IN THE PREFACE TO OUR FIRST BOOK, The Balanced Scorecard, we stated, “The book, while as comprehensive and complete as we could make it, is still a progress report…. We are confident … that innovating companies … will expand the structure and use of the scorecard even further. So perhaps in a few years readers can look forward to the sequel.”
That forecast was highly accurate on all counts. Since 1996, we have seen the initial set of adopters thrive and prosper by using the Balanced Scorecard as the centerpiece of their management systems and processes. And many other organizations now have adopted the Balanced Scorecard and achieved remarkable results. Adopters throughout the world include large and small, manufacturing and service, mature and rapid-growth, public and private, and for-profit and not-for-profit organizations. As we go to press, The Balanced Scorecard has been translated into nineteen languages, attesting to its universal appeal and applicability.
We first developed the Balanced Scorecard in the early 1990s to solve a measurement problem. In knowledge-based competition, the ability of organizations to develop, nurture, and mobilize their intangible assets was critical for success. But financial measurements could not capture the value-creating activities from an organization’s intangible assets: the skills, competencies, and motivation of employees; databases and information technologies; efficient and responsive operating processes; innovation in products and services; customer loyalty and relationships; and political, regulatory, and societal approval. We proposed the Balanced Scorecard as the solution to this performance measurement problem.
But we learned that adopting companies used the Balanced Scorecard to solve a much more important problem than how to measure performance in the information era. That problem, of which we were frankly unaware when first proposing the Balanced Scorecard, was how to implement new strategies. Statistics from various sources documented that organizations encountered major difficulties and often failed when implementing new strategies. In contrast to this general experience, we observed that a high proportion of the early Balanced Scorecard adopters effectively implemented new strategies and realized positive returns within twelve to twenty-four months. We realized that a new organizational form had emerged—the “Strategy-Focused Organization.” Executives of adopting organizations were using the Balanced Scorecard to align their business units, shared service units, teams, and individuals around overall organizational goals. They were focusing key management processes—planning, resource allocation, budgeting, periodic reporting, and the management meeting—on the strategy. Vision, strategy, and resource allocation flowed down from the top; implementation, innovation, feedback, and learning flowed back up from the front lines and back offices. With their new focus, alignment, and learning, the organizations enjoyed nonlinear performance breakthroughs. The whole truly became much more than the sum of its parts.
We are indebted to many people for helping us understand how to make an organization strategy focused. We have learned from and been inspired by leaders of exemplary organizations:
Many people created change from within their organizations to generate the rich experiences and successful implementations that we describe in the book:
In addition, we learned from the innovative implementations done by our colleagues at the Balanced Scorecard Collaborative: Michael Contrada, Geoffrey Fenwick, Laura Downing, Bill Hodges, Terry Brown, Ann Nevius, Rob Howie, Cynthia Baird, Mario Bognanno, Dave Foster, Randy Russell, and Gaelle Lamotte; by those formerly at Renaissance Worldwide—Francis Gouillart, Sean Hogan, Ryan Englund, and Timothy Henry; and by Ellen Kaplan, who facilitated at The May Institute, New Profit, Inc., and United Way of Southeastern New England.
Our collaborators at Harvard Business School Press—Carol Franco, President; Hollis Heimbouch, Senior Editor; Constance Devanthéry-Lewis, Managing Editor; Barbara Roth, Senior Manuscript Editor; and Laura Noorda, Production Manager—provided inspiration and outstanding support.
We appreciate the assistance of all these many people in helping us create this book.
Robert S. Kaplan and David P. Norton
Boston and Lincoln, Massachusetts, June 2000