Technology Company Balanced Scorecard Systems 06222010 Final

Strategy-Based Balanced Scorecards for Technology
Companies
Do you have a strategy to grow your business that is aligned with
your vision? Are your business and support units aligned with
organization strategy? Are employees and the work they do aligned
with strategy and a shared vision for the future? How are you
keeping score and communicating performance progress internally
and externally toward goals?

If you would like to develop an aligned business strategy, and
measure and communicate with clarity how well you are executing
your strategy, then a strategy-based balanced scorecard system By Howard Rohm
may be what you need. President and CEO
Balanced Scorecard Institute
“Balanced scorecard” means different things to different people. At
one extreme, measurement-based balanced scorecards are simple
&
dashboards of performance measures grouped into categories that Mark Malinoski
are of interest primarily to an organization’s managers and Founder, RKS Innovations
executives. Typical categories include financial measures, and
customer, process, and organization capacity measures. Measurement-based scorecards almost always report
on operational performance measures, and offer little strategic insight into the way an organization creates
value for its customers and other stakeholders.

At the other extreme, a strategic performance scorecard system is an organization-wide integrated strategic
planning, management and measurement system. Strategy-based scorecards align the work people do with
corporate vision and strategy, and communicate strategic intent throughout the organization. In other words,
these systems incorporate the culture of the organization into the management system.

In strategy-based scorecards, performance measures are only one of several important components, and the
measures are used to better inform decision making at all levels in the organization. In strategy-based balanced
scorecard systems, performance measures are the result of thinking about business strategy first, to measure
progress toward goals. In strategy-based systems, the first question to answer is the strategic question: “Are we
doing the right things?” The operations, process, and tactical questions come later: “Are we doing things right”.

Over the past decade balanced scorecards have evolved from systems that simply measure performance to
holistic strategic planning and management systems that help manage and track strategy execution. Despite this
evolution, the majority of balanced scorecards that we have seen over the past 10 years use a “just give me the
measures” philosophy. These measure-centric dashboard scorecards are interesting, but not very robust and not

975 Walnut Street, Suite 360 . Cary, North Carolina 27511 USA . Phone: 919.460.8180 Fax 919.460.0867 . www.balancedscorecard.org

Strategy-Based Balanced Scorecards for Technology Companies – Page 2 of 14

nearly as helpful as they could be. These scorecards remind me of the old Wendy’s commercial: “Where’s the
beef?” Strategy-based scorecard systems, on the other hand, create a “strategic thinking” mentality in an
organization, and can help lift the organization and its workforce to a higher, more performance-oriented way to
think and work.

Each organization is unique, and there is no “one scorecard fits all” solution. This article describes how to
develop a strategy-based balanced scorecard system for technology companies. We’ll share some lessons
learned from developing strategic performance scorecard systems in dozens of businesses and industries over
the past 10 years.

The Balanced Scorecard as a Technology Company’s Strategic Planning and
Management System
Technology company management teams are challenged by:

 Rapidly shrinking product cycles
 Recruiting, retaining and rewarding technology talent
 Making and communicating critical product development decisions
 Tracking the evolution of customer feature demands and use models
 Disruptive, enabling technologies that can invalidate products or entire business models

In addition, executives rarely communicate the strategic manner in which the business is being directed. The
typical result is disagreement and misalignment in how these challenges are perceived and addressed
throughout the company.

Any technology company strategy needs to embrace these challenges. Strategy is a company’s approach to
achieving its vision--it’s the organization’s “game plan” for success. One thing the technology company’s
strategy needs to define is how it will measure product planning and development success. Strategy needs to
define how ideas are advanced into opportunities. Passionate technology workers need to know why their ideas
and views were embraced, delayed, or discarded. Strategy must describe the timing of such considerations, so
that investments in programs underway are protected from an ill-timed innovation capturing the minds of
employees. Similarly, programs that are off track need to sound alarms so that corrective action can be taken.
Strategy needs to guide when and how to sound those alarms and ensure necessary corrections are taken.
Strategy needs to dictate tracking customer feature evolution, and if the company wields the core technology its
products need to be successful in the marketplace.

Using a balanced scorecard as the strategic planning and management framework allows a company to deal
with these and other issues that matter to creating value for customers and stakeholders, such as process
efficiency, financial performance, and organizational capacity and readiness. Starting with a strategic view of
how the organization creates value for customers, a scorecard system links strategy to what must be done
operationally to be successful. Good scorecard systems focus on the critical few performance measures that
provide real business intelligence and contribute to the achievement of operational excellence, employee
excellence, and business success. But more important, these systems focus on the elements of strategy that can
be made actionable – strategic objectives that are the building blocks of strategy.



Developing a Technology Company Balanced Scorecard System
The logic of building a scorecard system and using the system as the organization’s strategic planning and
management framework starts with an understanding of the organization’s customers and stakeholders, and
their needs. The management team then develops and validates the strategic components of the management
system. The components include mission, vision, core values, strategic perspectives (i.e., performance
dimensions), strategic themes and desired strategic results, strategic objectives, an organization-wide strategy
map, performance measures and targets, and strategic initiatives aligned with the objectives.

Strategy is the common thread through the scorecard system and forms the basis for communicating the
organization’s approach for gaining competitive advantage (for a business), or in the case of a public or non-
profit organization, for improving mission effectiveness for stakeholders. The finished strategy-based balanced
scorecard system translates customer needs, mission, and values into organization goals, strategy, objectives,
performance measures, and new initiatives. In a strategy-based scorecard system, strategy is analyzed through
four performance dimensions (perspectives): financial (stewardship for government and non-profits),
customer/stakeholder, business processes, and organization capacity.

The figure below shows how the strategic components relate to each other. Organization alignment comes from
linking the strategic components at “high altitude” to the components at “low altitude” in an orderly fashion,
and communicating the organization’s story of value creation for customers and stakeholders.
The Logic Of Balanced Scorecard
Figure 1: the Logic of Balanced Scorecard StrategicStrategic Planning
Planning

Strategic
Altitude
30,000 ft. What is our purpose? What
Customer/ Mission do we do?
Stakeholder
Needs
Vision What is our picture of the future?

Strategic What performance lenses should we
25,000 ft. Perspectives use to evaluate results?
Strategic Themes & What are our key high-level strategies
(“Pillars of Excellence”)? What results do
Results we want to satisfy our customers needs?
What continuous improvement activities are
Objectives needed to get results?
15,000 ft. How do we create and improve value for
Strategy Map customers?
Performance Measures How will we know if we are achieving the
& Targets results we want?

Specifically, what projects will
Ground Strategic Initiatives improve strategic performance?

A key strategy development © 2010 Balanced the creation of several company. All rights reserved.
step is Scorecard Institute, a Strategy Management Group high-level strategies (i.e., strategic themes),
associated strategic results, and strategic objectives for each theme. Strategic themes are aligned with the
organization’s vision and mission, and the theme’s strategic result describes a high-level outcome of successfully
implementing the strategic theme. Usually three or four themes define the business strategy of the organization
at a high level. Examples of strategic themes include Customer-Focused Operational Excellence, Market Driven



Technological Excellence, Strategic Partnering, and Growth Through Innovation. Many other themes are
possible, and the selection of vision and aligned strategic themes and results make for unique performance
scorecard systems for different organizations.

Another key development step is the creation of strategic objectives -- the “DNA” of strategy. Objectives are
expressed as continuous improvement actions that can be documented, measured, and made actionable
through initiatives and projects. Once developed, objectives are linked to form a “strategy map.” A strategy map
shows graphically how the organization creates value for customers, stakeholders, and employees. The strategy
map is constructed by linking strategic objectives using cause and effect relationships. A strategy map is one of
the most effective communication tools an organization can use to build transparency, alignment, and a focus
on results. The figure below shows how objectives (the ovals) are linked in cause-effect relationships to define a
strategy story of how value is created for customers and business owners.

Figure 2: a "Strategy Map" Tells a Story of Value Creation

Leading to a More Successful Business

Then financial performance will
Financial improve…
Perspectives

Customer/ Then customers will be more
Stakeholder satisfied…

Internal
Then process efficiency and quality
Processes
will improve…
Organizational
Capacity If we develop staff and
infrastructure capacity, and provide
Strategic appropriate tools and technology…
Objectives

The remaining sections of this article describe a thinking process around a set of possible strategic objectives for
a technology company, followed by a strategy map that shows the company’s value creation chain in the form of
a strategy map.

Aspects of a Technology Company’s Strategy
Companies that serve similar markets will often share similar traits in their strategies. These traits often stem
from common market opportunities and also from common pain points, which have an intrinsic association with
the challenges of the marketplace. We have seen such shared traits in the strategic objectives of technology
companies.

Key characteristics of most technology market segments are shown in the figure below:

 Disruptive, enabling technologies, which lead to….
 New capabilities, which lead to….
 Evolving use models, which drive….



 Shrinking product cycles

Figure 3: Technology Company Market Characteristics

The technology company is typically staffed and managed by personalities that are drawn to such a dynamic
marketplace. Many of these personalities thrive on innovating the next disruption, capability set, and use model.
Simply, the technology company must disrupt their marketplace or risk having their business and market share
disrupted.

As technology companies grow, their strategy needs to guide the business processes within this dynamic
environment. Otherwise, decision making can become misguided and threaten the long-term success of the
business.

This is where strategy steps in and guides decision making. Strategy defines the approach chosen to achieve an
organization’s vision, what actions to focus on, how to prioritize important projects, what to measure to ensure
priorities are being met, how to empower operational decisions in line with the strategy, and how to protect
those decisions from appealing options that are not aligned with the strategy.

The remainder of this article looks at one strategic theme that may be typical for a technology company --
“Disrupt the Marketplace.” Of course, each company will have more than one theme. Most companies have
three or four high-level strategic themes. Each of these themes will yield unique objectives and linkages that
differentiate the company from its competitors. We will look at one theme, Disrupt the Marketplace, and its
associated strategic result, Successfully create new market demand in uncontested markets. This will serve as a
core reference for a technology company to identify those strategic objectives that are most appropriate for
their company and market situation.

Strategic objectives from four perspectives, which help define technology companies within the theme of
Disrupt the Marketplace, are discussed below. While other themes and objectives are needed to “tell our story”,
the objectives below are especially important to the technology company’s value creation story.

Financial Perspective
Strategic Objective: Improve Development Expense Return on Investment (RoI)

A technology company that excels in many operational disciplines can still struggle if its product development
decisions are flawed. Product management decisions within technology companies need to be based in part on
the estimated and measured return on product development expense. A clear, consistent practice for analyzing
RoI and applying it in decision making must be driven vertically and horizontally throughout the organization.
Such a practice is an inherent requirement to realizing consistent decision making and communicating product
investment decisions.



Issues:
Managers of technology companies are frequently dissatisfied with their ability to determine the return on their
technology and product development expenses. Traditional return on investment (RoI) approaches, such as a
discounted cash flow analysis, rarely win the hearts and minds of technology and marketing stakeholders. Often
the analysis, and consequently the ownership, is left with the finance team, while decisions on how much to
spend, when to spend it, and what to spend it on, are happening elsewhere in the company. The end result is
weak alignment throughout the organization with regard to profitability contributions of product development
and support efforts.

An alternative return analysis approach that meets these requirements should be used:

 The single financial metric for product planning and management purposes
 Traceable to profitability metrics; Operating Income, EBIT or EBITDA
 Scales from the project level, to the product line, business unit and corporation

A single, scalable financial metric can guide decision making on what to invest in and when, and as important,
what not to invest in. Consistent consideration of the metric will ensure the pursuit of the programs with the
highest revenue and margin potential. With this as a strategic priority, the technology company maximizes its
revenue and profit derived from successful innovation and product development. Increasing profits and
increasing revenue are two additional strategic objectives that complete the financial perspective picture of this
company’s strategy.

Customer Perspective
Strategic Objective: Strengthen Customer Interactions

Technology customers will typically have strong belief systems underpinning what supplier they do business
with and what products/services they purchase. They require the ability to interact with the supplier’s
organization, and will grade the supplier on how successful those interactions are. It’s of strategic importance
that customer facing personnel, and those in support roles, place a priority on that customer interaction
consistently being a positive one.

Issues:
The pace of products in technology markets often do not allow for flawless product introductions. Customer use
of the product will generate lists of issues such as; “How does it do X?” and “Can it do Y?” and “When I do this, Z
happens.” Customer facing employees need to systematically track these issues to ensure:

 All issues are systematically tracked (to the extent that if it’s not tracked then it’s not an issue.)
 Highest priority issues are identified and have the necessary resources applied to resolve them.
Expectations for resolution are set with the customer and reliably met.
 The indicators of use model evolution are extracted from the stream of issues.

Tracking and prioritizing issues ensures that the highest risks to product success in the marketplace receive the
most attention. Satisfaction, retention, and referral value is maximized by responding to customer issues.



Strategic Objective: Accelerate New Features and Workflows

Key customers can serve as “lighthouses” to guide the way on new feature demands and evolving workflows.
Lighthouse customers are not necessarily the largest clients or user groups, but they can be. Lighthouse
customers understand the workflows and technologies they need, and which product/service vendors are most
likely to provide them. It’s strategically important to identify lighthouse customers, work closely with them to
track their issues, set expectations for their resolution, and consistently meet those expectations at a rate that’s
perceived to be the fastest, most responsive in the segment.

Issues:
Technology customers tend to expect, and in some cases demand, continuous improvement in the
products/services they purchase. A technology customer typically will consider an upgrade or enhancement over
a replacement, even if these upgrades come at a cost. If the customer does not act on the upgrade, his
satisfaction level will still be higher by simply knowing the option is available. The supplier who sets the pace in
the segment for continuously improving and refreshing their product offerings will typically be the leader in that
segment.

In technology businesses, interaction and participation in the marketplace is the primary source of information
regarding what the next set of product/service requirements might be. Issue tracking becomes the touchstone
of the organization with the marketplace. It yields the most precious information of how the use models can
evolve once the next product feature is introduced. There are no market reports or analysis that can provide the
adequate and timely information on what product/service features to bring to market. Given that,
systematically capturing and operating on market experience data is a strategic function. The gems of insight
that spark innovation, birth the next feature set, and result in market leading products and services lie within
this stream of experience data.

Often times, a customer engagement will result in a “Your product should do this” line of discussion. The natural
reaction of the customer facing personnel is to defend the product, recite specifications, review original
proposal details, or take some similar approach to reset the customer’s perspective and expectations. New
feature and workflow acceleration is born out of this type of client engagement. The “your product should do
this” input might be a revelation of significance. These conversations need to be captured and analyzed for
trend indicator value.

Internal Business Processes Perspective
Strategic Objective: Improve Market Assessment

Assessing, re-assessing and re-re-assessing market demand is imperative. The trend for increasing rate of change
in technology markets has no end in sight. A technology company cannot rely on one market assessment at one
point in time to guide project priorities. Market assessment needs to be continuous.

A strong example of a failure in this area is the Iridium satellite phone. Making a call from-anywhere-to-
anywhere was a lofty goal that Iridium set out to achieve. Along the way, the success of much lower cost and
lighter weight cellular systems eroded any chance that Iridium would find a market to return a profit on its
investment. It’s difficult to argue that starting the Iridium project was a mistake. It’s not difficult to argue that it



should have been canceled or at least re-directed before the investment of USD billions and the launch of 72
satellites.

Issues:
Technology companies must continually validate their market share and penetration plan against success
thresholds. These success thresholds need to comprehend feature demands and workflows, in concert with
market share and margin projections. The market conditions at the completion of product development may be
seen differently compared to the market conditions that justified the start of product development. The decision
to launch is the last opportunity to avoid engaging the entire distribution channel in what might become a failed
product. In many cases, a product is launched because development is complete, not because market conditions
still justify its launch.

Once the new product is launched, sales forecast accuracy becomes critical to determining whether the
objectives of a product plan are being achieved, or if corrective actions need to be taken. We’ve seen large
investments in CRM packages that have not resulted in improved sales forecasting accuracy due to:

 Weak definition of the customer’s buying cycle and the validation criteria
 Variations in the buying cycle and criteria across market segments, customer groups, or geographic
regions prohibiting a high-level rollup
 Ambiguity in timing customer purchases

For technology companies, this is a strategic imperative as shrinking product cycles collapse the window of
profitability and product success. Customers are increasingly demanding on lead times, while operations teams
are increasingly adverse to inventory. Forecast accuracy that can support or refute product plans for market
penetration has become critical for product success.

Strategic Objective: Improve Concept Development and Prioritization

For a technology company to continuously lead in its market segment, it needs to maintain strength in the
technologies that enable new capabilities. Computer displays and televisions are a recent example. Flat panel
displays have entirely replaced CRT displays and rear projection systems based on size, aspect ratio and
resolution. The set of technologies enabling flat panel displays have been competing in a price and performance
race, with LCD in the lead. Companies that are the leaders in LCD display technology are market leaders in
computer and entertainment display. “Chose the best enabling technology” is a strategic objective for
technology companies.

Issues:
The blood that runs through the veins of technology companies is the passion, devotion, and commitment of its
technologists. Technologists are those that thrive on the pace of innovation and product development and strive
to be part of it. Technologists can be found in many disciplines; management, marketing, R&D, operations or
field organizations. In return for their contributions, they need to believe in the continuing success potential of
their organization and its ability to achieve and sustain leadership positions in its markets. When technologists
see their organization acting on innovation opportunities and successfully delivering leading products to the
marketplace, both confidence and commitment is strengthened. Weaknesses in making and communicating
decisions risk discouraging technologists and consequently lessening the likelihood for continuing success.



Opportunities for innovation do not wait on action, or on the company to commit its resources to the most
strategically important opportunity. By continuously queuing a funnel of opportunities that the technologists
identify, the debate can be conducted as to which are selected, and why. As important is capturing and
communicating why other opportunities were not selected.

Strategic Objective: Improve Product Life Cycle Management

Once the commitment to an enabling technology has been made, products need to be developed. A balance
needs to be struck between features that can be delivered to the market the soonest versus those that will have
the biggest impact on the use model. When a technology company controls the use model of a market segment,
they frequently become major market share winners. A prime example is how Apple used PDA touch screen
technology coupled with its intuitive operating system to move into the mpeg player and cell phone markets.
Apple has been re-known for ease-of-use computing. The decision to become a leader in touch screen
technology positioned them to make excellent product development decisions on the iPod, iPhone and iPad.

Issues:
The most crucial decisions a technology company management team makes are what projects to invest in and
the level to invest. Technology company personnel continuously characterize situations as “resource limited”
when in reality resource limitation is inevitable. High priority issues are surrounded by a multitude of other
candidate high priority issues. The demands on R&D and product development teams can come from every
direction. Yet the fact remains that the outcome of their efforts will to a large extent determine the fate of their
company.

When innovation opportunities, existing program schedules, and customer demands conflict, the debate needs
to ensue. However, that debate needs to occur constructively and conclusively, with the result clearly
communicated. Not all will agree, but all need to align. It’s participation in the debate and communication of the
result that enables alignment. And it is strategically important to have the ground rules for the debate, the
decision, and the communication of the result.

Technology companies can often benefit from improvements in the management of the phases of their
products. A product life cycle describes the discrete steps or phases of a product or service from its conception
to its end-of-life. Typically, a few critical results at each phase can drive the decision as to whether a project
should continue or not. Defining these phases and the critical deliverables of each phase enables consistent,
coherent decisions on what programs are being invested in, and why. Similarly, opportunities that have not
been established as strategically important, must not steal from the precious innovation and product
development resources crucial for product development success.

Organization Capacity Perspective
Strategic Objective: Increase Capacity for Enabling Technology

As stated earlier, the path to marketplace disruption begins with the introduction of enabling technologies.
There are many paths to obtaining such enabling technologies, which do not require the risk and expense of
basic research and development. Yet, for the technology company to be a leader, it’s of strategic importance to



continually lead in the identification and application of technologies that enable use models and workflows in
the marketplace.

Issues:
The cost and risk of birthing new enabling technologies must be managed carefully. All options should be
exploited to reduce the cost/risk profile, such as:

 University partnerships
 Industry consortia
 Government funding

A technology company must exploit these options and avoid leaving the opportunity to a competitor.

Cross industry opportunities frequently surface to reapply an existing technology in a new way. An example of
this is emission microscopy in the semiconductor industry. CMOS technology may not have advanced if it were
not for highly sensitive infrared detector technology, which already existing in telescopes, being re-applied to
identify malfunctioning transistors. A technology developed for detecting infrared sources in the largest
geometries imaginable was used in the smallest geometries. Identifying these often-times counter intuitive,
reapplications of technology can lead to breakthroughs and disruption.

The people component of enabling technology capacity cannot be overlooked. The best and brightest in a
targeted technology area can often be the key in moving the organization forward. Continuous recruiting and
hiring practices to get the “best people on the bus” can be pivotal to increasing capacity. Often times the
innovation can come from an unsuspected part of the organization. The spark of innovation can occur
anywhere. Programs to encourage recognize, and reward out-of-the box thinking send a message of
commitment to this strategic objective.

Strategic Objective: Improve Project Management Expertise

Much of the technology company’s challenge lies in speed of execution. Important then is clear definition of
goals, priorities, the breakdown of the steps and tasks to reach the goal, and what deliverables result. By
increasing the project management skill level of the entire organization, a project management approach
becomes a standard practice for collaboration and communication. The efficiency and success rate of the entire
organization will improve as a result.

Issues:
We tend to avoid planning efforts when the projects are not of a development nature (such as in product
development or IT tool development) or when the path is not clear. But a project approach is powerful in its
ability to analyze and refine the problem statement, define and delegate the tasks required to reach a
marketplace goal, and track their execution and review their results versus expectations. Project management of
the features that will change workflows will often be rich with discovery, making a rigid planning/execution
approach less effective. But an approach with high-level planning followed by continuous plan refinements can
work well. The highest risk areas can be given priority and focus. By breaking the work effort into tasks,
deliverables and dates, a ruler is created to measure progress in the most critical areas. When discovery leads
down an unsuspecting path, the ruler will show progress is not being made and the ruler itself may need to be



adjusted. By encouraging the team that this is expected and desirable, plan adjustments are embraced instead
of avoided. Discovery and comprehension advances rapidly, the fog begins to clear, and the team finds itself in a
place it didn’t expect it could reach.

Strategic Objective: Improve Cross Discipline Teamwork

An organizational structure of functionally specific teams and line management cannot keep pace with
technology markets. Planning, developing, and launching innovative products at an ever increasing rate relies on
cross-functional product teams. An organization that knows how to form effective cross-functional, highly
collaborative teams, both horizontally and through management layers, has a strategic advantage.

Issues:
The classical “organization chart” fails the technology company. Top-down empowerment will slow progress and
risk falling off the pace of marketplace leadership. Empowered, cross-functional teams can use their diverse
perspective to bring recommendations of innovative paths to management for sanctioning and funding. As
product cycles continue to shrink, these cross-functional teams become the watchmen of the company’s ability
to continue to lead the marketplace. Management is required to keep pace with their teams by participating in
the collaborative processes that move the team forward. Continuous participation of the business decision
makers reduces the dependence on business case proposals and presentations for communication, and focuses
those sessions on decision making, speeding progress. Collaboration tools such as portable PCs, PDAs, desktop
sharing, work product repositories such as wikis and web portals, and network connectivity/performance/
bandwidth become infrastructure necessities. Training and knowhow to develop and drive the definition and
adoption of consistent collaboration processes must become a strategic mandate. Collaboration teams need to
cross geographies and time-zones to fully deploy the talent and knowhow the task requires. The prior barriers of
location and work hours need to give way to continuous collaborative progress.

A Strategic Theme for a Technology Company
The perspectives and objectives discussed above are shown in the figure below, with cause and effect linkages.
This is an example of how the objectives of one Strategic Theme might appear on a strategy map.


Technology Company Strategic Theme
Figure 4: Technology Company Strategic Theme

Increase
Profits
Manage
Development Increase
Financial Expense RoI Revenue
•Project funding
•Market projections
•Scalable reporting

Customer Strengthen Accelerate
Customer Interaction New
•Track & prioritize issues
•Set & meet expectations
Features &
Workflows

Processes
Improve Product
Improve Market Life Cycle Mgmt. Improve
Assessment • Phase exits Concept
•New feature demand • Critical Criteria Development &
•Evolving Workflow • Communicate decisions
•Accurate sales forecast Prioritization

Organization
Capacity
Increase Improve Improve
Capacity for Project Cross-
Enabling Management Discipline
Technology Expertise Teamwork

As stated earlier, these strategic objectives represent one strategiccompany. All rights reserved. the Marketplace.” Other
© 2010 Balanced Scorecard Institute, a Strategy Management Group
theme, “Disrupt
strategic themes will generate objectives and linkages that will also need to be captured in the total strategy
map. Your company may already be adequately tooled for some or many of these objectives. As a result your
strategy map would capture those objectives deemed to be the highest priorities, in balance with those high
priority objectives from other strategic themes.

Your Technology Company’s Strategy
Technology companies succeed when they capture innovation, produce innovative products, secure market
share and resolve client issues. A Strategy-Based Balanced Scorecard that describes and measures these
objectives can improve success in technology market segments.

Deciding to develop and use a balanced scorecard strategic management system is the start of a new journey for
an organization. The operative word here is “journey”, as building a scorecard system is not a project or an
activity with a finite lifetime. Committing to a scorecard system is committing to continuous improvement, and
represents a significant culture change for most organizations. A scorecard journey is a quest for high-
performance, a focus on results, an increase in group and individual accountability, and an embracing of
organizational change. A scorecard system impacts everyone in an organization, not just executives and
managers. Building and deploying a strategy-based scorecard system is more about changing hearts and minds
than it is about measurement and data collection.



Building a scorecard system the right way is a process of discovery, and involves critical thinking about an
organization’s shared vision, competencies, customers and their needs, competitors, employees, strategy, and
expectations. It takes 2 - 3 months to build a scorecard system, depending on the size of the organization.

How does one go about developing a strategic performance scorecard system? We developed the Balanced
Scorecard Nine-Step To Success™ framework, shown in the figure below, to build and implement strategy-based
scorecard systems. Separate versions of the framework are available for business and industry, non-profit, and
public sector organizations, but the development steps are the same. Starting with step one, Organization
Assessment, organization pains, enablers and values are developed, change management and scorecard
development plans are prepared, and mission and vision are validated. In step two, Strategy, the customer and
stakeholder value propositions are defined and used to create the organization’s strategy (strategic themes and
results). Strategic Objectives (the DNA building blocks of strategies) are developed in step three, and followed by
step four, where Strategy Maps (showing the causal relationships among the objectives leading to customer
value) are developed. Step five, Performance Measures and Targets, is used to develop the critical strategic
measures that provide information to track strategy execution. The building process ends with step six,
identification of new Strategic Initiatives, or projects, that form the basis for successful strategy execution.

Figure 5: Building and Implementing a Balanced Scorecard: Nine Steps to Success

• BSC Development Plan • Strategy Results
• Strategic Elements • Revised Strategies
• Change Management

• Alignment
• Customer Value • Unit &
• Strategic Themes Individual
• Strategic Results Scorecards

• Software
• Strategy Action • Performance
Components Reporting
• Knowledge
Sharing

•Cause-Effect Links

• Strategic Projects
• Performance Measures
• Targets
• Baselines

Step seven, Automation, starts the deployment and implementation phase, when performance data is collected,
reported, and transformed into vital performance information to better inform decision making and to
communicate progress throughout the organization. In step eight, Cascading, the corporate scorecard is
migrated to business units (e.g., departments or divisions) and support units (e.g., IT or HR), to translate
corporate vision and strategy into operational terms. Scorecards can then be cascaded to teams and individuals
to align day-to-day work with strategy and vision. Step nine, Evaluation, completes the cycle with a review and
assessment of the management system, to understand strategy results against expectations and make any
necessary changes in the organization’s strategy. Just like the organization, the scorecard system is dynamic, not



static, and changes in strategy and measures are common as performance data is transformed into information,
and then turned into business intelligence.

Is it worth taking the time and effort to build and implement a strategy-based performance scorecard system?
Research suggests that it is indeed worth managing to performance. Organizations using balanced scorecard
systems comprise a “Who’s Who” of international businesses, non-profits, and government agencies.

Does your technology company’s strategy describing the journey you want to be on? What are you using to
measure, monitor, and communicate your organization’s vision and strategy with clarity to all employees and
stakeholders?

Is it working?

©2010 Balanced Scorecard Institute, a Strategy Management Group company. All rights reserved. Do not copy without permission.

********************************************************************

Howard Rohm is an international trainer, facilitator, and performance improvement consultant. Howard is President and CEO of the
Balanced Scorecard Institute and founder of the Institute’s parent company, Strategy Management Group, Inc. Howard has worked with
over 50 private and public organizations and developed balanced scorecard and performance management systems to improve
organization performance. His clients include businesses and governments in 25 countries. He is the author of Building and Implementing
a Balanced Scorecard: Nine Steps to Success™, and the Performance Scorecard Toolkit™. Howard has taught and lectured at five
universities, and at the Federal Executive Institute. He can be reached at: hhr@balancedscorecard.org. The Institute’s Web site,
www.balancedscorecard.org, is the number one balanced scorecard site on the Internet, and contains a wealth of information on
balanced scorecard and strategic planning development and implementation.

Mark Malinoski is the founder of RKS Innovations, LLC, a company that provides consulting for strategic planning, and also support
services for M&A. Mark brings 30 years of experience in technology companies as well as M&A experiences in acquisition, divestiture,
integration, and operation of merged entities. As a technologist he holds multiple patents, has been published in several technology
forums and is an advisor to several firms. He can be reached at mark@rksinnovations.com and the company’s Web site
www.rksinnovations.com.


Technology Company Balanced Scorecard Systems 06222010 Final

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