Using Balanced Score Card for Agile Transformation

As the creators described, BSC is a strategy deployment tool and not so much a measurement tool, though that is how it has been understood and abused. While the literature talks about starting with financial objectives, I would prefer starting with customers and markets. Why? Because any strategy starts with vision and mission and that must always start with customer needs and the difference we want to make to their lives.

"The job of a mission statement is to articulate the essence of why the organization exists" - Sam Frank

We start with customers/ markets and what problems we would solve for them. This approach has another more basic idea at its foundation. Each customer segment has an inherent revenue potential. If I don't understand that, setting a financial goal would be a pipe dream. Hence I would start with customers.

The next step is deciding how much financial goals we would target from each of those major segments. As discussed, this would help us to understand the revenue potential and decide the financial viability of offering a product of service to that segment. This discussion can lead to strategic decision of exiting certain markets. This also helps define our sales targets for each customer segment for each product. This also helps us in deciding our budgets for delivering that product or service, considering the expected ROI.

Then comes the processes we need to run to satisfy those segment and meet those financial targets. This helps in deciding which services/ products we would offer. This helps us in positioning the organization in the market, highlighting our niche, deliverable expertise, capabilities and successful track record.

The next step is building the internal capabilities to deliver those products and services, meeting and justifying the positioning and brand promise. Here we need to decide which capabilities we need to build / acquire to run the business processes to deliver the products and services , meeting the customer demands, so that we can achieve the financial targets.

There is no concept of measurement till this stage, only a comprehensive alignment. Once this is decided, the deployment stage kicks in. Here, we will start from bottom up, creating activities and target dates along with KRAs and related KPIs. The measurement comes in to help monitor the progress and efficacy of the strategy in terms of its ability to hit the growth targets. The monitoring cant be annual as understood by some. That is the whole idea of bringing in the measurement component. This is the mother of MBO and all measurement.

Now, if you want to bring in OKR, they have to be aligned to the high level objectives decided as per the BSC. They can fit into the framework , along with KRA/ KPI which does not add much value per se, if we have done a good job with BSC. Without strategic alignment, nothing else makes sense, however nicely articulated it maybe. That is my take on this please.

Lets explore how this is related to Agile transformation.

"The agile transformation definition is as an act of transforming an organization’s form or nature gradually to one that is able to embrace and thrive in a flexible, collaborative, self-organizing, fast changing environment." - Source: www.castsoftware.com

This cant be achieved without considering the overall business strategy and aligning all the parts and components of an organization to execute that strategy; while staying flexible and adapting to changing business environment as necessary, to survive in the VUCA world.

This means that we must continuously realign the four domains of BSC - customers, financials, Internal processes and capabilities required. This is a completely different mindset and attitude, which thrives on growth mindset - constantly learning and adapting. This needs a fundamental acceptance of change as the new norm.

This brings in the efficacy of BSC into Agile transformation journey. BSC can help clearly articulate and identify internal processes and capabilities - above and beyond the software / product development and delivery - which need to play an integral part of this agile transformation journey. You may use OKR or any other framework but they may not give you such an integrated and tightly coupled approach to decide, define and monitor the various aspects and initiatives which are part and parcel of the transformation.

We can further use Theory of Change framework to bring in the necessary inputs, activities, outputs and outcomes. The outcomes are the strategic business objectives we decided in the BSC.

We are now ready for the X-Matrix or some other similar tool for figuring out the dependencies and tracking the various tasks and activities to completion.

Once we start implementation, Kanban and Theory of Constraints would kick in, helping us to identify the process as well as resource bottlenecks so that the same can be resolved and the program can move forward on the transformation journey.

The final understanding of this whole story is that there is no defined or desire end stage per se. It is only an organizational culture and inherent capability we are building, which will continuously evolve and ensure sustainable growth and progress.

I am Flt.Lt. Sridhar, helping the individuals, startups and mature organizations become truly agile and change the way they drive change.

If you are a change leader, responsible for driving Enterprise Agile Transformation, please contact me for designing and implementing a agile transformation roadmap, starting with an As-Is assessment, available at this link ( https://forms.gle/kMrwhfTmFamKkcBu9 )