When Robert Kaplan and David Norton released ‘The Balanced Scorecard’ back in 1996, even they probably didn’t expect it to become quite such an international movement. A management system that helps companies to describe and measure the success of their strategy, particularly in relation to intangible assets like people, the ‘BSC’ is now used by organisations all over the world – from private sector behemoths like GE and IBM to the government of Brazil (there’s even a grandly named ‘Hall of Fame’ for the 100-odd best ones).
With their reputation firmly established (and thanks to their consultancy the Palladium Group, presumably turning a healthy profit), the pair have since been churning out updates to the theory. Their new book, ‘The Execution Premium’, argues that companies can no longer treat strategy management as a one-off exercise – it needs to become a systematic process within the organisation. ‘It’s the endpoint of the evolution of thoughts we started 15 years ago,’ the affable Norton tells MT. ‘As we got into it, we realised we were describing a complete management system. So it’s a really a synthesis of all our other work’.
For the first time, they’ve also tried to synthesise other people’s work. They’ve come up with a ‘closed-loop’ strategy management system, which includes six stages (develop the strategy, translate the strategy, plan operations, monitor the strategy, test and adapt the strategy). The new book discusses how various other management theories like SWAT analysis, Porter’s value chain model, activity-based costing and Six Sigma can be brought to bear at each of these different stages, and used in conjunction with the BSC (and just to make it even more Wiki, they’re even launching a Web 2.0 online community so users can share their practical experiences more regularly).
So what’s new, exactly? Well, the key message is that strategy execution has now become a core business competence, so you have to treat it as such. That means keeping it completely separate from operational matters - even within the boardroom. ‘There are always problems in any organisation, so you can spend all your time together fighting fires,’ says Kaplan (who’s grumpier - perhaps it’s the jet lag). ‘You never have time to talk about strategy – so why not have two separate meetings?’
More radically, they’re also promoting the idea of a new function to look after the process: the Office of Strategy Management. ‘We noticed that a lot of organisations with very good projects didn’t sustain it – they lost energy, and became a bit routine,' says Norton. 'But a few organisations had done something differently: they’d taken the BSC leader and put them in a new position: as owner of all the management processes related to the BSC’. This new Office of Strategy Management is responsible for co-ordinating the strategic efforts of all the different departments within the company, as well as setting the update agenda for the senior team.
Not all of the new book’s theories ring true – notably an ambitious claim that effective leadership is not only necessary but also sufficient for the system (on the dubious grounds that the system is now so well-established in its own right that you can just plug in a reasonable CEO and it will work perfectly) - but its central thesis seems pretty plausible. And either way, the book’s going to go down well with the Kaplan and Norton devotees in the Hall of Fame...
'The Execution Premium: Linking Strategy to Operations for Competitive Advantage' by Robert Kaplan and David Norton, published by Harvard Business Publishing, is out now.
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Books Special: Kaplan and Norton on The Execution Premium