How These Companies Implemented the Balanced Scorecard and Its Apparent Effects
Today, the use of the Balanced Scorecards (BSC) is widely-spread due to their high effectiveness and customer-centeredness. In actuality, many companies use the BSC approach to conduct the marketing analysis and to assess the effectiveness of their performance in regard to the customer satisfaction and company-customer relationships. At the same time, the use of the BSC can help to improve the company-customer relationship consistently, which plays an important, if not to say, the determinant part in the marketing performance of modern organizations. In this regard, it is worth mentioning the fact that the experience of many companies shows that the use of the BSC may have a positive impact on their business development but they need to apply the BSC effectively that means the understanding of the essence of the method how to apply the BSC and techniques that can maximize the effectiveness of the BSC.
On analyzing the use of the BSC in the contemporary business environment, it is primarily necessary to dwell upon the use of the essence of the BSC and their application. At this point, it is worth mentioning the fact that specialists stand on the ground that “scorecards feature all manner of wonderful objectives relating to the customer value proposition and customer outcome metrics—for example, market share, account share, acquisition, satisfaction, and retention” (Kaplan, 2005, 1). In such a way, it is obvious that the use of the BSC is primary focused on the customer. In practice, this means the BSC aim at the adequate and accurate assessment of the customer value proposition, customer outcome and overall needs and wants of customers and the extent to which a company meet them.
In this regard, modern companies undergo three stages in the course of the implementation of the BSC method, including the definition of customers, the definition of needs, wants and demands of customers, and the proposition the company can make to its customers. Basically, all three stages are equally important and it is hardly possible to underestimate their significance. In order to understand the role of each stage, it is important to briefly dwell upon each of them.
Specialists often define the first stage as “Who are our customers?” stage (Niven, N.D.). This means that, at this stage, the company uses the BSC to identify its target customer group. This stage is very important because the company develops its products and services for the specific, target customer group. Therefore, before the development and introduction of the new product or service the company needs to define who its customers actually are and who will consume the product or service offered by the company in the market.
Specialists define the second stage as “What do those customers expect or demand from us?” stage (Niven, N.D.).
This is the stage, when the company has to identify clearly needs, wants and demands of customers. On the ground of this information the company should define what products it should manufacture or what services to offer to customers to meet their needs and wants. The understanding of needs and wants of customers is crucial because the product that does not meet needs and wants of customers is absolutely useless and such product is doomed to failure in the market.
Finally the last stage is “What is our value proposition in serving our customers?” stage (Niven, N.D.). At this stage, the company defines what products and services it is going to offer customers to meet their needs and wants. At this point, it is worth mentioning the fact that:
The ability to measure profitability at the individual customer level allows companies to consider new customer profitability metrics such as “percentage of unprofitable customers,” or “dollars lost in unprofitable customer relationships.” Such customer profitability measures provide a valuable signal that satisfaction, retention, and growth in customer relationships are desirable only if these relationships contribute to higher, not lower, profits. (Kaplan, 2005, 8).
In such a way, the BSC is quite a complex method oriented on customers, their needs and wants’ assessment.
Thus, in conclusion, it is worth mentioning the fact that the BSC is effective, if it is applied respectively to the aforementioned stages. Companies that used this method have proved to be successful in their business development.
Nevertheless, it is still possible to recommend enhancing the BSC with other methods of analysis, including methods that help to analyze the competitive environment of the company, for instance, the SWOT analysis, or Porter’s Five Forces analysis.
Gumbus, A. and Lussier, R.N. (2006) Entrepreneurs use a balanced scorecard to translate strategy into performance measures. Journal of Small Business Management. 44(3):407-426. Retrieved November 5, 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
Kaplan, R.S. (2005) A Balanced Scorecard Approach To Measure Customer Profitability. Working Knowledge. Harvard Business School. Retrieved November 5, 2010, from http://hbswk.hbs.edu/item/4938.html
Niven, P. (N.D.) Customer perspective. EPM Review. Retrieved May 17, 2010, from http://www.epmreview.com/Resources/Articles/Customer-Perspective.html
Peters, T. J. (2002) In search of excellence: Lessons from America’s best-run companies. New York: Harper & Row.