Beyond [static] Balanced Scorecard

Balanced Scorecard was never meant to be static. And by static I mean to have the same Strategy Maps, Scorecards and Strategic Initiatives for the whole cycle (year). It was clear, or at least self-understood, that we do not start the work of accomplishing all our Strategic Objectives in January and finish them all in December. Even more obvious, we do not run all our Strategic Initiative projects for the whole duration of the cycle. We simply do not have the resources to do that.

These being said, the reality evolved differently. For the sake of the dreaded simplification and for the benefit of the slowest minds on Earth, all BSC components have been presented as being set for the whole year. Yes, the quarterly reviews were designed to change our BSC model, here and there, mostly due to some of the hypotheses that we have employed, which have proven to be invalid. But we would still look in December at the same Strategy Map that we had in January. Well, that looks pretty much static to me.

What would I see as a Balanced Scorecard format that is not static (or that is dynamic, if you like)? One in which we would have at least different Strategy Maps, Scorecards and Strategic Initiatives in each quarter. Different, meaning consecutive and continuous, like having each quarter's accomplishments built on what we have accomplished in the previous quarters and cycles.

A quarterly-focus Strategy Map breakdown

Let us look at a quick example. This would be a static Strategy Map, looking like all those Strategy Maps that we have ever seen, usually designed for a full year.

We can intuitively guess the Strategic Gaps that each of the 15 Strategic Objectives is aiming to close. We may easily assume that the three BSC themes (the vertical columns) are corresponding to Geoffrey Moore 's four Zones to Win, with the first two (Performance & Efficiency) grouped within the left-hand theme of the Strategy Map, the other two themes corresponding to the Incubation (center) and Transformation (right-hand) zones. Somehow unusual for the typical Strategy Map, we see highlighted the effects propagation to/from previous/next cycles. That is because we are part of a multi-annual timeframe, not just a one-year plan. We have also employed the new recommended titles for the BSC perspectives (the horizontal rows) ... for more details, read: Balanced Scorecard in 2021.

This is the quick representation of integrating the Zone to Win with the Balanced Scorecard. For more details, read: From Zone to Win to Strategic Themes.

For communication purposes, the usual Strategy Map is fine, as it illustrates on a single page our Strategy execution's objectives for this cycle (year). But in practical terms it is rather misleading about which are our Strategic Objectives, at any specific moment in time. Why? Let us see an example of how the Strategy Map would look like each quarter, including only the objectives that we must accomplish during that quarter. Something that depends mostly on the cause-effect relationships between objectives an on the sequencing of the Strategic Initiatives corresponding to those objectives.

An interesting look! Our Strategy Map has learned how to break down and morph according to our quarterly focus. Not a static Strategy Map anymore! To make it more realistic, we illustrate some objectives as requiring more than one quarter for their accomplishment, so they are present in two consecutive quarters (P1 and S1).

We might rightfully object that these quarterly-focus Strategy Maps do not look as consistent as the one where we started from. True, but they bring one major advantage: They tell us on which objectives should we focus on, each quarter! A moment of jubilation for those of us complaining that the recommended 15-20 Strategic Objectives in each Strategy Map makes it too clogged and too complicated. Here you are, a simplified and dynamic Strategy Map that allows us to focus on 3-6 objectives to accomplish every quarter!

Ahh ... not so fast! At a second look, the quarterly quadrants above do not look right to me, with all the arrows and causal relationships moving from one quadrant to the other. And one other thing: the Deep Integration between Strategy Formulation and Strategy Execution seems to be somehow lost in the Strategy Map, wether broken down on quarters, or not.

What about bringing that deep integration back?

The chains of Strategic Gaps

The article about the The Deeply Integrated Strategy suggests that the missing link between Strategy Formulation and Strategy Execution are the Strategic Gaps that we must close to accomplish our Strategy. On the formulation side, they result mostly from the Capabilities System required to support our Strategic Choices. On the execution side, our Strategic Objectives are born from aggregating them, and the chains of causality between those capabilities and their gaps translate to the cause-effect relationships between our driving and driven Strategic Objectives.

On the planning front, we must close the Strategic Gaps in sequential order, guided by the interdependencies between the Zones to Win. Furthermore, even if we wanted to close the gaps right away, it would be impossible: we do not have the resources to do that. So, we break them down over several cycles (years) of Strategy Execution.

This illustrates a multi-annual high-level Strategic Plan example that tells the story of the chains of Strategic Gaps that we must close over the Strategic Horizons timeline.

In this example, that full timeline is four years. This 2D representation allows us to see clearly what groups of Strategic Gaps we must closed each year. We'll explore how a 3D representation might look like further below.

The Strategy Map matrix

With a little bit of imagination, we are able to take each yearly slice of the high-level plan and illustrate it in an even more intuitive manner, capturing the bond between our chains of Strategic Gaps and causality-related Strategic Objectives, together with their sequentiality. Then, we break down our objectives based on the quarterly focus discussed above. This example is for the second year of our plan. The others look similarly.

This is an odd looking Strategy Map, illustrated in a quarterly-focus breakdown view, with the 15 Strategic Objectives placed along the chains of Strategic Gaps that they are made of. It actually looks like a matrix companion to the Strategy Map (the fans of X-Matrix should not look for similarities, because it is only a graphical coincidence). For a simpler illustration, the titles of the objectives are placed below the matrix.

So, why this representation? For several reasons.

1. Deep Integration between Formulation & Execution. We must underline that the Strategic Objectives are actually developed (part of the Strategy Execution process) by aggregating clusters of Strategic Gaps (that resulted from the Strategy Formulation process). Moreover, the causality chains that link the clusters of gaps are translated to cause-effect relationships between the objectives. But why do we have causality chains between the gaps? Because causality is born early, starting from the moment we select our Strategic Choices and the Capabilities System supporting them. Hence this representation that illustrate both the chains of Strategic Gaps clusters and the Strategic Objectives of our Strategy Map.
2. Cause-Effect Relationships to/from next/previous cycles. We must understand that each execution cycle (as illustrated by the Strategy Map) is a slice of the multi-annual high-level Strategic Plan to execute our Strategy, by closing the Strategic Gaps that resulted from its formulation. More about this, further below.
3. The relationship between our Zones to Win. The Strategy Map themes must result from our change process within the four Zones to Win, with the first two zones grouped into one theme (Performance and Efficiency). It works like this: the successfully accomplished objectives in one zone (and implicitly, the gaps that we have closed) support the accomplishment of the objectives in the next zone. But guess what? In some cases that support, from one zone to another, is not happening within the same cycle!

For more details, read The Right Horizons Sequence.

Should this dynamic matrix replace the [static] Strategy Map? No, but it can be an excellent companion, allowing us to have a better quarterly-focus and regard it in an integrative, dynamic way, as highlighted by the three reasons above.

The multiple cycles helix

The dotted cause-effect relationships that go in/out of our one-cycle Strategy Map matrix are shown in a limitative way, due to the constraints of a 2D representation. But how would a multi-annual 3D representation look like? Maybe like this multi-layer helix that illustrates the relationships between consecutive cycles of our multi-annual Strategic Plan.

This helix shows which chains of Strategic Gaps are we planning to close during each cycle (year) of our multi-annual Strategic Plan, fully or partially, by placing our Strategy Map matrices within the full perspective of the Strategic Horizons (one for each Zone to Win).

The result is a representation of our Balanced Scorecard foundation, that is:

• better integrated with the Strategy Formulation (in precise, practical terms)
• with a dynamic, quarterly focus, and
• integrated within our Strategy's multi-annual timeframe.

As always when a set of concepts that is widely adopted, like the Balanced Scorecard and its Strategy Map, is presented from a different perspective, a lot of bricks are expected to be thrown at the author. But if you think that this complementary perspective helps you get a better understanding of the Balanced Scorecard framework, your observations or questions are more than welcome.

Other Strategy Clockwork newsletter articles:

The Strategic Alignment

Strategy Skunk Works

Don't Rely on a Single Strategy!

Without a Plan, Strategy is a Fairytale

Design Thinking inside Strategy

The Deeply Integrated Strategy

The Game inside Strategy

The Balance of Strategic Choices

The Corporate Balanced Scorecard

The Strategy Clockwork Newsletter

Enjoy!