I wrote a previous blog post about how to fight commoditization. A company can fight commoditization by providing unique value to its clients through the way it offers it services. This unique value is the key to good strategy. A good strategy is useless, however, if it is not executed successfully.
Peter Drucker has a famous quote, “What gets measured, gets managed.” This statement is absolutely true, so companies need to pay close attention to what they are measuring. Even though uniqueness is the key to success, often businesses only concentrate on tracking the same metrics and benchmarks as their competition. While it is important for companies to benchmark themselves against their competition, it only tell half the story. Companies need to measure and manage what makes them unique.
An effective strategic management system is key to increasing the odds of successfully executing a strategy. A good strategic management system should translate and communicate a company’s strategy, provide objectives and goals to drive results, and provide a measurement and feedback system for learning and adapting to changes.
The Balanced Scorecard, developed by Robert Kaplan and David Norton, provides a great framework for a strategic management system that also helps companies define ways to manage what makes them unique. It defines objectives and measures of performance beyond traditional lagging financial indicators to give a more balanced picture of a company’s performance and provide leading indicators of future success. It does this by viewing the strategy and performance of a company from four perspectives:
- Learning & Growth – How must the business grow to achieve its vision?
- Internal – What internal processes must the business be great at to achieve its vision?
- Customer – How should the business appear to its customers to achieve its vision?
- Financial – What does financial success look like to shareholders when the vision is achieved?
The Balanced Scorecard can be developed and utilized to help a company manage its strategy and unique value as follows:
- Develop strategy by defining the core purpose of the business, the vision of where the business is going, and the underlying core values that provide the business a basis for decision-making. Providing unique value should be central to this strategy.
- Gain clarity and understanding of the strategy and vision among leadership and then translate the strategy into specific strategic objectives that can be communicated to everyone involved with the strategy (i.e. all employees). Define these strategic objectives considering all four perspectives of the Balanced Scorecard.
- Develop measurements to monitor progress toward these strategic objectives. This will likely require development of new and unique metrics since unique value is central to the strategic objectives.
- Develop operational plans to achieve these strategic objectives by developing initiatives, setting goals, and allocating resources.
- Monitor progress towards the achievement of the strategic objectives and overall strategy by utilizing the new unique measurement tools developed.
- Learn from this monitoring and feedback and adjust strategy as necessary. Go back to step one and repeat.
A good strategy, grounded in uniqueness, is the key to success. Effective measurement is key to the successful execution of that strategy. Strategic management tools such as the Balanced Scorecard can help ensure success by helping companies measure the right things, not just the same things.
Note: The following article is a great resource if you want to know more about the Balanced Scorecard: Kaplan, Robert S. and Norton, David P. “Using the Balanced Scorecard as a Strategic Management System” Harvard Business Review, July-August, 2007.