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Balanced Scorecard Report the strategy execution source Article Reprint No. B1007B Mirror, Mirror: How to Enhance the Execution Premium Process with Competitive Intelligence By Leonard Fuld and Mark Chodnowsky This document is authorized for use only in PGP 1st Year 0109 by Mr. Rahul Mishra, Mr. Dinesh Kumar at IILM from January 2013 to July 2013. For a complete list of Harvard Business For reprint and subscription information For customized and quantity Publishing newsletters: for Balanced Scorecard Report: orders of reprints: http://newsletters.harvardbusiness.org Call 800-988-0866 or 617-783-7500 Call 617-783-7626 Fax 617-783-7658 http://bsr.harvardbusinessonline.org For permission to copy or republish: This document is authorized for use only in PGP 1st Year 0109 by Mr. Rahul Mishra,Call Mr. 617-783-7587Dinesh Kumar at IILM from January 2013 to July 2013. July–August 2010 : vol 12 no 4 The XPP framework offers four oppor- Mirror, Mirror: How to Enhance the tunities to examine competitive and Execution Premium Process with market activity on both the strategic and operational levels. To illustrate, we’ll Competitive Intelligence compare two very different companies apparently competing for the same By Leonard Fuld, Founder and President, and Mark Chodnowsky, market: Amazon, with its front-running Vice President, Fuld & Company Kindle, and Apple, with its recently In the July–August 2008 BSR, Frigo and Barrows introduced the released iPad. Amazon wants to maintain idea of using strategy mapping for competitor analysis. Just as its preeminence in electronic books. Its product has a black-and-white, paper-like your strategy map provides a high-level view of your strategy, screen and buttons for downloading and initiatives, and operational processes, your competitor’s strategy turning pages. Apple’s iPad, with a color map reveals a holistic view of its strategy and how it is organized screen and touch screen commands, to achieve it. Fuld and Chodnowsky, leading experts in competitive can also download music, videos, and intelligence, take the concept one step further: they propose that Internet content. the entire Kaplan-Norton Execution Premium Process (XPP) frame- 1. External Analysis at the Strate- work can be used to analyze any competitor’s strategy in a holistic gic Level: The 30,000-foot View way. Creating a “mirror image XPP” for your competitors will yield Before focusing on a competitor’s plans rich insights to help your organization sharpen its strategy and and activities, Amazon, like any other compete more effectively over the long term. organization, must first conduct external analysis (XPP stage 1, strategy develop- Although much of our firm’s competitive proceed through the XPP to capture a ment) to gain vital strategic information intelligence work focuses on operational coherent picture of the drivers, goals, and a more far-reaching picture of the benchmarking to help clients compare and activities of your competitors. (See competitive horizon. Various tools are their operational performance to that Figure 1, next page.) By overlaying your available to help formulate and adjust of competitors, our findings are often plans on the competitor’s assumed the strategy, each filtering different predictive of the competitor’s strategic goals and initiatives. For instance, one benchmarking study we performed for As the late journalist Sidney J. Harris once noted, “The whole a medical supply client revealed that purpose of education”—we’d say “intelligence”—“is to turn several of its competitors had essentially mirrors into windows.” outsourced shipping and warehousing to third-party logistics firms, allowing them to provide same-day delivery to plans, you can highlight the differ- types and levels of information about drugstores—a key market differentiator. ences between the two organizations. the market and the company’s place in it. Our client recognized that it could not Would you like to deduce your rival’s Through scenario, or PESTEL (political, match the competition’s performance, strategic themes and initiatives and economic, social, technological, envi- despite owning one of the industry’s their corresponding funding? Or how the ronmental, and legal), analysis, you can largest distribution networks. competitor’s underlying operations and study a market landscape five to 10 processes (e.g., marketing, R&D) differ This kind of insight is just the tip of the years in the future. For example, in 2000, from your organization’s? Juxtapose the competitive intelligence iceberg. The Amazon’s PESTEL analysis might have strategic planning outputs (XPP stages 1 strategy map’s ability to link strategy signaled demand for a portable elec- and 2) and the operational plans (stages and operations can be exploited to gain tronic reader that could also download 3 and 4) against a competitor’s XPP, intelligence on competitors. You start by books. This kind of future market picture and you have a mechanism for robust creating a competitor strategy map—a will influence the direction your com- competitor analysis. mirror of your organization’s map—and petitors take today. PESTEL forces are, This document is authorized for use only in PGP 1st Year 0109 by Mr. Rahul Mishra, Mr. Dinesh Kumar at IILM from January 2013 to July 2013. Market analysis between the drivers, assumptions, Scenario planning War games current strategy, and capabilities of the Competitor intelligence two competitors. A well-designed literature search should Knowledge yield more than half the strategic infor- Operational management benchmarking Internal mation you seek, but we recommend Competitor intelligence strategy mapping networks interviewing market analysts, key sup- Financial Early warning pliers, and customers to corroborate and forensics systems update your research. You may require third-party help to gain access to sources of more sensitive information. FIGURE 1: CREATE A MIRROR IMAGE XPP 2. External Analysis at the Opera- Juxtaposing your strategic planning outputs and operational plans against a com- tional Benchmarking Level petitor’s XPP produces robust competitor analysis. At the operational level, the view can get confusing. Dozens of tools are avail- of course, always at work, allowing new the “fuel” for all e-readers. Such findings able for learning about the operational rivals to enter your market and the more would inform Amazon how a competitor aspects of a competitor’s strategy, nimble ones to quickly adapt to change. such as Apple approaches the e-reader including value chain and supply chain Amazon’s management might ponder the market with a different set of assump- benchmarking, win-loss analysis, cus- publishing market altogether and how tions, motivations, and capabilities. From tomer acquisition tactics studies, tech- people will need or want to use informa- this information, a competitor strategy nology scouting, and HR benchmarking. tion. Amazon must try to anticipate this map can be developed (XPP stage 2)—a In fact, it’s easy to be overwhelmed by future, as its competitors surely will. more granular analysis to refine the the endless stream of available informa- initial strategy analysis. To gauge near-term market threats tion. You must become selective in the (those one to two years out), Porter’s five As Amazon sets out to build a strategy questions you ask, narrowing them to forces model1 provides the means to map for Apple, it might ask: How is specific targets that will reflect strategic examine customer and supplier pres- Apple’s strategy different from ours? objectives and, in the aggregate, provide sures, imminent substitutes, and current What are its financial and market goals? a clearer picture of the competitor’s rivals. At this level of analysis, Amazon Does it have different assumptions strategy and supporting operations needs to know which companies other about customers and trends? Does it (stage 4, Plan Operations). than Apple have chosen to compete on have many funded initiatives? Underpinning the XPP framework is the its turf. Will they be suppliers or publish- An ocean of published information, Balanced Scorecard, with its associated ers? Will the Nokias of the world, seeing from stock analysts’ reports to articles, strategic measures. Having already their handset revenue threatened, apply offers answers. From interviews with hypothesized your competitor’s strategy their core competencies to producing a Steve Jobs and his lieutenants, Amazon map and extrapolated its strategic Kindle-killer? To analyze and anticipate a could deduce Apple’s drivers. These same themes and objectives, you can now zero competitor’s strategic plans, a company information sources often publish a in on the key performance indicators can use such tools as war games and the management’s views of its company and (KPIs) underlying the strategic objectives. four corners model.2 assumptions about the market. Annual An important goal of external bench- Building a Mirror Strategy Map SEC 10-K filings (including the footnotes) marking is locating the critical areas that Developing external analysis of a reveal a company’s infrastructure, ability explain the differences between your competitor generally requires in-depth to generate adequate cash flow, and company’s operations and a rival’s; KPIs external research in specific critical plant or service capacity, among other signal those areas. details. Companies, Apple included, areas. Amazon might examine Apple’s in- Amazon’s KPI for product innovation often attempt to obscure such details, novations in user interfaces, or monitor might have been “volume of book but there are always data proxies, such how Apple’s phones have begun to set downloads.” By examining Apple’s “book as information on iPad shipments or ad- certain functionality standards, in the downloads” KPI, Amazon will discover vertising expenditures. Even at this high process changing attitudes from the that Apple has taken an entirely different level, marked differences will emerge content or media providers that supply view of its iPad-cum-iTunes platform: 1 Five forces, developed by Michael Porter, is described in his book Competitive Strategy: Techniques for Analyzing Industries and Competitors (Free Press, 1980).