Management Tools and Trends Balanced Score Card

Balanced Scorecard is a management performance tool It creates four categories of performance which together provides a balanced integrated picture of results Its major contribution is in moving away from an exclusively financial performance evaluation environment that has been prevalent in business and industry

What is the Balanced Scorecard

It is a Management System(not only a measurement system developed by Robert Kaplan and David Norton of HBS in the 1990s It enables organizations to clarify their vision and strategy and translate them into action It retains financial measures which only detail the past. This system focuses on the future and specifically the long term Through it, future value can be created through investment in customers, other stakeholders specially employees and vendors and in processes, technology and innovation

The 4 Categories
Financial performance is given its due with appropriate metrics for capital structure, profit/profitability and cash flow. Return on Investment using DCF the final indicator Customer Satisfaction is the next and incorporates all the relevant aspects of creation, servicing and retention of customers Business processes highlights the emphasis on systems which are critical for both short and long term performance Finally learning and growth with focus on Innovation points to the need to succeed competitively by being positively different.

The Balanced Scorecard

Financial Performance
In addition to the historical performance, the focus must be on desired future performance. The advantage of financial indicators is that they are the most convenient to measure and report We must incorporate the concept of opportunity cost as the benchmark We must use the time value of money We should also prioritize the areas for measurement(project implementation time for capital intensive industries and optimum capital structure, managing cash flows for low value, high throughput industries like personal care)

Customer orientation/satisfaction
The customer is the most important stakeholder, without whom an organization cannot survive let alone thrive Serve the customers wants in the best way I.e. max convenience, maximum choice and at lowest prices Identify your customers/segments and satisfy the above wants in the best manner and certainly better than its competitors Good reliable and honest after sales service is the key to customer satisfaction, builds loyalty and ensures highest retention. Repeat purchase is the only reliable indicator

Internal Business processes

Processes are parts of systems I.e conversion of inputs into the desired outputs. In business where the key to success is to perform repetitive activities uniformly and consistently. Relevant, related activities constitute processes Normally processes are associated with functional processes including marketing, logistics, manufacturing. The better way is to understand processes in terms of the progressive value addition, and value delivery to the customer

Internal Business Processes

systems approach needed i.e. understanding linkages between system objectives, outputs,inputs and processes Data entry/ updation simultaneous to the physical events e.g. material receipt to be updated at the point of physical entry of the material Identifying customer wants, developing new products, manufacture, delivery to customer and fulfillment of promise through after sales service constitute the major organizational processes Support processes include supply chain, Human resource processes, budgeting, quality control to

Customer Orientation and Satisfaction

Identify the wants e.g. reliable, efficient, spacious, low operating cost refrigeration devices(refrigerators and freezers) Develop products and delivery systems better than your competitors with value for money as the optimizing criterion Fulfill the promise made to your customers by truthful, transparent and reasonable after sales service. Consider both primary and secondary customers as deserving of consideration as they deserve Relevant physical and information systems to be set up and operated

Learning and Growth

We all learn from our mistakes, we grow by avoiding mistakes(which we made and which we see others making) We grow by doing existing things better and by starting better things. Enormous scope in organizations to improve efficiency and effectiveness Innovation is doing things differently with a positive result.

Some bare truths about Innovation

Most business processes are the same across Industries and business types Logical analysis of systems requirements and there from developing progressively better systems is something anyone can and everyone should do Left brain thinking is paramount contrary to popular management thinking Creativity can be taught and learnt by Panchvi class intelligence Japanese approach to Inventory management and vendor management two excellent

Assignment of Weightages
We have four factors in the balanced score card. Do we assign equal or unequal weightages to the various factors? Depending on the competitive situation and the firms required priorities we assign weightages. Start with 25% weightage, then establish the relative priorities. For small and start up firms, financial and innovative factors would have more weightage say 30% each and the other two could be 20% each. For mature firms in competitive situations, learning and growth and internal processes would have higher weightages

Conclusion
Balanced score card moves organizational thinking from the historically conventional to the relevant present In an increasingly globalized world strategic thinking and sound implementation vital A sound framework which if understood and used effectively could make the difference between victors and vanquished in business Needs to be supported by progressive management focused on optimizing long term business performance

Consumer Ethnography
Ethnography is the descriptive study of human societies based on fieldwork(interaction and observation) It makes use of conceptual knowledge from psychology, economics and cultural studies This field has become increasingly relevant and usefully applicable in the context of increasing globalization It is being applied in studies of consumer behaviour and buying preference in geographically and culturally diverse markets

Understanding Culture
Societies are differentiated by race, creed, physical and behavioural characteristics More importantly they are differentiated by the system of beliefs, values and social practices. These beliefs,values and practices transmitted and sustained through several generations constitute Culture Culture is evidenced by dress, food, attitude to education,symbols of economic and social success and family orientation.

Significance of Culture in understanding Consumers

Popular perception is that consumer behaviour is culture specific and always varied Universal customer expectation over the long term is maximum, convenience, maximum choice and minimum prices on mass market products/services(niches will exist but fade away) Key is to understand the technology cycle and the reach of technologies over various societies

Cultural differences in consumer expectation

Food preferences are explainable by the level of development of a country and the availability of technology Table bread produced by large baking ovens came from the western countries. The eastern world had different types of unleavened bread baked in small household ovens As mass baking technologies aided by powerful leavening agents becomes widespread baked bread(in the form of loaves) will become the food of the masses all over the world(next 100 years)

Cultural differences in consumer expectation

Indians for centuries have eaten hot meals mainly because refrigeration facilities were not available As refrigeration becomes universally available, Indians will adapt to warmed up cold food which NRIs in the U.S. or Europe already are used to. Increasing adaptation of western clothes(jeans and Tshirts) point to the same thing. Indian Sarees will never become a mass market product in any other country and is already worn less even in India for obvious reasons

Key for Marketers

Understand the universal long expectations of customers Assess the current availability of relevant technologies. Be realistic in creating and promoting products relevant to the current technology capability. E.g. Broad band in telecommunication is limited in India and therefore high bandwidth devices should be introduced carefully and with minimum hype

Key for Marketers

While the prosperous nations will move generally upmarket in new technology areas(telecom, biotech, nanotech), there is potential for down market stuff(small cars)which developing countries can export Some products will be unique to some countries for the next few hundred years e.g. Sun tan for the Caucasians and Fairness creams for the Asian and Africans However in the really long term the same products and services will be available to the undifferentiated human race

Conclusion
Understanding ethnic and cultural differences is important These studies and recommendations arising there from can point to useful marketing conclusions in terms of what will sell where In the short and medium term exploiting our knowledge of differences will give marketing advantage In the long term all markets would move to universal products and services that would reflect current technological capabilities and meet the universal expectations of customers vis. Max, choice and convenience at lowest price

Core Competences
Concept first introduced in a HBR paper 1991by Gary Hamel and C.K. Prahlad Deals with hard competency i.e. relating to technical processes in Engineering, Electronics, Optics to name a few It argues that superior competence in a technology as opposed to focusing on products would lead to long term competitive advantage.

Conceptual framework
C.C. framework can be compared to the structure of a tree viz. roots, trunk and branches and finally leaves, flowers, fruits Core competence can be likened to the roots which sustain the structure and contribute to its longevity Trunk and branches can be compared to core products which form part of the final products Leaves, flowers and fruits represent the final products including product variants

Understanding the framework

Let us take examples: Core competency of Matshushita is in small compressor technology (less than 1hp) Refrigerator compressors constitute the core product of which Matshushita has a global market share of 50% Refrigerators, freezers are the finished product. World has several hundred brands and variants accounting for millions of sale units and billions of dollars of sale value Half of these use the Matsushita compressor

More Examples
Canons reinvented itself from a camera company to a pioneer in Imaging technology Its core competence is Imaging which encompasses Micro electronics, laser technology, material flow technology and display technology Core products include the Laser imaging heads and printer heads used on millions of copiers, fax machines, printers Result Canon has grown from a small company to a giant with revenues exceeding the total of its former giant rivals in their respective businesses viz. Kodak in photography and Xerox in Photocopying

Honda
Started by a brilliant mechanic Soichiro Honda, the companys first product was a small engine that powered an agricultural sprayer The company developed its core competence in Power train technology Honda is a global leader in motor cycles, cars and portable generators Core products are engines, gearboxes and axles Finished products cover the entire automobile and powered portable devices field

Kyocera the small giant

Kyocera has developed core competence in precision ceramics technology Its core products are ceramic holders for computer processor parts The company has 55% of the world market share in these parts which are used in an increasing world market for mainframe and personal computers Even with this dominant global market share, Kyocera offers unparalleled customer service responding to emergency requests for supplies and rushing to attend customer complaints

Core competence in Soft technologies

Hamel and Prahlad have not extended the CC logic to soft areas We define these areas as encompassing the key management sub processes vis planning, organizing, controlling and leading They also include functional competences such as marketing, manufacturing, logistics, Information storage and processing

Examples of Soft CCs

Reliance industries has world class project management capabilities as a core competence This competence has been applied to various primary projects including petro chemical complexes, oil refineries, oil exploration These projects produce world class products enjoying prominent market share and contributing towards the firms profitability and growth and sustained market leadership

Examples of Soft CCs

Googles core competence is in information accessing technologies Over a brief period of a single decade the firm has put in place several core products such as search engines, micro locating tools like Google earth and map extension and reading tools The end products are individual information packages customized to hundreds of millions of customers across the globe and market information reach and access to firms and customers

Timex Watches Ltd.

The core competence was technology absorbtion Complex technologies including precision tool design and manufacture, Injection molding, Vacuum plating were adopted, and mastered in extremely short time frames Products and processes including precision dies for a variety of industries, plating of industrial and consumer products and precision plastic products The firm was able to utilize the core processes described above to make superior cost effective products in house The core processes were leveraged into reproducing these on a customized basis for several customers

Conclusions
Core competences enable superior competitive capabilities Development of core products are the logical outcome The firms creative and productive energy is focused on a few products that dominate the relevant market space and enable it to avoid the energy sapping market contests in the end product field The CC concept is applicable to hard technology (Hamel and Prahlad) The CC concept is equally applicable in soft technology areas (R.J.M.)

Growth Strategy
Every organization must seek continuous growth to fulfill its purpose of long term profit maximization It is important to understand the process of growth and the alternatives available A firm has to facilitate first growth in demand for its products/services existing as well as planned This is done by expanding existing markets and creating or entering new ones

Alternative growth paths

Organic or internal growth is the first and obvious opportunity Inorganic or external growth is the other opportunity Organic growth is achieved by capacity expansion (domestic and global) and then by progressive integration forward and backward on the value chain External growth is achieved through diversification -related and unrelated

An Example- Organic Growth

An automobile co. like Maruti which started by assembling cars from fully assembled imported aggregates (engines, gearboxes---) First increase assembly capacity, then go for backward integration i.e. components Go for global expansion through exports and setting up manufacturing abroad

Inorganic Growth
Once the potential for Organic growth is fully exploited Maruti could consider diversifying into two wheelers or commercial vehicles When the automobile space is saturated, domestically/internationally, Maruti could consider acquiring other auto cos Following this the co. could consider other opportunities in the transportation space Only if and when all of these possibilities are exhausted, the firm can consider unrelated diversification

Facilitating market growth

At every stage, the firm should attempt to expand and extend its market penetration This would include new products and new markets The firm should also improve market share in existing markets through more focussed marketing and selling efforts

Conclusion
Growth is an absolute imperative for every firm Organic and Inorganic growth are the two routes for growth There is a logical pattern (first organic then inorganic: ensure full exploitation of potential at every stage Opportunities for market expansion and extension at every

Knowledge Management
knowledge is the understanding of a subject gained through experience or study it can also be described as know how which enables a person to perform a specialized task it can also be viewed as an accumulation of facts procedures and heuristics facts are true statements about a subject matter procedures are uniform consistent and documented activities heuristics are rules of thumb developed over years of validated experience intelligence is the ability to acquire and apply knowledge

Some More Definitions

memory is the ability to store and retrieve relevant experience at will and is part of intelligence learning is knowledge or skill acquired by instruction or study instruction and study refer to the formal excercise dealing with exploration and understanding of concepts experience is the validation of theoretical concept through active or passive practical application and what we learn from it. common sense is the innate ability to sense judge or perceive situations acquired initially in childhood and developed progressively as one gets older

Understanding Knowledge
first we understand what data and information are. data are facts. information is data processed for use by an individual or an organization knowledge is the understanding of information based on its perceived relevance/importance to a specific subject data information and knowledge are related with data forming the base of the pyramid, information the middle and knowledge the top of the pyramid knowledge can be summed up as the integrate of perceptions, skills, common sense and experience

Types of Knowledge
there are four basic ways of categorizing knowledge procedural knowledge deals with performance of a standard tasks e.g. making and sending an appointment letter declarative knowledge is routine awareness short term knowledge e.g. memorizing a phone no. from a directory to dial the no. semantic knowledge is knowledge of major concepts and hierarchic knowledge e.g. understanding McGregors theory X and theory Y and how it is to be applied episodic knowledge is deep personal knowledge based on experience and resides in the mind. e.g. sacking a senior union office bearer for gross misconduct procedural and declarative knowledge are short term and shallow. semantic and episodic knowledge are deep and long term and differentiate the expert from the novice

What is Knowledge Management(k.m)

k.m. is an inter disciplinary model that has knowledge within an organization as its focus it uses accessible knowledge from outside sources it captures and stores knowledge in existing business processes, products and services it enhances data bases and documents with additional knowledge transfers and shares knowledge throughout the organization promotes knowledge growth through the orgn.s culture and incentive systems

The k.m Process

k,m. is the process of capturing and making use of a firms collective expertise spread throughout the orgn. the expertise may be available in documents or databases( called explicit knowledge) it may be resident in individuals minds(this is called tacit knowledge) tacit knowledge is the more precious and accounts for the greater part of knowledge in most orgns. a competitive orgn. should view all its processes as knowledge processes and continuously enrich each process with explicit and tacit knowledge

Explicit and Tacit Knowledge

explicit knowledge is codified and stored and therefore widely and easily available. e.g. personnel data incl employee personal and salary related data tacit knowledge is knowledge embedded in the human mind through personal knowledge, experience and discrimination e.g. the knowledge of characteristics of people who are not team players and in fact destructive personalities tacit knowledge is not only accumulation of and mastery of facts but involves beliefs and values gained through years of worthwhile experience (positive and negative it has been established that 90% of knowledge that will enable a firm to become and remain a superior competitor is tacit knowledge the aim of every firm should be to access, store and use as much of its potential wealth of tacit knowledge as it possibly can

expertise and experts

knowledge developed over time through successful experience leads to expertise an expert is a person with advanced knowledge who can solve difficult problems swiftly and accurately an expert is characterised by attention to detail and quality results experts are adept at problem solving with results far above the ordinary an expert is usually a perfectionist and wants the solution to be exactly what is called for by the problem

some specific qualities of an expert

uses chunked knowledge i.e. large patterned chunks of knowledge(facts, circumstances, people involved etc) sees the big picture e.g. people will jump bonds dont count on them for retention:try something better thinks creatively i.e. thinking differently with a positive outcome. e.g. how Timex watches avoided a union

some specific qualities of an expert

possesses good communication skills i.e both conveying and receiving viz verbal as well as listening skills exhibits confidence and is able to maintain credibility judged by the people who she interacts with is a good teacher and by implication is a good learner the greatest advantage possessed by experts is the ability to spot patterns that are relevant to a problem and therefore to its solution

capturing tacit knowledge

the goal of knowledge capture is to extract problem solving knowledge from the human expert to build the k.m. system apart from the skills previously discussed the expert should have motivation, enthusiasm and willingness to share his knowledge three levels of experts: the highly expert person, the moderate expert and the novice expert where the domain knowledge is concentrated, a single expert is accessed. where the d.k. is diffuse multiple experts will be accessed

capturing tacit knowledge

the primary instrument for accessing e.k. the interview: may be structured or unstructured: approach to be logical and properly sequenced. be prepared for the experts pattern matching and analogies which may seem like fuzzy reasoning ambiguities of language to be considered and addressed reliability of experts information can be affected by question construction and by perceptual slant other problems include response bias, and hostile attitude.

things to avoid
generalizing conclusions on the basis of a few sessions. Always verify with expert do not force the expert to repeat anything because of poor recording of previous sessions avoid taping: good listening and recording will ensure good coverage avoid videotaping: unfavourable with most experts do not interrupt the expert nor convert the interview into an interrogation session

problems that may be encountered in interviews

response bias of expert due to selective interpretation, lack of time, motivation, and hostility inconsistency specially where more than one expert is involved and poor questioning technique communication problems between expert and interviewer Required a competent and sensitive k.d. asking the right questions, being a good listener and disciplined recorder

other k.c. techniques

on site observation observing, interpreting and recording an experts problem solving behaviour on site. brainstorming two or more experts in an idea generation and opinion sharing session. protocol analysis where experts articulate the process of specific problem solving. the Delphi method is a progressive way of generating ideas among the experts involved: working towards convergence and consensus Blackboarding is a collaborative approach where

A practical application:Using spare tool room capacity to build a world class tool room Timex Watches was equipped with a tool room to maintain precision watch assembly line tooling(repair and rebuild) We used Marketing, technical and R&D and resource optimization expertise within the company Our tool room became the foremost tool room in North India, then the whole country and finally a global player

The resources and the process

Experts included, tool room senior managers, machine and tooling marketers and resource and logistics experts Senior Manager tool room, Vice president operations and the Managing Director all using expertise gained during their respective careers Approach was collaborative and proactive, driven by top management with intent to improve resource utilization, profitability and exploit potential growth areas for the company Time frame was aggressive but realistic. Information gathering was informal but disciplined

Another Example. World class info systems

Starting with 1 PC and 1 incompetent IT professional Timex in 3 years was ready with its in house third generation info system Initially we worked with standard functional software packages like Tally Encouraged key employees to leverage their knowledge of simple RDBMS packages to operate and build integrated systems Managed the teething problems of duplicate databases and conflicting info between depts like Accounts and Materials

Another Example. World class info systems

Established responsibility for dbase building and maintenance and encouraged interactive processing and info sharing After three years the company had developed capability for introducing its third generation RDBMS comparable to Oracle RDBMS The company throughout kept accurate and upto date information as the objective going beyond conventional claims of superior hardware and software availability

The resources and the process

The expertise was from the IT area, the user areas starting with the materials and finance and accounting area Key experts included the heads of IT, accounting, Materials, Operations and the top management Experts used past experience as well as the shared and integrated knowledge of the Precision Engineering industry of which the watch industry is a member Data collection, problem solving was again a collaborative exercise, informal but disciplined and highly motivated