The book of the month: “The Strategy-Focused Organization” by Robert S. Kaplan and David P. Norton

News categories: enterprise and business strategy, strategic enterprise management, business performance management

Kaplan and Norton introduced the “Balanced Scorecard” first in 1992 with an article in Harvard Business Review – presenting a management system which does not rely only on financial information but also on non-financial key performance indicators (KPIs). The main innovation was a structured approach to KPI monitoring, providing orientation and guidance to managers reviewing their now extended reports which typically include – in addition to the 3-4 traditional financial KPIs – some additional 12-16 non-financial ones.

Kaplan’s and Norton’s system was based on extensive research on successfully managed companies. Their research revealed, that these companies had developed a systematic approach to manage customer satisfaction, internal processes, innovation and learning as well as financial performance at the same time in a balanced way. Therefore they proposed to structure KPIs into four so called “perspectives”: financial, customer/market, internal and innovation & learning. The concept of the “Balanced Scorecard” evolved in the following years into one of the most successful management concepts ever and attracted interest from nearly every senior executive worldwide. Some 50% of major US companies have either already implemented a Balanced Scorecard based management system or are just on the way to do this right now.

This unusual success and survival of a management concept over several years is not only based on the ability of the authors to identify and describe a sustaining management trend, but it is also based on their talent to sense new sub-trends and respond by adapting their concept and by developing it further. Since I started to work 2 years ago together with David Norton on the conception of a software application that supports this new concepts (SAP’s Strategic Enterprise Management solution – see also SAP’s White Paper written by David and me: “SAP Strategic Enterprise Management – The Balanced Scorecard: Translating Strategy into Action”) it was amazing for me to see, how the two authors have developed their concept further from conference to conference that I have attended with usually several months in between, taking into account new developments and incorporating these into it.

Now the two authors, who described the original approach from 1992 in more detail in their first book “The Balanced Scorecard: Translating Strategy into action”, which had been published in 1996, came up with the new version of The Balanced Scorecard concept in their recent book, extending The Balanced Scorecard from a pure performance monitoring system into a true strategic enterprise management system. They introduce a new approach that makes strategy a continuous process owned not just by top management, but by everyone. In The Strategy-Focused Organization, Robert Kaplan and David Norton share the results of ten years of learning and research into more than 200 companies that have implemented the Balanced Scorecard. Drawing from more than twenty in-depth case studies – including Mobil, CIGNA, Nova Scotia Power, and AT&T Canada – Kaplan and Norton illustrate how Balanced Scorecard adopters have taken their ground-breaking tool to the next level. These organizations have used the scorecard to create an entirely new performance management framework that puts strategy and the centre of key management processes and systems. In the book, Kaplan and Norton articulate the five key principles required for building Strategy-Focused Organizations: (1) translate the strategy to operational terms, (2) align the organization to the strategy, (3) make strategy everyone’s everyday job, (4) make strategy a continual process, and (5) mobilize change through strong, effective leadership. The authors provide a detailed account of how a range of organizations in the private, public, and non-profit sectors have deployed these principles to achieve breakthrough, sustainable performance improvements.

Written by Robert S. Kaplan, the Marvin Bower Professor of Leadership Development at Harvard Business School, and by David P. Norton, Management Consultant and President of the Balanced Scorecard Collaborative, Inc. – the worldwide competence centre for the Balanced Scorecard concept – this book shows how today’s leaders can shape their own companies to meet the challenges and reap the rewards of a new competitive era. The book is highly recommended to any reader interested in new business performance and strategy management systems that enable organizations to react faster to changes in its environment with appropriate new strategies and to execute on this new strategies in a more reliable way – thus improving business performance to levels never experienced before.

The Strategy-Focused Organization
by Robert S. Kaplan and David P. Norton
Hardcover - 416 pages (September 2000)
Harvard Business School Press; ISBN: 1578512506

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