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8/3/2019 Readng 1 Class Ppt
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Strategic Dreams Often Turn Into Nightmares IfCompanies Start Engaging In Expensive And
Distracting Restructurings. Its Far More Effective ToChoose A Design That Works Reasonably Well,Then Develop A Strategic System To Tune The
Structure To The Strategy
8/3/2019 Readng 1 Class Ppt
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How to Implement a New Strategy
without Disrupting Your
OrganizationRobert S. Kaplan and David P. Norton
Presented By:Miloni Sanghrajka
Afiya Khan
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History
Since early times. Corporations have alwaysmatched their structures to their strategies
19th Century: Centralized key functions likeoperations, sales and finance
Decades Later: Business Units structured aroundproducts and geographical markets
These 2 models worked for a long time
But problems cropped up in the last quarter of thetwentieth century
Need for new models to unlock corporate value
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This led to : Matrix Structure But this was also difficult as managers operating at a
matrix intersection had to juggle the dictates of 2masters
BPR of 1990s : Corporations organized around itsvarious processes
Virtual / Networked Organizations : operating acrosstraditional boundaries
Velcro Organization : Company capable of beingpulled apart and reassembled in new ways torespond to changing opportunities
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Need for New Models
Advantage today, lies with how companies use theirintangible assets like Knowledge Workers, R&D andIT
Globalization is forcing companies to revisit many
assumptions about the control and management ofphysical and intangible assets
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Kaplan and Norton believe that Structural Change isnot always the right tool
Companies do not need to find a perfect structure fortheir strategy
Choose an organizational structure that workswithout major conflicts and then design a customizedstrategic system to align that structure with thestrategy
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What kind of system??
Management System is the set of processes andpractices used to align and control an organization
Historically companies relied on financial systemonly
Later on TQM was adopted as new system
As per Kaplan and Norton,
“Balanced scorecard (BS) is the best way toalign strategy and structure”
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A balanced scorecard –based system provides both a
template and a common language for assembling
and communicating information about value creation. BS + Strategy map helps to identify & measure
sources of value creation
Perspectives
Financial
Learning& growth
Process
Customer
Ex. GE
Ex. Media General,McDonalds
Ex. GE
Ex. Cannon
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Strategic themes
Alignment of corporate and business unit strategiesi.e “dual citizenship”
Strategic theme used to describe entire enterprise
value proposition
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Dupont’s Engineering Polymers
Strategic Themes
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About DuPont
In 2000, $2.5 billion sales Employed- 4500 people
30 facilities in the world
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Royal Canadian Mounted Police
Strategic Themes
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About Royal Canadian Mounted Police
(RCMP)
Public Sector enterprise
23000 employees
C$ 3.3 billion annual budget
RCMP operates at four level
International
National
Provincial
Local
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Zack’s vision
Zacardelli (Zack) - New Commisioner: 2001
Vision
“The RCMP could become a strategically focused
organization of excellence”
Challenge
“Getting all RCMP units scattered across enormouslandmass to align and contribute to corporate levelstrategies”
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Need for strategic themes in RCMP??
Diverse units Limited political freedom to experiment with
structural change
Budgetary constraints
Increasing crime rates
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Plan of action
Senior level project team
Five corporate level strategic themes
Mission: “Safe homes, Safe communities”
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Five corporate level strategic themes
1. Reduce the threat and impact of organized crime2. Reduce the threat of terrorist activity in Canada
and abroad
3. Reduce and prevent youth involvement in crime,both as offenders and as victims
4. Effectively support international operations
5. Contribute to safer, healthier aboriginal
communities
Mission: “Safe homes, Safe communities”
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Implementation
The RCMP developed a separate strategy map foreach theme, with its own initiatives, targets, andmeasures
One senior manager One theme
Strategy map & score card & strategic theme
Corporate Level Strategy
Local Level Strategy
Ten Objective + Normal policing responsibilities
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Modification in themes
Ex.In northwest,
Low threat of terrorist activities Strategy map doesnot contain this theme
Ex.
In Toronto, contribution to aboriginal community not aneed but reduction in organized crime
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Benefits of using corporate level strategy
Promotes co-operation & integration amongindependent policing units
Encourages sharing of lessons learned and best
practices
The public’s level of satisfaction with the force has
risen since 2003 to 2005
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Ricoh Co. Ltd
Communicating Strategy
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About Ricoh
Manufactures and Sells copying machines and otherinformation processing products – Digital Cameras
Founded in 1936 and Headquartered at Tokyo
In 2000, Net Sales: US$ 6.5 bn
Number of Employees: More than 12000
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Why Balanced Scorecard?
Lack of Growth in Japanese economy made it crucialfocus the organization on Medium-term strategies
Ricoh introduced scorecards for its 51 business unitsin October 1999
Intention: Create a Management Style emphasizingstrategy implementation
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Perspectives Used
Financial Perspective Customer Perspective
Process Perspective
Learning and Growth Perspective
Environmental Safeguard
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Perspective Strategic Goal
Performance Management andPerformance Evaluation Criteria
Lag PerformanceIndicator
Lead PerformanceIndicator
Financial
Increased Business
Value
Increased Sales
Increased Efficiencyof Assets
Increased Free
Cash Flow
Increased SalesGrowth
R&D investmentrate based in sales
Supply Sales Rate
Sale of NewProducts
Number of
Employees forDeveloping a New
Product
P f M t d
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Perspective Strategic Goal
Performance Management andPerformance Evaluation Criteria
Lag PerformanceIndicator
Lead PerformanceIndicator
Financial
Increased BusinessValue
Increased Sales
Increased Efficiencyof Assets
Increased FreeCash Flow
Increased SalesGrowth
R&D investmentrate based in sales
Supply Sales Rate
Sale of NewProducts
Number ofEmployees for
Developing a NewProduct
Customer
Increased MarketShare of Major
Customers
Increased ColorProducts
Sustained andIncreased
Market ShareMedium and High
Speed ColorProducts
CustomerSatisfaction
Sales power of newproducts vsCompetition
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Perspective Strategic Goal
Performance Management andPerformance Evaluation Criteria
Lag PerformanceIndicator
Lead PerformanceIndicator
EnvironmentSafeguard
Keep the balancebetween
environmentalsafeguard and
business
Rate of UsingRecycle Parts
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Process of Evaluating
Each Business Unit - every 6 months
Committee of 7 senior managers (includes President
of Ricoh) – examines performance on lag indicators
This evaluation has a direct impact on the bonus forthe heads of business units
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Consequences of introducing BSC
All business units achieved their strategies
Relations between top management and businessunits were improved
Ricoh’s President came to a better understanding of
the business logic of each business unit
Top Management understood the stage ofdevelopment for each unit and strategic imperativesfor all business units
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Evaluation
BSC was used successfully for 18 months
This should be combined with the Management byObjectives which will result in strengthening of the
strategy implementation
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Electric Utility Inc
Expansive Global Cosmetics Group
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Market Share and Success of BSC
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There are many organizations that use only thebasis of BSC and then have it tailormade to suit theirrequirements
Hence it is difficult to measure the impact ofscorecard use of business results
Scorecards are used for a larger turn – around effort,
linked to advent of a new CEO, changes in strategyetc
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Impressions of managers who have used BSC
Enthusiastics
Adopted scorecard as a formatfor change Extended their use of BSC
patiently over a number ofyears
They believe BSC to be an
integral part in their successstory
Failures
BSC did not work for thesemanagers BSC use was discontinued or
petered out Initial discussions seem to be
useful – but over a period of
years it fails Very expensive exercise BSC provide excuses to
managers rather than improvedfocus
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Final Evaluation
BSC is designed with the realization that traditionalfinancial measures are not adequate to measure
Hence, customers, processes and learning andgrowth perspectives were added
This provided management with a broaderperspective and focus on long term objectives
Primary Benefit: BSC assists to focus everyone’s
attention towards the future
BSC enables the organizations to introduce newgovernance and renew the processes (so that theynow focus on strategy)
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Corporate scorecards and strategy maps
organized around strategic theme
Helps realize enormous value of their portfolio ofassets, people & skills
No rigors of replacing one rigid structure withanother
Flexible approach
Uncovers opportunities for value creation
Communicating corporate priorities to local units