Strategy Implementation, Performance, and BSC

To achieve a competitive edge, and to retain customers; organizations should be innovative to fulfill the
ever changing needs of their customers. Being innovative leads to customers' satisfaction which in turn
strengthens the financial position of the organization (Ahmad et. al., 2010). Therefore, organizations
should develop sound strategies to maintain strong financial positions.

Evans (2005) mentioned that strategies may be very well drawn and presented, but the problem is that
strategy is not very well communicated to people involved in the execution process. Charan & Colvin
(1999) pointed that although strategy execution is everyone's business in the organization, the final
result is poor strategy execution in many organizations. Top management formulates strategy, but the
execution is a bottom up process.

According to Anand (2004) four barriers are responsible for strategy implementation:

 Vision Barrier: Few people in the organization understand the strategy of their organization.
 People Barrier: The objectives of most workers are not linked to the organization's strategy.
 Resource Barrier: Misallocation of time, energy, and money to processes that are critical to the
organization.
 Management Barrier: Management allocates little time to strategy, and much time to short-
term tactical
 decision-making.

Kaplan and Norton (2000) argued that most companies fail to execute strategies, and that:

 Only 5% of the workforce understands their company's strategy.

Namazi & Abhari (2010) mention that prior to 1980's, organizations used financial measures (ROI, net
profit, return on equity etc.) to evaluate their performance, however it is very well known that financial
measures are good, only, in the short term. The emphasis placed by most companies on financial
measures creates a gap between strategy development and implementation. Therefore, it is imperative
to communicate the strategy to everyone in the organization in an understandable language. If
strategy is well expressed in terms of measurements and targets, then employees will understand their
roles and what is expected from them. This will finally lead to better strategy execution and enhanced
performance (Kaplan & Norton, 1996).
The issues of poor strategic implementation, and the reliance on financial measures only to judge the
strategic performance of the organization motivated Kaplan and Norton (1992) to propose the BSC (in a
series of articles) as a tool to link performance measures by looking at the business's strategic vision
from four different perspectives: Financial, Customer, Internal Processes, and Learning and Growth.

The BSC is intended to document a strategic logic in terms of cause and effect relationships between
the current activities of an organization and its long-term success. The following is a description of the
BSC perspectives based on Kaplan and Norton (1992, 1996):

Financial Perspective: Financial measures convey the economic consequences for the actions already
taken by the organization, and focus on the profitability related measures on which the shareholders
verify the profitability of their investment. Therefore, under this perspective managers are required to
generate measures that answer the following question: "To succeed financially, how should we appear
to our shareholders?" Kaplan and Norton acknowledge the need for traditional financial data. The
accurate and timely financial data are necessary for the efficient and smooth direction of the
organization. The provision of the right and timely financial data to the right person in the organization
helps much in the process of making the right decision in the right moment. Under this perspective the
most common performance measures incorporated are: ROI, Cash Flow, Net Operating Income,
Revenue Growth, etc.

Customer Perspective: This perspective provides a view on how customers perceive the organization.
The customer www.sciedu.ca/ijba International Journal of Business Administration Vol. 3, No. 4; July
2012 46 ISSN 1923-4007 E-ISSN 1923-4015 perspective should be considered the central element of any
business strategy that provide the unique mix of products, price, relationship, and image that the
company offers to its customers. In this perspective the organization should demonstrate how it
differentiates itself from the competitors by retaining, attracting, and sustaining relationships with its
targeted customers. Therefore, managers are required to generate measures to answer the following
question: "To achieve our vision, how should we appear to our customers?" Typical measures used
under this perspective are: customer satisfaction, customer complaints, customer lost/won, sales from
new product, etc.

Steve Job’s famous statement says the customer’s perspective correctly - "The customer is always right."
Steve always provided more preference to create product on customers needs over market research
companies and stated - Some people say give the customers what they want, but that' ..

Internal Business Processes Perspective: Internal business processes provide the organization with the
means by which performance expectations may be accomplished. This perspective refers to the internal
business processes of the organization and, therefore, managers are required to provide measures that
answer the following question: "To satisfy our customers and shareholders, what business processes
must we excel at?" The central theme of this perspective is the results of the internal business processes
which lead to financial success and satisfied customers. Typically the measures of this perspective are
based on producing goods and services in the most efficient and effective methods. Commonly used
measures for this perspective are: cost of quality, cost of non-conformance, process innovation, time
savings etc.

For Apple’s scenario, Steve maintained one critical measurement for Internal Business Processes -Core
Competencies .Steve not bothered to force employees to be highly focused on a few key competencies:
for example, user friendly interfaces, powerful software architectures, and effective distribution
systems, very high end security applications.

However, rest of the board member recognized that measuring performance along these competency
dimensions could be difficult. As a result, the company started experimenting with obtaining
quantitative measures of these hard-to measure competencies.

The second measure for Steve’s to measure internal business processes is to launch the product on very
less cycle time with superior quality and reasonable cost. The scenario when Apple’s product failed in
market because of decision of CEO (pepcio ceo) to make the product over high priced when company
was succeeding didn’t go well as it was not aligned with the customer’s expectation.

Learning and Growth Perspective: Under this perspective managers must identify measures to answer
the following question: "To achieve our vision, how will we sustain our ability to change and improve?"
Actually, this perspective is related to the employees of the organization, and it measures the extent to
which the organization exerts efforts to provide its employees with opportunities to grow and learn in
their domain. Kaplan and Norton acknowledge that the learning and growth measures are the most
difficult to select; therefore they suggest the following measures as examples: employee empowerment,
employee motivation, employee capabilities, and information systems capabilities.

In Apple one example of the discussion/interview of Steve with Design Director of Macintosh after
resuming back as Consultant /Advisor show case Steve’s intention to understand with how well Apple’s
Design Director understands the company's strategy as well as whether or not his team were asked to
deliver results that are consistent with that strategy. The results of the interview outcome the new idea
of application that can utilize colors on personal computers and devices.