I haven’t been able to come up with an authoritative list of major balanced scorecard software vendors. UK-based consultancy 2GC lists more than 100 in a helpful database with little blurbs on each, but they include performance management systems that are not necessarily for balanced scorecards. The Balanced Scorecard Collaborative, home of balanced scorecard co-inventor David P. Norton, lists two dozen products they have certified as meeting true balanced scorecard criteria. Of these, more than half belong non-specialist companies including enterprise software (Oracle, Peoplesoft [now Oracle], SAP, Infor, Rocket Software) and broad business intelligence systems (Business Objects, Cognos, Hyperion [now Oracle], Information Builders, Pilot Software [now SAP], SAS). Most of these firms have purchased specialist products. The remaining vendors (Active Strategy, Bitam, Consist FlexSI, Corporater, CorVu, InPhase, Intalev, PerformanceSoft [now Actuate], Procos, Prodacapo, QPR and Vision Grupos Consultores) are a combination of performance management specialists and regional consultancies.
That certified products are available from all the major enterprise and business intelligence vendors shows the basic functions needed for balanced scorecard are well understood and widely available. I’m sure there are differences among the products but suspect their choice of system will rarely be critical to project success or failure. The core functions are creation of strategy maps and cascading scorecards. I suspect systems vary more widely in their ability to import and transform scorecard data. A number of products also include project management functions such as task lists and milestone reporting. This is probably outside of the core requirements for balanced scorecard but does make sense in the larger context of providing tools to help meet business goals.
If your idea of a good time is playing with this sort of system (and whose isn’t?), Strategy Map offers a fully functional personal version for free.
Showing posts with label score cards. Show all posts
Showing posts with label score cards. Show all posts
Tuesday, June 12, 2007
Monday, June 11, 2007
Why Balanced Scorecards Haven't Succeeded at Marketing Measurement
All this thinking about the overwhelming number of business metrics has naturally led me consider balanced scorecards as a way to organize metrics effectively. I think it’s fair to say that balanced scorecards have had only modest success in the business world: the concept is widely understood, but far from universally employed.
Balanced scorecards make an immense amount of sense. A disciplined scorecard process begins with strategy definition followed by a strategy map, which identifies the measures most important to a business and how they are relate to each other and final results. Once the top-level scorecard is built, subsidiary scorecards report on components that contribute to the top-level measures, providing more focused information and targets for lower-level managers.
That’s all great. But my problem with scorecards, and I suspect the reason they haven’t been used more widely, is they don’t make a quantifiable link between scorecard measures and business results. Yes, something like on-time arrivals may be a critical success factor for an airline, and thus appear on its scorecard. That scorecard will even give a target value to compare with actual performance. But it won’t show the financial impact of missing the target—for example, every 1% shortfall vs. the target on-time arrival rate translates into $10 million in lost future value. Proponents would argue (a) this value is impossible to calculate because there are so many intervening factors and (b) so long as managers are rewarded for meeting targets (or punished for not meeting them), that’s incentive enough. But I believe senior managers are rightfully uncomfortable setting those sorts of targets and reward systems unless the relationships between the targets and financial results are known. Otherwise, they risk disproportionately rewarding the selected behaviors, thereby distorting management priorities and ultimately harming business results.
Loyal readers of this blog might expect me to propose lifetime value as a better alternative. It probably is, but the lukewarm response it elicits from most managers has left me cautious. Whether managers don’t trust LTV calculations because they’re too speculative, or (more likely) are simply focused on short-term results, it’s pretty clear that LTV will not be the primary measurement tool in most organizations. I haven’t quite given up hope that LTV will ultimately receive its due, but for now feel it makes more sense to work with other measures that managers find more compelling.
Balanced scorecards make an immense amount of sense. A disciplined scorecard process begins with strategy definition followed by a strategy map, which identifies the measures most important to a business and how they are relate to each other and final results. Once the top-level scorecard is built, subsidiary scorecards report on components that contribute to the top-level measures, providing more focused information and targets for lower-level managers.
That’s all great. But my problem with scorecards, and I suspect the reason they haven’t been used more widely, is they don’t make a quantifiable link between scorecard measures and business results. Yes, something like on-time arrivals may be a critical success factor for an airline, and thus appear on its scorecard. That scorecard will even give a target value to compare with actual performance. But it won’t show the financial impact of missing the target—for example, every 1% shortfall vs. the target on-time arrival rate translates into $10 million in lost future value. Proponents would argue (a) this value is impossible to calculate because there are so many intervening factors and (b) so long as managers are rewarded for meeting targets (or punished for not meeting them), that’s incentive enough. But I believe senior managers are rightfully uncomfortable setting those sorts of targets and reward systems unless the relationships between the targets and financial results are known. Otherwise, they risk disproportionately rewarding the selected behaviors, thereby distorting management priorities and ultimately harming business results.
Loyal readers of this blog might expect me to propose lifetime value as a better alternative. It probably is, but the lukewarm response it elicits from most managers has left me cautious. Whether managers don’t trust LTV calculations because they’re too speculative, or (more likely) are simply focused on short-term results, it’s pretty clear that LTV will not be the primary measurement tool in most organizations. I haven’t quite given up hope that LTV will ultimately receive its due, but for now feel it makes more sense to work with other measures that managers find more compelling.
Sunday, June 03, 2007
Data Visualization Is Just One Part of a Dashboard System
Following Friday’s post on dashboard software, I want to emphasize that data visualization techniques are really just one element of those systems, and not necessarily the most important. Dashboard systems must gather data from source systems; transform and consolidate it; place it in structures suited for high-speed display and analysis; identify patterns, correlations and exceptions; and make it accessible to different users within the constraints of user interests, skills and authorizations. Although I haven’t researched the dashboard products in depth, even a cursory glance at their Web sites suggests they vary widely in these areas.
As with any kind of analytical system, most of the work and most of the value in dashboards will be in the data gathering. Poor visualization of good data can be overcome; good visualization of poor data is basically useless. So users should focus their attention on the underlying capabilities and not be distracted by display alone.
As with any kind of analytical system, most of the work and most of the value in dashboards will be in the data gathering. Poor visualization of good data can be overcome; good visualization of poor data is basically useless. So users should focus their attention on the underlying capabilities and not be distracted by display alone.
Friday, June 01, 2007
Dashboard Software: Finding More than Flash
I’ve been reading a lot about marketing performance metrics recently, which turns out to be a drier topic than I can easily tolerate—and I have a pretty high tolerance for dry. To give myself a bit of a break without moving too far afield, I decided to research marketing dashboard software. At least that let me look at some pretty pictures.
Sadly, the same problem that afflicts discussions of marketing metrics affects most dashboard systems: what they give you is a flood of disconnected information without any way to make sense of it. Most of the dashboard vendors stress their physical display capabilities—how many different types of displays they provide, how much data they can squeeze onto a page, how easily you can build things—and leave the rest to you. What this comes down to is: they let you make bigger, prettier mistakes faster.
Two exceptions did crop up that seem worth mentioning.
- ActiveStrategy builds scorecards that are specifically designed to link top-level business strategy with lower-level activities and results. They refer to this as “cascading” scorecards and that seems a good term to illustrate the relationship. I suppose this isn’t truly unique; I recollect the people at SAS showing me a similar hierarchy of key performance indicators, and there are probably other products with a cascading approach. Part of this may be the difference between dashboards and scorecards. Still, if nothing else, ActiveStrategy is doing a particularly good job of showing how to connect data with results.
- VisualAcuity doesn’t have the same strategic focus, but it does seek more effective alternatives to the normal dashboard display techniques. As their Web site puts it, “The ability to assimilate and make judgments about information quickly and efficiently is key to the definition of a dashboard. Dashboards aren’t intended for detailed analysis, or even great precision, but rather summary information, abbreviated in form and content, enough to highlight exceptions and initiate action.” VisualAcuity dashboards rely on many small displays and time-series graphs to do this.
Incidentally, if you’re just looking for something different, FYIVisual uses graphics rather than text or charts in a way that is probably very efficient at uncovering patterns and exceptions. It definitely doesn’t address the strategy issue and may or may not be more effective than more common display techniques. But at least it’s something new to look at.
Sadly, the same problem that afflicts discussions of marketing metrics affects most dashboard systems: what they give you is a flood of disconnected information without any way to make sense of it. Most of the dashboard vendors stress their physical display capabilities—how many different types of displays they provide, how much data they can squeeze onto a page, how easily you can build things—and leave the rest to you. What this comes down to is: they let you make bigger, prettier mistakes faster.
Two exceptions did crop up that seem worth mentioning.
- ActiveStrategy builds scorecards that are specifically designed to link top-level business strategy with lower-level activities and results. They refer to this as “cascading” scorecards and that seems a good term to illustrate the relationship. I suppose this isn’t truly unique; I recollect the people at SAS showing me a similar hierarchy of key performance indicators, and there are probably other products with a cascading approach. Part of this may be the difference between dashboards and scorecards. Still, if nothing else, ActiveStrategy is doing a particularly good job of showing how to connect data with results.
- VisualAcuity doesn’t have the same strategic focus, but it does seek more effective alternatives to the normal dashboard display techniques. As their Web site puts it, “The ability to assimilate and make judgments about information quickly and efficiently is key to the definition of a dashboard. Dashboards aren’t intended for detailed analysis, or even great precision, but rather summary information, abbreviated in form and content, enough to highlight exceptions and initiate action.” VisualAcuity dashboards rely on many small displays and time-series graphs to do this.
Incidentally, if you’re just looking for something different, FYIVisual uses graphics rather than text or charts in a way that is probably very efficient at uncovering patterns and exceptions. It definitely doesn’t address the strategy issue and may or may not be more effective than more common display techniques. But at least it’s something new to look at.
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