Most organizations are restless… markets and competitors change, competitiveness is increasing, in some cases the results worsen without being very clear if it is due to structural or conjunctural problems… In this situation, organizations are in a time to search for solutions. The strategy and the use of the Balanced Scorecard can help us at this time.
Thus, in our consulting work we find sectors or companies that traditionally come from having large margins due to product / business innovation or the lack of competitors and who currently tell us: “we have less and less margin. Competitors are more aggressive and we have to sacrifice margin often. "
In this situation it is an important time to ask yourself some questions:
- Are we losing the advantages over our competitors and are we currently engaged in a price war? Does the market see us as one more, without any differentiation over our competitors? Is the impact of globalization being important in our sector? Are we losing operational efficiency? If we are in a productive sector, are we competitive with current costs? Is the business model in crisis?
Actually what we find in practice is that the managers of the organizations usually find it difficult to identify their strengths and weaknesses because it is often difficult to analyze the situation when immersed in it.
It is difficult to conclude that a company that has achieved great results for 30 years has to change radically. It is very difficult for managers and owners to reach that conclusion… But on many occasions we find ourselves faced with the difficult dilemma of “change or die”.
Beyond great theories on the definition of the strategy, I think that the first thing we must be clear about is what the strategy is and what it is for. The strategy is to make a deep analysis of both our organization and the environment to define an action plan that leads us to improve our position on competitors in the medium-long term. The strategy is to choose a path.
On many occasions we find organizations that define "continuity" strategies, that is, assuming that clients and competitors do not change and therefore that the strategy will be in the same line as that of the last 30 years. There is great resistance to change and this solution is usually not good: what worked 30 years ago does not usually work today.
It is very important to emphasize that the strategy should not be to "project" figures over x years but we must bear in mind that a strategy that does not lead us to have competitive advantages is a useless strategy and will lead us directly to competition. by prices decreasing the profit margin day after day and ends up being a cancer for the company.
The typical process of defining the strategy is represented below:
For practical purposes, in the previously described strategic management process we find four potential weak points:
1.- Usually we find big problems in the initial diagnoses. On many occasions, managers are too "optimistic" so there is often a tendency for continuity plans and "radical" action plans are not necessary.
2.- That the strategy be defined at the senior management level and not communicated to the entire organization.
3.- That the strategy cannot be executed because there is clearly no relationship between the strategic, tactical and operational levels.
4.- That the strategy is «static» and that it is not reviewed with the agility that a changing environment like the current one requires.
Each of these situations has a different line of solution. In the first case, a culture in the organization that is open to constructive criticism and in which all people can contribute to the company's strategy and that their visions are valued must be promoted.
To solve the second, third and fourth problems we have a tool called Balanced Scorecard.
The Balanced Scorecard
The Balanced Scorecard is born to definitively relate the strategy and its execution using indicators and objectives around four perspectives. The benefits of implementing the Balanced Scorecard can be integrated into four concepts:
1.- Relate the strategy with its execution defining objectives in the short, medium and long term
2.- Have a control tool that allows agile decision making.
3.- Communicate the strategy to all levels of the organization, thus aligning people with the strategy.
4.- Have a clear vision of the cause-effect relationships of the strategy.
To achieve these benefits, the Balanced Scorecard uses a model based on indicators and objectives that revolves around four perspectives: financial, clients, internal processes, and learning and growth.
Thus, a scoreboard is defined with objectives in each of the perspectives that serve to execute, communicate and control the strategy.
In addition, the strategic map is also used, which is an outline of the cause-effect relationships of the strategy through the four perspectives and which serves to graphically capture the deployment of the strategy to have a clearer vision for taking decisions.
In conclusion, at a time like this is a good time for a deep review of the organization's strategy with a critical eye and to use a balanced scorecard to get it working.
