WBISCT Pty Ltd – Enterprise Architecture Consulting and Training

Balanced Scorecard, what’s this about?

You may have heard about this strategic management framework that provides a balanced view of an organisation’s performance by considering multiple perspectives. It was developed by Robert Kaplan and David Norton in the early 1990s. The framework is designed to help organisations align their activities and strategies with their overall vision and objectives. I even refer to it on some occasions myself. It is quite a powerful tool in an EA arsenal.

The Balanced Scorecard looks beyond just financial measures and incorporates four key perspectives to evaluate performance:

  1. Financial Perspective: This perspective focuses on financial indicators such as revenue, profitability, return on investment, and cost control. It aims to ensure that the organisation’s financial goals are being met.
  2. Customer Perspective: This perspective examines how the organisation is meeting customer needs and expectations. It considers factors like customer satisfaction, loyalty, market share, and customer retention. The goal is to provide value to customers and enhance relationships with them.
  3. Internal Processes Perspective: This perspective evaluates the efficiency and effectiveness of the organisation’s internal processes. It looks at areas such as operational excellence, process improvement, quality control, and innovation. The aim is to optimise internal processes to deliver customer value and achieve strategic objectives.
  4. Learning and Growth Perspective: This perspective focuses on the organisation’s ability to learn, innovate, and adapt. It considers factors such as employee skills and capabilities, training and development, knowledge management, and organisational culture. The goal is to foster a culture of continuous learning and improvement to support long-term success.

The Balanced Scorecard encourages organisations to define specific objectives, measures, targets, and initiatives for each perspective. By evaluating performance across these four perspectives, organisations can gain a more comprehensive understanding of their overall performance and make informed decisions about their strategic direction.

The Balanced Scorecard is often implemented using a set of key performance indicators (KPIs) that are aligned with the objectives and measures defined for each perspective. These KPIs are regularly tracked and monitored to assess progress and identify areas for improvement.

Overall, the Balanced Scorecard provides a framework for organisations to translate their strategic goals into actionable objectives, measure performance from multiple angles, and align their activities to achieve long-term success.

As an example of it, I mention the Discipline of Market Leaders by Michael Treacy and Fred Wiersema on occasion when I speak about the crucial need for architects to understand their business and know where to focus on the most to ensure a balanced approach for their organisation to thrive in a competitive market. These two guys have built their thinking around the Norton and Kaplan’s Balances Scorecard strategic thinking.

Their book provides a business model based on three dimensions (called Value Disciplines):

– Customer Intimacy
– Product Leadership
– Operational Excellence

This postulates that any successful business needs to maintain at least “acceptable levels of performance in each of the three dimensions, but would need to choose one of them to become a market leader in its field. The model suggests that if you truly want to excel in any of the three disciplines, you will have to make sacrifices in the other two, as these become mutually exclusive.

When one wants to find out if an EA project is feasible or even realistic, several assessments are required; and amongst which (depending upon the context of the architecture ref to DPBoK 4 contexts) the maturity level of both sides, so if the baseline is not deemed acceptable nor suitable, then a target maturity level around the value disciplines (and as such what feasible approach to a balanced scorecard) should be chosen. This will need to be factored in as a soft scope for the EA project. I say soft scope, because the impact between the project vision and its context can be non-negligible and affect the cost (quality, timeboxing and risk) of the project.

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