David Wiraeus and James Creelman

Agile Strategy Management in the Digital AgeHow Dynamic Balanced Scorecards Transform Decision Making, Speed and Effectiveness

David Wiraeus

Stratecute Group, Gothenburg, Sweden

James Creelman

Creelman Strategy Alliance, London, UK

ISBN 978-3-319-76308-8e-ISBN 978-3-319-76309-5

https://doi.org/10.1007/978-3-319-76309-5

Library of Congress Control Number: 2018945201

© The Editor(s) (if applicable) and The Author(s) 2019

This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed.

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The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

I dedicate this book to my wife Vanja and our child Ella, as well as my sister Frida and parents Ulla and Anders, with all my love.

David Wiraeus

For my great nephews Kian Creelman and Ezra French and my great niece Arrabella French. Enjoy the long journey ahead.

James Creelman

Foreword

More than 25 years have passed since Bob Kaplan and I introduced the concept of the Balanced Scorecard through a Harvard Business Review article. This relayed the findings from a research project we led in 1990 with 12 large companies to find better ways to measure performance, rather than relying solely on financial measures. At that time, we were transitioning into the knowledge age, in which intangible assets were becoming more valuable than tangible ones, and where the increasing speed of change in markets meant that financial measures were no longer reliable predictors of future performance.

Financial results would remain, and continue to be, important, at least for commercial entities, but what were the non-financial drivers of those outcomes? This was the question we grappled with.

The answer proved simple and logical. Customers delivered financial results; the organization had to ensure its internal processes delivered value to the customer and that they possessed the required skills and capabilities to deliver those processes effectively and efficiently.

These observations were translated into the Balanced Scorecard framework, which comprised Financial , Customer , Internal Process , and Learning and Growth perspectives, each of which contained objectives (what we want to achieve), measures and targets (how we will monitor progress), and initiatives (how we will deliver to those targets).

A further question we wrestled with was why 90% of organizations failed to deliver to their strategy, even when it was well thought-out and logical. We found that the Balanced Scorecard could describe and operationalize strategies that previously were generally restricted to a very detailed strategic plan, which rarely left the boardroom shelf. Bob and I chronicled the successes of the original tranche of scorecard users in our first book, The Balanced Scorecard: Translating Strategy into Action .

In our continued research, we found that some of the early Balanced Scorecard users, such as Mobil Oil’s North American Division, gained additional value when the strategic objectives were laid out separately to show the causal effect from the learning and growth perspective, through internal processes to customer and financial. Furthermore, although originally launched to overcome strategic performance management and measurement challenges in commercial organizations, government and not-for-profit entities, such as the City of Charlotte, North Carolina, soon adopted the framework. However, to meet their needs, such organizations reordered the perspectives, with stakeholder at the top (typically replacing the term customer) and financial lower down the Strategy Map.

These first Strategy Maps proved as valuable to users as the original Balanced Scorecard itself, as we explained in our second book, The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment and described fully in our third book, Strategy Maps: Converting Intangible Assets into Tangible Outcomes.

The story did not end there. We continued to learn from the experiences of an ever-growing number of users. Our fourth book, Alignment: Using the Balanced Scorecard to Create Corporate Synergies, documented the value organizations gained from cascading the Balanced Scorecard from the corporate level to business units and then to operating departments and support functions, as well as being the basis for strategically aligning external stakeholders.

Our final book. The Execution Premium: Linking Strategy to Operations for Competitive Advantage, set out to offer a complete strategy management system through a six-stage model: defining the strategy, translating the strategy, aligning the organization, aligning operations, monitoring and learning, and testing and adapting.

However, even completing the fifth and final book does not mean the end of the story. On introducing the Balanced Scorecard framework and methodology, Bob Kaplan and I realized we were launching a revolution, not a static system. We knew it would continue to evolve to meet the strategic requirements of organizations in ever-changing and fast-moving markets.

Our work, and most notably the final book, serves as the inspiration for this book, Agile Strategy Management in the Digital Age  – How Dynamic Balanced Scorecards Transform Decision Making, Speed, and Effectiveness.

Just as Bob and I grappled with the challenges of transitioning from the industrial age to the knowledge age, Wiraeus and Creelman turn their attention to the challenges of moving into the digital age.

Changing roles from Balanced Scorecard historian to Balanced Scorecard futurist, the authors inventory the issues that must be integrated into the management systems of the future – They are to be commended for the audacity of their undertaking and for the reach of their results.

The revolution continues.

David P. Norton

Massachusetts

March, 2018

Acknowledgements

This book could not have been written without the advice, knowledge, and support of many people, whom we here acknowledge.

Bill Barberg (Insightformation), James Bass (Certified Scrum Professional), Bjarte Bogsnes (Statoil), James Coffey (Beyond Scorecard), Deepanjan Chakrabarty (previously Palladium), Marcello Coluccia (Imerys Graphite & Carbon), Jade Evans (Palladium), Liam Fahey (Leadership Inc.), Elena Gómez Domenech (Palladium) Mihai Ionescu (Strategys), Saliha Ismail (Ministry of Works, Municipality Affairs & Urban Planning, Bahrain), Brett Knowles (pm2Consulting), Stanley Labovitz (SurveyTelligence), Armen Mnatsakanyan (ConconFM), Sandy Richardson (Collaborative Strategy), Hubert Saint-Onge (Saint-Onge Alliance), Alistair Schneider ( startupsinnovati​on.​com ), Andreas de Vries (Oil & Gas Strategy Management Speuncialist expert), Iain Wicking (Oyonix Group).

We also extend our gratitude to Dr. David Norton for providing the Foreword to this book and to all our ex-colleagues in Palladium, who shared their knowledge and experience with us over many years.

Thanks also to Palgrave Macmillan’s Stephen Partridge and Gabriel Everington for their continued support and guidance.

Finally, James would like to thank Matt Sabbath Stark, Hugh Sturrock, Hugh Macleod, and Anto Brownes for their many nights in the Earl of Derby, Kilburn, London, patiently listening to his constant talking about the writing of the book.

Contents

1 Digital Age Strategy Management:​ From Planning to Dynamic Decision Making 1

Introduction 1

No “Perfect” Management Solution 1

It’s All About Evolution 2

Common Challenges 5

The Scourge of Silo-Based Working 6

The Strategy Function and Process 8

Assumptions that Must Be Verified in Execution 10

End-to-End Process Management 10

Strategic Innovation 12

The Importance of Agility 13

An Agile and Adaptive Model for Strategy Execution in the Digital Age 14

Parting Words:​ Shifting Paradigms 19

Self-Assessment Checklist 20

References 21

2 From Industrial- to Digital-Age-Based Strategies 23

Introduction 23

Challenging the Notion that “Strategy is dead!” 25

Defining Strategy 26

Defining the Sense of Purpose 28

Finance-Based Planning 34

Capturing the Voice of the Customer 36

From Finance-Based to Technology-Based Planning Self-Assessment Checklist 42

References 44

3 Agile Strategy Setting 45

Introduction 45

Crafting a Vision Statement 45

Identifying the Value Gap 48

Environmental Scanning 49

SCOPE Situational Analysis 53

The Danger of Being Frozen in Time 54

Senior Management Interviews 55

Using an External Facilitator 56

A Strategic Change Agenda 59

Parting Words 62

Self-Assessment Checklist 65

References 66

4 Strategy Mapping in Disruptive Times 69

Introduction 69

Starting with the Strategy Map 69

Writing Objectives 70

Keeping Strategy Maps Focused 73

Objective Statements 73

The Value of Strategic Themes 75

The Power of Cause and Effect 79

Parting Words 83

Self-Assessment Checklist 87

References 88

5 How to Build an Agile and Adaptive Balanced Scorecard 89

Introduction 89

The Purpose of KPIs 90

Four Steps of KPI Selection 92

The Balanced Scorecard Is Not a Measurement System 96

The Science of Measurement 98

Setting Targets 103

Choosing Strategic Initiatives 106

Parting Words 109

Self-Assessment Checklist 110

References 112

6 Driving Rapid Enterprise Alignment 113

Introduction 113

Traditional Approaches 113

An Agile Approach 117

Team Discussions 120

Alignment and Synergies 122

Parting Words 125

Self-Assessment Checklist 126

References 127

7 Aligning the Financial and Operational Drivers of Strategic Success 129

Introduction 129

Aligning Budgeting with Strategy 129

Killing the Budget 134

Linking Operations to Strategy 139

Parting Words 147

Self-Assessment Checklist 148

References 149

8 Developing Strategy-Aligned Project Management Capabilities 151

Introduction 151

Agile Project Management 153

The Transformation Office 156

Measuring Impact 159

A Portfolio Approach 160

Parting Words 162

Self-Assessment Checklist 165

References 166

9 Unleashing the Power of Analytics for Strategic Learning and Adapting 167

Introduction 167

Correlations and Causality 168

Analytics and KPIs 169

Analytics and Decision Making 169

Advanced Analytics and Strategy Management 172

Required Capabilities 175

Simple Analytics 177

Performance Reviews 179

Strategy Reports 182

A Decline in the Importance of KPIs 182

The Strategy Refresh 183

Implications for the Strategy Office:​ Practitioner View 185

Parting Words 186

Self-Assessment Checklist 189

References 190

10 How to Ensure a Strategy-Aligned Leadership 191

Introduction 191

The Importance of Context 192

Leadership for the Execution of Strategy 193

Strategic Leadership:​ Research Evidence 199

Agile Leadership in an Age of Digital Disruption 201

Assessing the Models 204

Parting Words 205

Self-Assessment Checklist 205

References 206

11 How to Ensure a Strategy-Aligned Culture 207

Introduction 207

Defining Culture 209

Corporate Values 210

Leadership and Culture 213

Driving Culture Change with the Balanced Scorecard 214

Cultural Assessment 215

Integrating Data 216

Parting Words 218

Self-Assessment Checklist 222

References 223

12 Ensuring Employee Sense of Purpose in the Digital Age 225

Introduction 225

Gallup Research Evidence 225

Changing the Employee-Employer Relationship 227

The End of Appraisals 228

The Dangers of Assigning KPIs to Individuals 229

Changing the Conversation 230

Theory X and Theory Y 231

A Sense of Purpose 231

Deloitte Research Findings 232

Communication 234

Human Capital Development to Execute Strategy 237

Parting Words 238

Self-Assessment Checklist 240

References 241

13 Further Developments:​ Driving Sustainable Value Through Collaborative Strategy Maps and Scorecards 243

Introduction 243

Corporate Social Responsibility 243

Triple Bottom Line 244

Nova Nordisk Case Illustration 244

Sustainability Strategy Map 245

Shared Value 248

Shared Value Explained 248

Positive Impact 249

Networked Organizations 249

Case Illustration:​ Thriving Weld 250

Robust Shared Measurement System 252

Improved Engagement and New Actions 254

Parting Words 254

Self-Assessment Checklist 256

References 257

14 Conclusion and 25 Key Strategic Questions 259

Introduction 259

Agile and Adaptive 259

25 Key Strategic Questions 260

Stage 1:​ How to Formulate Strategies for the Digital Age 260

Stage 2:​ How to Build an Agile and Adaptive Balanced Scorecard 263

Stage 3:​ Driving “Rapid” Enterprise Alignment 265

Stage 4:​ Getting Results Through Agile Strategy Execution 266

Stage 5:​ Unleashing the Power of Analytics for Strategic Learning and Adapting 268

Underpinning the Model 270

Final Words 272

References 272

Index273

List of Figures

Fig. 1.1 First generation Balanced Scorecard2

 

Fig. 1.2 A Strategy Map. (Source: Palladium)3

 

Fig. 1.3 The Execution Premium Process4

 

Fig. 1.4 Agile and adaptive strategy execution model5

 

Fig. 1.5 Age 2 Strategy Management System20

 

Fig. 2.1 Stage 1: How to formulate strategies for the digital age24

 

Fig. 2.2 Mapping the customer journey38

 

Fig. 3.1 Stage 1: How to formulate strategies for the digital age46

 

Fig. 3.2 A PESTEL analysis50

 

Fig. 3.3 Porter’s Five Forces framework50

 

Fig. 3.4 A SWOT analysis template51

 

Fig. 3.5 Strategsys SWOT analysis. (Source: Strategsys)52

 

Fig. 3.6 Strategic Change Agenda60

 

Fig. 3.7 FBI Strategic Change Agenda61

 

Fig. 3.8 FBI strategy map62

 

Fig. 3.9 Strategic Change Agenda, arranged from four perspectives63

 

Fig. 4.1 Stage 2: How to build an “agile,” and “adaptive,” Balanced Scorecard System72

 

Fig. 4.2 Strategic themes within the internal process perspective76

 

Fig. 4.3 Example of strategic themes within customer and internal process perspectives. (Source: Palladium)76

 

Fig. 4.4 A.W. Rostamani strategic pillars77

 

Fig. 4.5 Mobil oil linkage model for 199481

 

Fig. 4.6 Intellectual capital model82

 

Fig. 4.7 The risk Bow-Tie86

 

Fig. 5.1 Stage 2: How to build an “agile,” and “adaptive,” Balanced Scorecard System90

 

Fig. 5.2 Three sub-processes of hospital example strategic objective94

 

Fig. 5.3 Initiative scoring model108

 

Fig. 6.1 Stage 3. Driving rapid enterprise alignment114

 

Fig. 7.1 Stage 4: getting results through agile and adaptive strategy execution130

 

Fig. 7.2 Statoil’s alternative to the budget132

 

Fig. 7.3 Statoil’s menu for managing costs133

 

Fig. 7.4 Using rolling forecasts alongside Balanced Scorecard targets and initiatives. (Source: Palladium)137

 

Fig. 7.5 Driver models provide the analytical framework to focus on key leverage points and to link operational KPIs and action plans to strategic priorities137

 

Fig. 7.6 Decomposing an internal process objective into operational drivers and KPIs145

 

Fig. 7.7 Patient access operational dashboard146

 

Fig. 8.1 Stage 4: getting results through agile and adaptive strategy execution152

 

Fig. 8.2 Execution: the “seventh” stage of the execution premium process152

 

Fig. 8.3 The roles of the three offices within a transformation office. (Source: ShiftIn)159

 

Fig. 8.4 Initiative realization time-lag. (Source: Synergys)161

 

Fig. 9.1 Stage 9. Unleashing the power of analytics for strategic learning and adapting168

 

Fig. 9.2 The 4Vs of big data170

 

Fig. 9.3 Gartner analytic ascendancy model. (Source: Gartner)171

 

Fig. 9.4 A Fishbone diagram177

 

Fig. 9.5 The five whys problem solving tool178

 

Fig. 10.1 Strategy-aligned leadership and culture192

 

Fig. 10.2 The Leadership for the Execution of Strategy Model. (Source: Palladium)194

 

Fig. 11.1 Strategy-aligned leadership and culture208

 

Fig. 11.2 A Strategy Map with a “build a high performance culture” objective214

 

Fig. 11.3 High-level Eggi schematic, showing alignment as the core focus. (Source: SurveyTelligence)221

 

Fig. 12.1 Create a strategt-aligned workforce for the 4th industrial revolution226

 

Fig. 12.2 The causal relationship between the four human capital pillars and ultimate financial or mission success237

 

Fig. 13.1 A Sustainability Strategy Map. (Source: pm2Consulting)246

 

Fig. 13.2 A Sustainability Strategy Map aligned to the 21 Sustainability Business Goals. (Source: pm2Consulting)247

 

Fig. 13.3 Thriving Weld County Strategy Map. (Source: Insightformation)251

 

List of Tables

Table 1.1 Self-assessment checklist21

 

Table 2.1 Self-assessment checklist43

 

Table 3.1 Self-assessment checklist66

 

Table 4.1 Self-assessment checklist88

 

Table 5.1 Self-assessment checklist111

 

Table 8.1 The difference between traditional and agile approaches to project management154

 

Table 8.2 Self-assessment checklist166

 

Table 9.1 Performance area breakdown for customers that provided an overall rating of 5179

 

Table 9.2 Performance area breakdown for customers that provided an overall rating of 3179

 

Table 9.3 Self-assessment checklist189

 

Table 10.1 Self-assessment checklist206

 

Table 12.1 Self-assessment checklist241

 

Table 13.1 Self-assessment checklist256