing & Assessing Your

Performance:

1. Company Round Analysis

2. Analyst Report

S I M U L A T I O N

M A N A G E M E N T

Round Aanalysis-example

S I M U L A T I O N

M A N A G E M E N T

Simulation Scoring System