Balance Score Card
Ladies and gentlemen, I would like to take this opportunity to discuss with you about the Balanced score card. This paper shall analyse the balance score card approach as used in technology companies. The paper shall also present a coherent and comprehensive comparison between the balance score card approach and the other traditional approaches that were used before. .
The balance score card.
There is no universally accepted definition for a balance score card. The term balance score card means a different thing to different people. However, for the sake of this discussion, the term balance score card is defined as a strategic management and planning tool which is used in various sectors such industry, government, companies and businesses among others in order to align the activities of the organization to the vision and strategies of that organization. The balance score card helps different organization to improve both external and internal communications as well as monitor the performance of the organization against its strategic goals.
Why Balance Score Card Is Important In The Strategic Planning Of Technology Company.
It is prudent to note that most technology companies are always faced by the following challenges: rapidly shrinking product cycle, recruiting, retaining and rewarding technology talent, making and also communication of certain critical product development decisions, tracking the evolution of customer feature demands and use models, disruptive, enabling technologies which can invalidate products or even the entire business.
In order to solve the above outlined challenges, the company ought to employ the use of a balance score card as a strategic management and planning tool. This is because, the balance score card will enable the company to the above mentioned challenges together with other which are of great concern in terms of creating value for customers and the stakeholders.
A company that make use of an effective balance score card in the organization is always effective and efficient in its operation. This is because an effective balance score card focuses on critical performance measures which provide real business intelligence and also contributes to the achievements of employee excellence, business success and operational excellence.
Figure 1: The Balance Score Card Framework
The four perspectives of a balanced score card include.
- Financial perspective
- Customer
- Internal business processes
- Organization perspectives.
Financial perspective
The fundamental objective of financial perspective is to ensure that development expense return on investment is improved. It is true that a technology company can still struggle if product development decisions are flawed despite excelling in many operational disciplines. It is prudent that analyzing ROI and applying it in decision making have to be driven horizontally and vertically in the organization. Such practice is part and parcel to realizing consistent decision making as well as communicating product investment decisions.
Most managers of technology companies do find it difficult to determine the returns on product and technology development expenses. Traditional approaches such as discounted cash flow analysis rarely attracts such managers because of their inefficiency in providing accurate results. This is because such approaches provide weak alignment in the organization regarding the profits that the company is earning as a result of product and technology development. By employing the use of a good balance score card, the organization will be able to provide financial profitability and stability within the organization.
A balance score card unlike the normal cash flow analysis will help the company to make rational decisions regarding what it should invest in and what it should not invest in. This will enable the company to maximise on its revenue and profit obtained as a result of investing in the right product and technology development.
Customer perspective.
The customer perspective focuses on the ability of the organization to meet the needs its esteemed customers. This in turn strengthens the customer relation with the business organization. The balance score card help to track and prioritize issues that are likely to interfere with the product success. . Tracking and prioritization of product issues ensures that the highest risks to the product success in the market place are given much attention as it deserves. This ensures that product produced meets the expectation of the customers.
Because most technology customers do tend to expect continuous improvement in product development, a balance score card ensures the company takes into consideration the varied and changing needs of the customer. A balance score card will ensure that the organization track most pertinent information regarding the needs and requirements of the customers. Therefore, for an organization to satisfy the changing needs of different customers, it is prudent that they adopt the use of a balance score card.
Internal business perspective.
A balance score card provides the perimeters for improving market assessment. It is prudent to note that technology companies cannot rely only on one market assessment. They have to assess, reassess and even re-re-assess the market demand. The balance score card provides parameters for doing this unlike the traditional performance measures which can only provide one market assessment.
Various technology questions need to find out their market share as well as penetration plans against their success threshold. Frequent assessment of the market will enable the company to improve in timing customer purchase, determines variation in buying behaviour of the customer. A balance score card therefore provides a parameter for forecasting the consumer buying behaviour in order to improve market penetration and share of the company.
Organization capacity perspective.
The organization capacity of the balance score card examines what ought to be excelled at. It identifies the most crucial internal processes required for the organization’s strategy to succeed. It focuses on the following process
Innovation cycle; identifies the market and create service offering. Secondly, it examines operation cycle; which deals with building the services and also service delivery. Thirdly post sales services deals with delivery of services to customers. .
It is important to note that it is important to manage the cost and risks associated with development of new technologies. Most challenges facing technology company’s lies in their speed of execution. Most managers in the technology companies do tend to avoid planning efforts especially when the projects are not of the nature of development. However, a balance score card provides parameters necessary for analyzing and refining the problem statement. It also helps in defining and delegating tasks required in attaining the goals of the marketplace. The balance score card also provides parameters for tracking execution and review the results versus expectations.
Comparison
The traditional financial measures such as ROI, net profit, sales growth and the market share is not able to capture the true picture of the firms’ value preposition. This is because they mainly focus on the past. . They mainly focus on the past transactions of the firm thereby disregarding the future benefits. However, the balance score card is able to rectify the above problems associated with relying on traditional performance measures.
Conclusion
This paper has examined various perspectives of the balance score card. The paper has also compared a balance score scard with various traditional measures that were initially used to measure performance before the invention of this performance tool. However, it has been realised that a balance score card is a good performance measure compared to the traditional ones such as the ROI. This is because the traditional is based on past transactions while the balance score card is able to analyse the future benefits. Therefore, as a consultant, I would like to advice technology companies to make use a balance score card. This is because of its myriad advantages in production and product development.
References
Rohm, H., Malinoski, M., Strategy based balanced scorecards for technology. Balanced Scorecard Institute. Retrieved on 6th June 2013from: http://www.balancedscorecard.org/Portals/0/PDF/Technology Company Balanced Scorecard Systems_06222010_Final.pdf.
Niven, P. R. (2005). Balanced Scorecard Diagnostics: Maintaining Maximum Performance. John Willey and sons: New York.
Niven, P. R. (2010). Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results. New York: John Wiley and Sons.
Pham-Gia, K. (2009). Balanced Scorecard - Solving All Problems of Traditional Accounting Systems? U.K: GRIN Verlag.
Robert Kaplan, R. S. (1996). The Balanced Scorecard: Translating Strategy Into Action. U.S.A: Harvard Business Press.
