Of the many planning methods proposed and widely used in the last two decades, two stand out for their impact and longevity. Michael Treacy and Fred Wiersema’s “Discipline of Market Leaders” was published in 1994, closely followed by Robert Kaplan and David Norton’s “Balanced Scorecard” two years later. How do the two interact ideally? Can a strategy process and strategy be both balanced and disciplined?
The discipline of market leaders is to prioritize resource investments into one dimension of strategic choices, while making modest investments in the other dimensions. Treacy defines the generic dimensions as Operational Excellence (cost reduction), Product Leadership and Customer Intimacy (best total solution). Based upon market opportunities (customers and competitors), wise organizations choose one dimension for emphasis and align all other variables to support that choice.
The balanced scorecard emphasizes the importance of measures and a complementary planning process that ensures that four levels of activity are reviewed: Learning and Growth (asset management, broadly speaking), Internal Processes (operations, product development, customer interface – the how), Customer Satisfaction and Financial Results. Asset management feeds optimal processes delivering customer satisfaction and financial results.
The two approaches seem to conflict: one says focus (discipline) while the other says diversify (balance). The resolution lies in their application. The balanced scorecard provides a universal framework of the factors that drive business success in a logical sequence. Organizations still have to compare their direction (mission, vision, values) with their situation (SWOT) in order to determine critical success factors. CSF’s help the organization to select those 10-20 measures that best cover the landscape.
The discipline of market leaders is making strategic investment choices, while the balanced scorecard is using a planning and control process that highlights opportunities and links strategy to results. The advice from Treacy and Wiersema is to focus on a single dimension, rather than to spread the investments evenly. In balanced scorecard terms, this means that the measures will emphasize different dimensions.
Focusing on operational excellence indicates the use of more measures in the Internal Processes and Asset Management levels. Customer intimacy requires customer satisfaction measures, key internal process measures that impact customers and a touch of asset measures regarding the adequacy of the products offered. Product leadership requires measures of customer satisfaction with the features and benefits set offered, the product development process itself and the availability of key technical resources that create products.
Organizations will benefit from finding ways to apply the insights from both camps. Strategy and structure matter more than ever. The best answers continue to be “both/and” rather than “either/or”.
http://www.slideshare.net/kennyong/balanced-scorecard-for-strategic-planning-and-measurement
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