Getting in Control with the Balanced Score Card

Getting in Control with the Balanced Score Card

Original posted by on Tue, Dec 13, 2011

As a result of my previous blog on cloud computing, I have had conversations with many IT executives.  Cloud computing is a trending topic in most organizations. During both face-to-face and online conversations, I noticed that the “need” for cloud services usually is not part of a structured plan or part of an approved IT roadmap/yearly plan, but is treated as a separate project or path. During the discussions it became clear to me that since CIOs have been primarily focused on stripping out costs at an operational level during the last few years, making business-aligned IT plans has become a lower priority.

When I asked how business value is being measured with the introduction of new a cloud solution, I heard a lot of silence.  During follow up meetings it became clear that there is still a need for a model that will link and measure innovation, client satisfaction, internal processes and financial results. This reminded me that a methodology like a balanced score card (BSC) could be revitalized again.

BSC

The BSC was introduced by Kaplan and Norton in 1992 at an enterprise level. The basic principle is that the evaluation of a company should not be restricted to financials only. The additional areas of innovation, internal processes and client satisfaction should ensure future financial results, while driving a company toward its future goals. Therefore, each of the four areas should be evaluated so that managers can get a more balanced view of the organization. For each of the perspectives they proposed a layered model: mission, objectives and measurements.

An IT-strategic BSC links with the business by contributing to business goals. The IT-strategic BSC can be supported by a linked cascade of scorecards (e.g. architecture, development, operations management). This set of BSCs, including measurements, will help to determine how business value is being created.

e-Commerce IT BSC

When the BSC was launched, e-commerce was just at its commercial beginning. What has changed from the ”old days” is that the IT function/role today is more a strategic partner than a service provider. The following four areas can be part of an e-commerce BSC framework: customer satisfaction, innovation, operations and financial control. Below is an example of how we could map e-commerce actions into a BSC. As actions may occur not only for technology, it is beneficial to split actions into the headers: technology, organization and processes.

If you have created a BSC and look at the defined actions, it may appear that some planned actions may benefit in several areas.
Balnced Score Card

Example of an e-Commerce IT BSC

 

Conclusion

As many organizations are in some kind of transformation mode, whether due to newly available technology or changing business needs, it may be a good idea to consider structuring your activities according to a BSC. This will ensure that the defined activities will really contribute to the creation of business value.

What kind of BSC card or equivalent are you using?