Module_2_CA_R1.docx Module_2_CA_R2.docx Module_2_CA_R3.docx Module_2_CA.docx The power of choice If he had been around in the middle of the 20th century I`ll bet Henry Ford would have greatly admired country music superstar Johnny Cash. Why? Because Johnny was known as the “Man in Black,” and Ford, founder of the automobile company bearing his name, is often remembered for his famous dictum “They can have any color they want as long as its black,” in reference to his hugely popular Model T. Such bravado was of little consequence to Ford at a time when the balance of power between customers and manufacturers was heavily weighted in favor of those producing goods and services, when consumers were thankful simply for the opportunity to buy products that hadn`t even existed just a few decades earlier. Today, however, the pendulum has swung dramatically in the opposite direction with customers, not producers, holding most of the cards in the purchase transaction. Technology, particularly the internet, has paved a road of customer knowledge and insight that leads directly to greater bargaining power. As a result it is absolutely vital for all companies, regardless of the industry in which they find themselves, to “Walk the line” as Johnny Cash would say and track their success from the ever-discriminating eyes of their customers. A look inside the Customer perspective Companies must answer three questions when developing a Customer perspective for their Balanced Scorecard. The first is simply “Who are our customers?” Before we begin the task of measuring and monitoring our success from their vantage point we must determine exactly who it is we consider customers of our products and services. Once we`ve cleared that hurdle, identifying target segments, we reach the second question: “What do those customers expect or demand from us?” Whether they`re buying hats, honeymoon trips, or hockey sticks, all consumers have certain expectations that must be satisfied should we hope to bring them back for more. Understanding what motivates people to buy our wares, be it quality, responsiveness, ease of purchase or a host of other possibilities, goes a long way towards creating a positive experience and cementing their loyalty with each and every purchase. Our final question in creating the Customer perspective is this: “What is our value proposition in serving our customers?” Before you run off to your Consultants` dictionary to look up ‘value proposition,` let me save you the trip by suggesting it simply means how you propose to provide value to your customers. In other words, why should they choose you over one of your competitors? What is it about your offering that makes them better off by choosing it? Traditionally, three distinct value propositions have been presented by companies hoping to attract customers to their goods and services: product leadership (offering the product or service with the latest and greatest features), customer intimacy (providing unrivaled service and offering a total solution to customers` needs) and operational excellence (harnessing super-efficient operations to offer the lowest prices). Quick quiz - Which value proposition do you think Wal-Mart focuses on? Give yourself a pat on the back if you said operational excellence. Nordstrom gives us a great example of a customer intimate company, and finally, Intel and Sony are representatives of the product leadership class, companies that outperform through innovation. While every company will possess a core strength in at least one of the three value propositions it is important to offer customers all three. In today`s hyper-competitive environment companies that wish to get ahead and maintain their advantage must simultaneously devote themselves to innovation, outstanding customer care, and flawless execution. Even Henry Ford, despite his apprehensions and best efforts to avoid change, ultimately offered a rainbow of colors – the customer is always king! ======================== The customer perspective of the balanced scorecard begins to trace the achievement of financial goals one step back – that is, to the customers and/or recipients of the services provided by the organization whose resources support it. Here is a useful brief summary of the approach: Niven, P. (N.D.) Customer perspective. EPM Review. Retrieved May 17, 2010, from http://www.epmreview.com/Resources/Articles/Customer-Perspective.html Analysis of customers sounds like a no-brainer – so obvious that it should be taken for granted. However, in practice, it`s actually particularly complicated – and therefore often done superficially or neglected altogether in favor of memories, convenient abstractions, unshakeable prejudices, or other non-data-based strategic assumptions. Doing it right involves acknowledging the diversity of customers, their widely varying needs and resources, and the entire economic climate within which they function. Kaplan, one of the gurus of the balanced scorecard, has an interesting discussion setting forth both why this perspective is necessary and how complicated it can become: Kaplan, RS (2005) A Balanced Scorecard Approach To Measure Customer Profitability. Working Knowledge. Harvard Business School. Retrieved May 17, 2010, from http://hbswk.hbs.edu/item/4938.html Our example in this case is an assessment of this aspect of the balanced scorecard in three small to medium sized companies. Here`s how this process has been described: Although 50 percent of Fortune 1000 companies currently use a balanced scorecard (BSC), few small businesses are using a BSC. A review of the literature finds no BSC papers in leading small business/entrepreneurship journals. This article begins with a discussion of the BSC and why a small business should use it. Three small to medium-sized enterprise (SME) case studies are presented, with a copy of their BSC, to illustrate how Hyde Park Electronics, Futura Industries, and Southern Gardens Citrus use a BSC to set strategy and align operations to achieve breakthrough results. Implications are, that like large businesses, SMEs can also benefit from using a BSC. Entrepreneurs of SMEs can use the case studies to develop their own BSC to improve performance. Implications for practice and research are discussed. The article from which this summary is taken can be found here: Gumbus, A. and Lussier, RN. (2006) Entrepreneurs use a balanced scorecard to translate strategy into performance measures. Journal of Small Business Management. 44(3):407-426. Retrieved May 17, 2010, from http://proquest.umi.com/pqdweb?sid=1&vinst=PROD&fmt=6&startpage=-1&clientid=29440&vname=PQD&RQT=309&did=1074432261&scaling=FULL&vtype=PQD&rqt=309&TS=1226877391&clientId=29440 As your case assignment for this module, you are to carefully review this article, and then (in 3-4 pages) prepare your analysis of how these companies implemented the balanced scorecard and its apparent effects. Assignment Expectations: Your analysis should be structured along the lines you`ve been using this far in these cases: Introduction: On what specific customer perspectives did each company focus, and what measures did each company use to ascertain how well it was meeting the goals implied by those specific perspectives? Analysis: In your opinion, are these measures truly "customer-centric" as described in the background reading by Niven? Why or why not? Defend your position. Use your readings to help you decide whether the improved performance was due to viewing the company from the perspective of their potential, prospective, and/or present customers. Conclusion: From the companies` point of view, do you think their effort to evaluate the business from the customer`s perspective was the KEY contributor to improved performance? If so, defend your position. Or was another perspective more important? If so, which one was the KEY contributor? Defend your position. Evaluation: Identify at least one measure you would have included that they omitted. In other words, how could you have improved on their approach?