Balanced ScoreCard

In 1992, Robert S. Kaplan and David P. Norton introduced the balanced scorecard, a concept for measuring whether the activities of a company are meeting its objectives in terms of vision and strategy. By focusing not only on financial outcomes but also on the human issues, the balanced scorecard helps to provide a more comprehensive view of a business which in turn helps organizations to act in their best long-term interests. The strategic management system helps managers focus on performance metrics while balancing financial objectives with customer, process and employee perspectives. Measures are often indicators of future performance.
Since the original concept was introduced, balanced scorecards have become a fertile field of theory and research, and many practitioners have diverted from the original Kaplan & Norton articles. Kaplan & Norton themselves revisited the scorecard with the benefit of a decade's experience since the original article.
1. Implementing the scorecard typically includes six processes:
2.Translating the vision into operational goals;
3.Communicate the vision and link it to individual performance;
4.Business planning;
5.Feedback and learning and adjusting the strategy accordingly.

A comprehensive view of business performance

Balanced Scorecard is simply a concise report featuring a set of measures that relate to the performance of an organization. By associating each measure with one or more expected values (targets), managers of the organization can be alerted when organizational performance is failing to meet their expectations. The challenge with Balanced Scorecard is, and has been since it was popularized by an article in 1992 published in the Harvard Business Review, deciding on which measures to choose.[an actual example of such a report would greatly clarify this further]
From the outset, the Balanced Scorecard has been promoted as a tool to help organizations monitor the implementation of organizational strategy.

The earliest Balanced Scorecards comprised simple tables broken into four sections - typically these 'perspectives' were labeled "Financial", "Customer", "Internal Business Processes", and "Learning & Growth". Designing the Balanced Scorecard simply required picking five or six good measures for each perspective. Many writers have since suggested alternative headings for these perspectives, and also suggested using either additional or fewer perspectives: these suggestions being triggered by a recognition that different but equivalent headings will yield alternative sets of measures. The major design challenge faced with this type of Balanced Scorecard is justfiying the choice of measures made - "of all the measures you could have chosen why did you choose these...?" is a common question asked (and using this type of design process, hard to answer). If users are not confident that the measures within the Balanced Scorecard are well chosen, they will have less confidence in the information it provides. Although less common, these early style Balanced Scorecards are still designed and used today.

The early style Balanced Scorecards are hard to design in a way that builds confidence that they are well designed. Because of this, many are abandoned soon after completion.

In the mid 1990s an improved design method emerged. In the new method, selection of measures was based on a set of 'strategic objectives' plotted on a 'strategic linkage model' or 'strategy map'. With this modified approach, the strategic objectives are typically distributed across a similar set of 'perspectives' as is found in the earlier designs, but the design question becomes slightly more abstract. Managers have to identify the five or six goals they have within each of the perspectives, and then demonstrate some inter-linking between them by plotting causal links on the diagram. Having reached some consensus about the objectives and how they inter-relate, the Balanced Scorecard's measures are chosen by picking suitable measures for each objective. This type of approach provides greater contextual justification for the measures chosen, and is generally easier for managers to work through. This style of Balanced Scorecard has been the most common type for the last ten years or so.

Several design issues still remain with this modified approach to Balanced Scorecard design, but it has been much more successful than the design approach it supersedes.

Since the late 1990s, various improved versions of Balanced Scorecard design methods have emerged - examples being The Performance Prism, Results Based Management and Third Generation Balanced Scorecard for example. These more advanced design methods seek to solve some of the remaining design issues - in particular issues relating to the design of sets of Balanced Scorecards to use across an organization, and in setting targets for the measures selected.

Many books and articles on Balanced Scorecard topics confuse the design process elements and the Balanced Scorecard itself: in particular, it is common for people to refer to a 'strategic linkage model' or 'strategy map' as being a Balanced Scorecard.

Balanced Scorecard is a performance management tool: although it helps focus managers' attention on strategic issues and the management of the implementation of strategy, it is important to remember that Balanced Scorecard itself has no role in the formation of strategy. Balanced Scorecard can comfortably co-exist with strategic planning systems and other tools.

Actual usage of the balanced scorecard

Kaplan and Norton found that companies are using the scorecard to:
1.Clarify and update budgets
2.Identify and align strategic initiatives
3.Conduct periodic performance reviews to learn about and improve strategy.

In 1997, Kurtzman found that 64 percent of the companies questioned were measuring performance from a number of perspectives in a similar way to the balanced scorecard.
Balanced scorecards have been implemented by government agencies, military units, corporate units and corporations as a whole, nonprofits, and schools; many sample scorecards can be found via Web searches, though adapting one organization's scorecard to another is generally not advised by theorists, who believe that much of the benefit of the scorecard comes from the implementation method.

Comparison to Applied Information Economics

A criticism of balanced scorecard is that the scores are not based on any proven economic or financial theory and have no basis in the decision sciences. The process is entirely subjective and makes no provision to assess quantities like risk and economic value in a way that is actuarially or economically well-founded. The Balanced scorecard does not provide a bottom line score or a unified view with clear recommendations, it is simply a list of metrics. Positive responses from users of balanced scorecard may merely be a type of placebo effect. There are no empirical studies linking the use of balanced scorecard to better decision making or improved financial performance of companies.

Applied Information Economics (AIE) has been researched as an alternative to Balanced Scorecards. In 2000, the Federal CIO Council commissioned a study to compare the two methods by funding studies in side-by-side projects in two different agencies. The Dept. of Veterans Affairs used AIE and the US Dept. of Agriculture applied balanced scorecard. The resulting report found that while AIE was much more sophisticated, AIE actually took slightly less time to utilize. AIE was also more likely to generate findings that were newsworthy to the organization while the users of balanced scorecard felt it simply documented their inputs and offered no other particular insight. However, balanced scorecard is still much more widely used than AIE.

Key performance indicators

According to each perspective of the balanced scorecard there are a number of KPIs.
1. Financial
-Cash Flow
-ROI
-Financial Result
-Return on capital employed
-Return on equity
2.Customer
-Delivery Performance to Customer - by Date
-Delivery Performance to Customer - by Quantity
-Customer satisfaction rate
-Customer retention
3.Internal Business Processes
-Number of Activities
-Opportunity Success Rate
-Accident Ratios
-Defect Rates
4.Learning & Growth
-Investment Rate
-I llness Rate
-Internal Promotions %
-Employee Turnover
-Gender/Racial Ratios

Blue Ocean Strategy

Blue Ocean Strategy

Blue Ocean Strategy is a corporate strategy and bestselling business book written by Professors W. Chan Kim and Renée Mauborgne, of insead. The book offers examples of how successful businesses captured uncontested market space, and thereby made competition irrelevant. This was formerly described as "Value Innovation," in 5 articles for the Harvard Business Review by Kim & Maubourgne before they released the book in 2005. Blue Ocean Strategy is the result of a decade-long study of 150 strategic moves spanning more than 30 industries over 100 years (1880-2000).

Concept:

The "ocean" refers to the market or industry. "Blue oceans" are untapped and uncontested markets, which provide little or no competition for anyone who would dive in, since the markets are not crowded. A "red ocean", on the other hand, refers to a saturated market where there is fierce competition, already crowded with people (companies) providing the same type of services or producing the same kind of goods.
Their idea is to do something different from everyone else, producing something that no one has yet seen, thereby creating a "blue ocean". An essential concept is that the innovation (in product, service, or delivery) must raise and create value for the market, while simultaneously reducing or eliminating features or services that are less valued by the current or future market. The authors critique Michael Porter's idea that successful business are either low-cost providers or niche-players. Instead, they propose finding value that crosses conventional market segmentation and offering value and lower cost.

Examples:

Some examples of companies that may have created new market spaces in the opinion of Kim and Mauborgne include Cirque du Soleil (unique circus format) and Home Depot (offering the prices and range of lumberyard, while offering consumers classes to help them with DIY projects). A current example of this strategy is the success of the Nintendo Wii, which Nintendo designed to target audiences not traditionally known to play videogames.

Criticisms:

While co-authors Professor Kim and researcher Mauborgne propose approaches to finding uncontested market space, at the present there are few if any success stories of companies that applied their theories. This hole in their data persists despite the publication of Value Innovation concepts since 1997. A critical question is whether this book and its related ideas are descriptive rather than prescriptive. Kim and Maubourgne take the marketing of a value innovation as a given, assuming the marketing success will come as a matter of course. The authors present many examples of successful innovations, and then explain from their Blue Ocean perspective - essentially interpreting success through their lenses.

The concept is often categorized as a management fad. Even Prof Kim acknowledge these attacks.
The research process followed by the authors presents many questionable practices, raising doubts on the integrity of the theory. Some of these are:

-No control group was used. There is no way to know how many companies exploiting a blue ocean strategy concept failed. The theory therefore does not meet the falsifiability criteria in practice. A deductive process was not followed. The examples in the book are selected to "tell a winning story".

-A whole chapter of the book "Tipping Point Leadership" is based on an already demonstrated flawed conclusion that the drop in crime in NY city is not explained by policies and actions but by an increase in abortion rates (according to book Freakonomics). Crime rates fell also in other cities other than NY without applying what the authors call Tipping Point Leadership.

-The main framework Eliminate-Reduce-Raise-Create is redundant and circular. By definition innovating is about doing something different. And by definition something different will necessarily have something eliminated, reduced, raised or created. There are no new insights with this framework. The key and more important questions not addressed in the book is WHAT is to be eliminated and HOW and WHAT you create.

-Brand and communication are taken for granted and do not represent a key for success. Kim and Maubourgne take the marketing of a value innovation as a given, assuming the marketing success will come as a matter of course.

It is argued that rather than a theory, Blue Ocean Strategy is an extremely successful attempt to brand a set of already existing concepts and frameworks with a highly sticky idea. The blue ocean/red ocean analogy is a powerful and memorable metaphor, which is responsible for its popularity. This metaphor can be powerful enough to stimulate people to action. However, the concepts behind the Blue Ocean Strategy (such as the competing factors, the consumer cycle, non-customers, etc.) are not new. Many of these tools are also used by Six Sigma practitioners and proposed by other management gurus.

Working capital management

Working capital management

Decisions relating to working capital and short term financing are referred to as working capital management. These involve managing the relationship between a firm's short-term assets and its short-term liabilities.

The goal of Working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses.

Decision criteria

By definition, Working capital management entails short term decisions - generally, relating to the next one year period - which are "reversible". These decisions are therefore not taken on the same basis as Capital Investment Decisions (NPV or related, as above) rather they will be based on cash flows and / or profitability.
One measure of cash flow is provided by the cash conversion cycle - the net number of days from the outlay of cash for raw material to receiving payment from the customer. As a management tool, this metric makes explicit the inter-relatedness of decisions relating to inventories, accounts receivable and payable, and cash. Because this number effectively corresponds to the time that the firm's cash is tied up in operations and unavailable for other activities, management generally aims at a low net count.
In this context, the most useful measure of profitability is Return on capital (ROC). The result is shown as a percentage, determined by dividing relevant income for the 12 months by capital employed; Return on equity (ROE) shows this result for the firm's shareholders. Firm value is enhanced when, and if, the return on capital, which results from working capital management, exceeds the cost of capital, which results from capital investment decisions as above. ROC measures are therefore useful as a management tool, in that they link short-term policy with long-term decision making. See Economic value added(EVA).

Management of working capital
Guided by the above criteria, management will use a combination of policies and techniques for the management of working capital. These policies aim at managing the current assets (generally cash and cash equivalents, inventories and debtors) and the short term financing, such that cash flows and returns are acceptable.

-Cash Management. Identify the cash balance which allows for the business to meet day to day expenses, but reduces cash holding costs.

-Inventory management. Identify the level of inventory which allows for uninterrupted production but reduces the investment in raw materials - and minimizes reordering costs - and hence increases cash flow

-Debtors management. Identify the appropriate credit policy, i.e. credit terms which will attract customers, such that any impact on cash flows and the cash conversion cycle will be offset by increased revenue and hence Return on Capital.

-Short term financing. Identify the appropriate source of financing, given the cash conversion cycle: the inventory is ideally financed by credit granted by the supplier; however, it may be necessary to utilize a bank loan, or to "convert debtors to cash" through "factoring".

Capital investment decisions

Capital investment decisions

Capital investment decisions are long-term corporate finance decisions relating to fixed assets and capital structure. Decisions are based on several inter-related criteria.

Corporate management seeks to maximize the value of the firm by investing in projects which yield a positive net present value when valued using an appropriate discount rate.

These projects must also be financed appropriately. If no such opportunities exist, maximizing shareholder value dictates that management return excess cash to shareholders. Capital investment decisions thus comprise an investment decision, a financing decision, and a dividend decision.

Business Plan

Business plan

A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.

The business goals being attempted may be for-profit or non-profit. For-profit business plans typically focus on financial goals. Non-profit and government agency business plans tend to focus on service goals. Business plans may also target changes in perception and branding by the customer, client, tax-payer, or larger community. A business plan that has changes in perception and branding as its primary goals is called a marketing Plan.

Business plans may be internally or externally focused. Externally focused plans target goals that are important to external stakeholders,particularly financial stakeholders. They typically have detailed information about the organization or team attempting to reach the goals. With for-profit entities, external stakeholders include investors and customers.

External stake-holders of non-profits include donors and the clients of the non-profit's services.

For government agencies, external stakeholders include tax-payers, higher-level government agencies, and international lending bodies such as the IMF, the World Bank, various economic agencies of the UN, and development bank.
Internally focused business plans target intermediate goals required to reach the external goals. They may cover the development of a new product, a new service, a new IT system, a restructuring of finance, the refurbishing of a factory or a restructuring of the organization. An internal business is often developed in conjunction with a balanced scorecard or a list of critical success factors. This allows success of the plan to be measured using non-financial measures. Business plans that identify and target internal goals, but provide only general guidance on how they will be met are called strategic plans.
Operational plans describe the goals of an internal organization, working group or department.

Project Plans, sometimes known as project frameworks, describe the goals of a particular project. They may also address the project's place within the organization's larger strategic goals.

Business plans are decision making tools. There is no fixed content for a business plan. Rather the content and format of the business plan is determined by the goals and audience.

A business plan should contain whatever information is needed to decide whether or not to pursue a goal.
For example, a business plan for a non-profit might discuss the fit between the business plan and the organization’s mission. Banks are quite concerned about defaults, so a business plan for a bank loan will build a convincing case for the organization’s ability to repay the loan.

Venture capitalists are primarily concerned about initial investment, feasibility, and exit valuation. A business plan for a project requiring equity financing will need to explain why current resources, upcoming growth opportunities, and sustainable competitive advantage will lead to a high exit valuation.
Preparing a business plan draws on a wide range of knowledge from many different business disciplines: finance,human resource management, intellectual property management,Supply chain management, operation management, and marketing, among others.It can be helpful to view the business plan as a collection of sub-plans, one for each of the main business disciplines.[

Rich with Online Business

A rich Internet application (RIA) is an entirely new kind of web experience that is engaging, interactive, lightweight, and flexible. RIAs offer the flexibility and ease of use of an intelligent desktop application, and add the broad reach of traditional web applications. The tool that enterprises use to build and deploy RIAs is Adobe Flex™ 2. Flex enables enterprises to create personalized, multimedia-rich applications that dramatically enhance user experience, increasing customer satisfaction and making users more productive. And, because RIAs run on the ubiquitous Adobe® Flash™ Player 9, enterprises can reach a broad audience of customers, partners, and employees with rich content and interactivity.

Rich Internet applications offer benefits for:

Business managers

• Increase customer satisfaction
• Reach anyone, on virtually any platform
• Reduce time-to-market of new, innovative solutions
• Drive revenue through applications that reduce process abandonment and enable intuitive self-service
• Empower users to make more informed decisions and respond to changes faster

IT

• Extend business processes to rich user interfaces
• Create more interactive, dynamic, and engaging user experiences
• Increase customer satisfaction and make users more productive
• Utilize industry-standard programming languages and design patterns

Developers

• Efficiently create rich applications using a highly productive, standards-based programming model
• Combine rich data controls, visual transitions, and integrated multimedia components
• Customize the look and feel of your applications using a CSS-based skinning and styling model
• Customize the look and feel of your applications using a CSS-based skinning and styling model
  

The Home Business Opportunity

Starting a home business

• Increase Your Income by Starting a Home BusinessWhat You Need to Know
  According to Newsweek Magazine, "It is anticipated that by the year 2005, 50% of households in the U.S. alone will be involved in [their own] business."Why start a home business? Job security is one reason. According to the American Banking Association,
  "The large majority of American are 3 to 4 months away from bankruptcy. Many are 30 days away."Question for you: if you lost your job, what source of income would you turn to?

• Starting a home business has many advantages:
  1. You have Time Freedom
  2. You determine Your Own Paycheck ... there are absolutely no income limitations
  3. You determine Your Own Hours ... no layoffs and no downsizing.

• Of course, it it were that easy, everyone would be quitting their current jobs to start a home business. True, you do gain Time Freedom, Your Own Paycheck and set Your Own Hours. But like any success story, you will need to work hard for these achievements.

• To succeed at any home business, you need to follow these four basic rules:
  1. First, you need to find and believe in the product and/or service that you are marketing and/or developingWe invite you to review our recommended areas of home business investment
  2. Be prepared to make an initial investment to jump-start your home business:
  3. Make a commitment to succeed through goal setting, motivation, and disciplineFinally, develop the skill set to market and sell your home business

Important Note: be careful about the type of home business you engage. Avoid Internet ads and emails that promote fast and easy income with limited work. Having a successful home business will require work and personal sacrifice.

Business Opportunity for Make Money

Welcome to my business opportunity blog.Here you will learn about business opportunity tips and how to find good information.