Agile Strategy Management in the Digital Age

How Dynamic Balanced Scorecards Transform Decision Making, Speed and Effectiveness

David Wiraeus,James Creelman

• Publisher: Palgrave Macmillan
• Year: 2018
• ISBN:
  9783319763095
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

In a world of rapid and unpredictable change, the problem with strategic planning is that if you follow your plan through to the end, you will get exactly what you used to want.

What you need is a framework for planning and implementing a strategy that is agile enough to adapt to a dynamic environment but focused enough to deliver. That framework is the Dynamic Balanced Scorecard.

The original Balanced Scorecard system has proven the most popular, successful and enduring framework for strategy execution over the last 25 years. Comprising a Strategy Map and a scorecard of KPIs, targets and initiatives, the framework helped organizations distil a strategy into actionable components and measure progress towards a strategic vision, while also implementing and monitoring the actions that drove change.

However, for all its success, the Balanced Scorecard system now needs to evolve for the digital age. Until now, building the system, rolling it out enterprise-wide and adapting it to external changes has been a lengthy process. While the fundamental principles of the system are still sound and relevant, it needs to become nimbler and more responsive.

The book provides a step-by-step guide to agile strategy management: from formulation to implementation to learning and adapting. For each of the steps, the book explains how Dynamic Balanced Scorecards, fit for the digital age, are built and deployed.

© The Author(s) 2019

David Wiraeus and James CreelmanAgile Strategy Management in the Digital Agehttps://doi.org/10.1007/978-3-319-76309-5_1

Begin Abstract

1. Digital Age Strategy Management: From Planning to Dynamic Decision Making

David Wiraeus¹ and James Creelman²

(1)

Stratecute Group, Gothenburg, Sweden

(2)

Creelman Strategy Alliance, London, UK

David Wiraeus (Corresponding author)

James Creelman

The Plan is Nothing, Planning is everything,

General (later President) Dwight Eisenhower

End Abstract

Introduction

Let’s get the clichés out of the way (for now!). We live in turbulent, unpredictable times. Constant disruption is the new status-quo. We need to be more customer-centric. We live in a digitally driven world, where data and ideas move across the globe and at the speed of light and the touch of a button: the digital economy is changing everything. We have the most highly educated workforce in history and the Millennials are fundamentally changing the essence of the employer-employee relationship. We could go on.

Billions of words are being written in books, blogs, and so on, and as many again spoken in podcasts, seminars, conferences, and their like, explaining what all this means in terms of strategic management, future organizational structures, teamwork, innovation, and the rest. Perfect solutions—the much sought-after magic bullets—are being proffered.

No “Perfect” Management Solution

Here’s our take: various frameworks, models, and solutions will emerge to capitalize on the opportunities of the digital age (or the now often-called 4th industrial revolution) and to manage the accompanying risks. We cannot, with any degree of accuracy, predict which will be particularly useful. No one has ever accurately predicted how revolutions will play out or what a post-revolutionary world will look like: it is likely that when it comes to how organizations go to market and create value, there will never be such a time as post-revolutionary.

We can be more confident in predicting that there will never be a “perfect” management solution. Rather, there will be a combination of approaches that will work well in a specific context for a specific timeframe, before becoming dysfunctional and no longer appropriate. To add another cliché, we might always be cursed to, “live in interesting times.”

It’s All About Evolution

Think of it this way: the model we propose builds on the seminal works of many pioneering thinkers. Most notably, the ground-breaking work of Harvard Business Professors Robert Kaplan and Dr. David Norton in evolving the Balanced Scorecard Strategy Execution System. The Balanced Scorecard was introduced as essentially a measurement system that addressed the issues of being overly reliant on financial metrics for managing organizations by adding the non-financial balance (Fig. 1.1 shows the first generation Balanced Scorecard) [1]. The next step saw the inclusion of Strategy Maps to capture causal relationships between the non-financial drivers and the financial outcomes (Fig. 1.2) and, finally, to the articulation of the Execution Premium Process (XPP), to align operations with strategy. Figure 1.3 shows the stages of the XPP, with the sub-steps for each stage.

Fig. 1.1

First generation Balanced Scorecard

Fig. 1.2

A Strategy Map. (Source: Palladium)

Fig. 1.3

The Execution Premium Process

The Balanced Scorecard System, as we shall call it, has evolved continually since its introduction through a seminal Harvard Business Review article in 1992. In an interview with one of the authors, Dr. Norton said, “Bob Kaplan and I launched a revolution, not a static system. It will continue to evolve.” That the originators never trademarked the Balanced Scorecard is testament to their commitment to its evolution and the input of others. Over the last couple of years, Dr. Norton has been describing a model for Age 2 Balanced Scorecard Systems (see Panel 1).

Learning from Genetics

As an allegory, think of genetics. There’s a strong scientific argument that the human being (or any other being) is not actually that important. It is simply a vehicle for genes to continue to survive and, through genetic mutations, evolve to better deal with the challenges of their changing environments. Strategy management is no different. Whatever the vehicle is, what is important is the thinking that underpins the system. New ideas will be introduced (read genetic mutations). Many will be discarded. Others, which are found to be particularly useful, will be kept. Simple evolution. Stop evolving and you die.

Based on the authors’ many years’ experience, research, and hundreds of organizations worked with in shaping and implementing strategic plans, this book adds to the evolutionary, revolutionary, genetics-driven approach. We have myriad observations of successes, failures, and particularly damaging misconceptions. Common lessons emerge, which we will share throughout this book.

Common Challenges

Certain aspects of conventional Balanced Scorecard implementations, as well as the Execution Premium Process, have proven problematic or, more regularly, poorly understood. Kaplan and Norton’s last in their seminal canon of five books that traced the evolution of the Balanced Scorecard System was published back in 2008 [2]. As they and others comment, time has moved on, but evolution does not stop. Figure 1.4 shows our Agile and Adaptive Model for Strategy Management in the Digital Age.

Fig. 1.4

Agile and adaptive strategy execution model

We have no doubt that systems such as the Balanced Scorecard are still required. The fundamental issues that underpinned the introduction of the scorecard system and other similar frameworks (dealing with more dynamic markets, the potential of technology, etc.) are seismically more challenging now than they were in the 1990s or even the first decade of this century. The central “story” of the book is how the principles of the Balanced Scorecard System are evolving for these early stages of the digital age. But first, let’s step back in time—before the first scorecard article. Indeed, all the way back to 1911. What happened in that year has profound implications for today.

The Scourge of Silo-Based Working

At the turn of the twentieth century, Western economies were facing then-revolutionary change as they began to move from a system of craft-based working to leveraging developments in machinery and automation to enable mass production. Various thinkers grappled with mastering this transition, but the most impactful perhaps was Frederick W. Taylor, because of his 1911 published monograph The Principles of Scientific Management, [3].

Faced with increasingly complex industrial models and, at best, a semi-literate workforce, Taylor focused on “simple jobs for simple people.” He advocated the training of workers to do very specific jobs and not think outside of that role. He strongly believed that it was the role of management to “think” and workers to “do.” More than that, he introduced (or scientifically institutionalized) mistrust as a normal part of management. “Hardly a competent workman can be found who does not devote a considerable amount of time to studying just how slowly he can work and still convince his employer that he is going at a good pace,” is how he dismissed the value of an employee and why their “superior” bosses should treat them with suspicion.

Versions of Taylor’s system, such as Fordism (introduced by the Ford Motor Company to drive efficiency into the mass-production of Automobiles), institutionalized this “silo”-based working approach and the accompanying fear- and control-based culture. From the second decade of the nineteenth century onwards, people were encouraged (ordered) to think only of their silo—of their narrow sphere of operations. Terms such as cross-functional teamwork, collaboration, and so on were not part of the scientific manager’s lexicon.

Such siloed thinking essentially introduced the idea of function-based working. We have since continued to structure organizations according to this template: even in the second half of the twentieth century, with the introduction of strategic planning (see below), HR, IT, and so on, the idea of the function prevailed: this is your job, build expertise, and just do that. We have built professions around these functions. Think also of the now widely used contact centres by banks and the like. The person on the other end of the line can only answer questions that relate to their own job (and to a strict script). Nothing outside of that is their job. Therefore, the customer is transferred to another department—and typically must wait on the line for some time: a source of continued irritation to customers.

Frederick W. Taylor would still recognize much of his thinking in today’s organizations, despite their espousing of commitment to values, empowerment, and all this nice stuff. Taylor dismissed front-line or factory-floor workers as idiots and not to be trusted. Although appalling, such attitudes were common in the very hierarchical social systems of the time, when only a minority were well educated. However, to be fair, some of the thinking was very useful for transitioning to a systems-based approach to working.

Today, we benefit from highly educated employees that are constantly contributing to ...