1. Balanced Scorecard Kaplan & Norton: HBR July-August 2005: repeat of 1992 seminal article Feb 2004: Strategy Map Oct 2005: Examples March 2006: Implementation examples Finland 2010

2. Perspectives GOALS & PERFORMANCE MEASURES –Financial perspective How do we look to shareholders? –Customer perspective How do customers see us? –Internal Business perspective (BPR) What must we excel at? –Innovation & Learning perspective Can we continue to improve & create value? Finland 2010

3. Example: anonymous semiconductor company FINANCIAL perspective GOALSMEASURES SurviveCash flow SucceedQuarterly sales Growth Operating income by division ProsperIncrease in market share Increase in Return on Equity Finland 2010

4. CUSTOMER perspective GOALSMEASURES New products% sales from new products % sales from proprietary products Responsive supply On-time delivery (customer definition) Preferred suppliers Share of key accounts’ purchases Ranking by key accounts Customer partnerships # of cooperative engineering efforts Finland 2010

5. INTERNAL BUSINESS perspective GOALSMEASURES Technology capability Benchmark vs. competition Manufacturing excellence Cycle time Unit cost Yield Design productivity Silicon efficiency Engineering efficiency New product innovation Schedule: Actual vs. Planned Finland 2010

6. INNOVATION & LEARNING perspective GOALSMEASURES Technology leadership Time to develop next generation Manufacturing learning Process time to maturity Product focus% products equalling 80% of sales Time to marketNew product introduction vs. competition Finland 2010

7. 2004 article: Strategic Readiness Strategy map: framework to link intangible assets to shareholder value creation –Through the 4 perspectives 3 Intangible Asset categories essential to implement strategy (Learning & Growth) –Human Capital Skills, training, knowledge –Information Capital Databases, information systems, networks, infrastructure –Organizational Capital Culture, leadership, alignment with goals, knowledge sharing Finland 2010

8. Strategy Map: Intangible assets link to Internal Process Intangible assets make up Learning & Growth perspective Map to Internal Process perspective –Operations Management Produce & deliver products & services –Customer Management Enhance customer value –Innovation Create new products & services –Regulatory & Social Improve communities & the environment Customer perspective –Price, quality, availability, selection, functionality, service, partnership, brand Financial perspective –Productivity strategy Improve cost structure Increase asset utilization –Revenue growth strategy Enhance customer value Expand revenue opportunities Finland 2010

9. Consumer Bank (anonymous) example: Human Capital Finland 2010

10. Information Capital Readiness Finland 2010

11. Organization Capital Readiness Finland 2010

12. SCM & BSC Beasley, Chen, Nunez & Wright, Strategic Finance 87:9 [2006] CATEGORYPurposeAim Learning & Growth for Employees To achieve our visionHow will we sustain our ability to change & improve? Internal Business Processes To satisfy our stakeholders & customers Where must we excel in our business processes? Customer SatisfactionTo achieve our visionHow should we appear to our customers? Financial PerformanceTo succeed financiallyHow should we appear to our stakeholders? Finland 2010

13. Learning & Growth for Employees GOALSMEASURES Increase employee process ownershipEmployee survey scores Improve information flowsChanges in information reports Frequencies across supply chain partners Increase employee identification of potential supply chain disruptions Compare actual disruptions with reports of potential disruption drivers RISK-RELATED GOALS Increase employee awarenessNumber of employees attending risk management training Increase supplier accountabilitySupplier contract provisions on risk Increase employee awareness of supply chain risks & other enterprise risks Number of departments participating in supply chain risk identification & assessment workshops Finland 2010

14. Internal Business Processes GOALSMEASURES Reduce waste across supply chainPounds of scrap Shorten time from start to finishTime from raw material purchase to product/service delivery to customer Achieve unit cost reductionsUnit costs per product/service delivered % of target costs achieved RISK-RELATED GOALS Reduce probability & impact of threatsNumber of employees attending risk management training Identify specific tolerances for key processes Number of process variances exceeding specified acceptable risk tolerances Reduce number of exchanges of supply chain risks to other enterprise processes Extent of risks realized in other functions from supply chain process risk drivers Finland 2010

15. Customer Satisfaction GOALSMEASURES Improve product/service qualityNumber of customer contact points Improve timeliness of product/service delivery Time from customer order to delivery Improve customer perception of valueCustomer scores of value RISK-RELATED GOALS Reduce customer defectionsNumber of customers retained Monitor threats to product/service reputation Extent of negative coverage of quality in press Increase customer feedbackNumber of completed customer surveys about delivery comparisons to other providers Finland 2010

16. Financial Performance GOALSMEASURES Higher profit marginsProfit margin by supply chain partner Improved cash flowsNet cash generated over supply chain Revenue growthIncrease in customers & sales per customer % annual return on supply chain assets RISK-RELATED GOALS Reduce threats from price competitionNumber of customer defections due to price Reduce cost overrunsSurcharges paid Holding costs incurred Overtime charges applied Reduce costs outside the supply chain from supply chain processes Warranty claims incurred Legal costs paid Sales returns processed Finland 2010

17. Gaudenzi & Borghesi The International Journal of Logistics Management 17:1 [2006] AHP in balanced scorecard style –Develop formula to evaluate risk within departments Focus on top level criteria –On-time delivery –Completeness –Correctness –Damage/defect free products Finland 2010

18. Gaudenzi & Borghesi Weights CriteriaMeanweightsExtreme1weightsExtreme2Weights On-time delivery 1000.3171000.402500.215 Completeness900.286660.2651000.429 Correctness750.238500.201500.215 Damage-defect free 500.159330.133330.142 315249233 Finland 2010

19. Weights: Contingent upon On-time first vs. Completeness first CriteriaOn-time firstCompleteness first On-time delivery0.360.22 Completeness0.290.43 Correctness0.21 Damage-defect free0.14 Finland 2010

20. On-time delivery evaluation – Manager subjective scores ProcurementWarehouseOrder Cycle MfgTrans. On-time delivery 0.3600.51 0 Completeness0.2900.5111 Correctness0.2111110.5 Defect free0.140.51110 Value scores0.280.67510.820.395 Finland 2010

21. Completeness evaluation – Managerial subjective scores ProcurementWarehouseOrder Cycle MfgTrans On-time delivery 0.2200.51 0 Completeness0.4300.5111 Correctness0.2111110.5 Defect free0.140.51110 Value scores0.280.67510.890.535 Finland 2010

22. Other Business Scorecards in Broader Perspectives Internal auditing in accounting –Campbell, Adams, Campbell & Rose Financial Executive 22:1 [2006] Mental health governance –Sugarman & Kakabadse The International Journal of Clinical Leadership 16 [2008] Finland 2010

23. Marketing natural gas vehicles Janssen, Lienin, Gassmann & Wokaun, Transportation Research Part A 40 [2006] INDICATORS 1.Ratio of natural gas vehicles per compress natural gas fueling stations 2.Type coverages (how many different natural gas vehicle types were available) 3.Natural gas vehicle investment pay-back time 4.Sales per type 5.Subsidies par automobile Finland 2010