Palladium Group Asia Pacific

Palladium / Thailand Stock Exchange Conference 2011

16th June 2011

Dr. David P. Norton

Director, Palladium Group, Inc.

Author, The Balanced Scorecard

Introduction

Mr T M Nagarajan

South East Asia Director

Palladium Group Asia Pacific

3110612_APAC Tour_Module1_Strategy_dpn

© 2011 Palladium Group Asia-Pacific -

Confidential

We provide our clients an integrated set of services designed to

deliver tangible results and leave lasting capabilities—the

Execution Premium

Founded by Balanced Scorecard creators Drs. Robert S. Kaplan

and David P. Norton

Global expertise in:

— Strategy Design

— Strategy Management

— Leadership

— Innovation

700 total client organisations; 200 employees

Services include:

Palladium Group is the global leader in helping organisations execute strategy

Consulting Conferences Training Technology

— Operational Performance

— Governance

— Risk Management

4110612_APAC Tour_Module1_Strategy_dpn

Strategy Design We help our clients to formulate strategy with a highly deductive, client driven approach designed for successful execution

Strategy Management We help our clients build the capability to translate strategy, align the organisation, measure and report performance and efficiently deploy resources to achieve breakthrough results

Innovation We help our clients identify and deploy new business models and develop new, highly differentiated ways to engage stakeholders and customers through innovation of key interactions and experiences.

Leadership We help leaders (directors, executives, managers) to enhance their capabilities to execute strategy through coaching and mentoring and robust methodologies that help eliminate key barriers to execution.

Operational Performance We help our clients to identify, understand, and manage the critical drivers of operational performance and build the appropriate governance, reporting and information management disciplines to drive enhanced decision making

Risk and Governance We help our clients to improve Board and executive governance and the management and measurement of enterprise, strategic and operational risk

© 2011 Palladium Group Asia-Pacific. - Confidential

Dr. David P. NortonDirector, Palladium Group, Inc.

Author, The Balanced Scorecard

Mastering The Strategy Management System

Overview: Managing Strategy is Managing Change

Palladium Group Asia Pacific

Strategy Execution Forum

June 2011

7110612_APAC Tour_Module1_Strategy_dpn © 2011 David Norton and Palladium Group, Inc.

Biography

Dr. David P. NortonDirector, Palladium Group

Dr. Norton is a founder and director of the Palladium Group, an organization specializing in systems and processes to improve the execution of business strategy.

He has founded and built a series of professional service firms during the course of his career, each focused on leading edge issues of management. Nolan,

Norton and Company, founded in 1975, specialized in the emerging science of information technology management. Renaissance Solutions, founded in 1992,

focused on the emerging niche of knowledge management. The Balanced Scorecard Collaborative, founded in 1998, helped form the new professional discipline of

strategy management.

A frequent lecturer and author, Dr. Norton is best known for his work with the Balanced Scorecard, which has been the subject of many conferences and articles.

He is the co-author, with Robert S. Kaplan, of eight Harvard Business Review (HBR) articles and five books:

• The Balanced Scorecard (1996)

• The Strategy Focused Organization (2000)

• Strategy Maps (2004)

• Alignment (2006)

• The Execution Premium (2008)

His books have sold more than one million copies in 23 different languages.

The Balanced Scorecard concept was selected by the editors of the Harvard Business Review as one of the most influential management ideas of the past 75

years. Dr. Norton was voted on as one of the world’s 12 most influential management thinkers by Sun Top Media’s “Thinkers 50” for 2007. Drs. Norton and Kaplan

were recently honored with the “Champion of Workplace Learning and Performance Award (2008)” by ASTD (The American Society for Training and Development).

Dr. Norton earned a BS in electrical engineering from Worcester Polytechnic Institute, an MS in operations research from the Florida Institute of Technology, an

MBA from Florida State University, and his doctorate in business administration from Harvard Business School.

8110612_APAC Tour_Module1_Strategy_dpn © 2011 David Norton and Palladium Group, Inc.© 2011 David Norton and Palladium Group, Inc.

The Evolution of a Performance Management Approach

Silo IntegrationSchool of

Thought

Point

Solution

1992 - 1996

An Idea (Balanced

Scorecard)

Early Adopters

• Mobil

• Cigna

• Chem Bank

1996 - 2002

A Philosophy

(Strategy Focused

Organization)

Hall of Fame

2000 - 2009

Management System

(Execution Premium)

Link to Other

Management

Processes

(HR / IT / TQM)

2006 -

A Competency (Office

of Strategy

Management)

Certified Professionals

Global Communities

school

Kno

wle

dge

/ Im

pact

PROGRESS IS CUMULATIVE

time

integration

silo

point solution

A

Problem

1990

Measurement

systems causing

myopic behavior

90% of organizations

fail to execute their

strategies

WHY?


How do you build an effective strategy management system?

MANAGING PROCESS

• Managing strategy is synonymous with

managing change

• Strategy defines the changes to the status

quo required by the vision

• Managing change is the art of strategy

execution

• A common process is needed

to synchronize the efforts of

many people

Present

Vision

Strategy

t

Performance

Gap

productivity

growth

innovationPresent

Vision

Strategy

t

Performance

Gap

productivity

growth

innovation

MANAGING CHANGE

results

performance measures

ProcessInitiative

EXECUTION


results

1

3

5

6

Strategic Plan

• Strategy Map

• Balanced Scorecard

• Stratex

Operating Plan

• Sales Forecast

• Resource Requirements

• Dashboards

• Budgets

2

• Key process improvement

• Sales planning

• Resource capacity plan

• Budgeting

PLAN OPERATIONS4

• Business Units

• Support Units

• Employees

ALIGN THE ORGANIZATION

• Strategy Reviews

• Operating Reviews

MONITOR & LEARN

• Profitability Analysis

• Strategy Correlations

• Emerging Strategies

TEST & ADAPT

• Strategy Map / Themes

• Measures / Targets

• Initiative Portfolios

• Funding / Stratex

TRANSLATE THE STRATEGY

• Mission, Values, Vision

• Strategic Analysis

• Strategy Formulation

DEVELOP THE STRATEGY


Leadership Matters! It is not a simple process for a CEO to mobilize transformation

Graham Sher

CEO, Canadian Blood Services

HBR, October 2005

“While many people believe that chief executives wield direct

and easy influence, the reality is that any CEO has a difficult

time influencing his or her organization”

• “A CEO’s attempts at command and control undermine

the authority of senior executives”

• “Bad news is filtered before it gets to me”


Source: BSCol Research (Survey of 143 performance management

professionals, drawn from BSCol Online Community, March 2006)

Process Matters! Organizations with a formal strategy execution process in place

are dramatically outperforming organizations without formal processes.

Do you have a formal strategy

execution process in place?

Describe your organization’s

current performance.

Yes No

(54%) (46%)

• …. We have breakthrough results

• …. We are performing better than our peer group

Sub-Total

12%

58%

70%

7%

20%

27%

Do you use a formal performance management methodology?

Rated “most competitive” in

their industry

Rated “least competitive” in

their industry

Source: IDC Research (Improving Organization Decision-Making

through Pervasive Business Intelligence, 2009)

75% 43%


The Balanced Scorecard Management System provides a structured framework

for managing change

Present

Vision

Strategy

t

Performance

Gap

productivity

growth

innovationPresent

Vision

Strategy

t

Performance

Gap

productivity

growth

innovation

results


Process

Initiative

EXECUTION


results

1

3

5

6Strategic Plan

• Strategy Map


• Stratex

Operating Plan

• Sales Forecast


• Dashboards

• Budgets

2


• Sales planning


• Budgeting

PLAN OPERATIONS4

• Business Units

• Support Units

• Employees




MONITOR & LEARN




TEST & ADAPT










results


Process

Initiative

EXECUTION


results

1

3

5

6Strategic Plan

• Strategy Map


• Stratex

Operating Plan

• Sales Forecast


• Dashboards

• Budgets

2


• Sales planning


• Budgeting

PLAN OPERATIONS


• Sales planning


• Budgeting

PLAN OPERATIONS4

• Business Units

• Support Units

• Employees


• Business Units

• Support Units

• Employees




MONITOR & LEARN



MONITOR & LEARN




TEST & ADAPT




TEST & ADAPT



















PROCESS-AIDED CHANGE MANAGEMENT

“LEFT-BRAIN”

LEADERSHIPStructured

change-management

tools

Scorecards

Strategy Maps

Stratex

“RIGHT-BRAIN”

LEADERSHIPUnstructured

leadership

behavior

Unfreezing

Visioning

Consensus

Culture

STRATEGY MANAGEMENT PROCESS


In our recent book, we posit that organizations need to build a formal system to

execute their strategies.

How does a management system promote

successful strategy execution?

results


Process

Initiative

EXECUTION


results

1

3

5

6

Strategic Plan

• Strategy Map


• Stratex

Operating Plan

• Sales Forecast


• Dashboards

• Budgets

2


• Sales planning


• Budgeting

PLAN OPERATIONS4

• Business Units

• Support Units

• Employees




MONITOR & LEARN




TEST & ADAPT











The strategy management system promotes speed, flexibility and adaptability to

change

• Focus on short-term

• Protect long-term

• Shorten time horizon

• Rapid response

• Communicate

• Shift priorities

• Re-align organization

• Analyze

• Find new

opportunities

• Be clear about

objectives and measures

• Re-prioritize investments

• Manage Stratex

• Change the strategy

Process

Initiative

EXECUTION

1

3

5

6

2

• Key process

improvement

• Sales planning


• Budgeting

PLAN OPERATIONS4

• Business Units

• Support Units

• Employees




MONITOR & LEARN




TEST & ADAPT










Price Quality Time Function Relation Brand

Product/Service Attributes Relationship Image

Process Perspective

Financial Perspective

Customer Perspective

Sustained

Shareholder

Value

Operations

Management

Processes

Customer

Management

Processes

Innovation

Processes

Productivity Revenue Growth

Regulatory and

Social Processes

Learning & Growth Perspective

Human Capital

Information Capital

Organization Capital





Process Perspective



Sustained

Shareholder

Value

Operations

Management

Processes

Customer

Management

Processes

Innovation

Processes


Regulatory and

Social Processes


Human Capital

Information Capital


Strategy Maps

Process

Initiative

EXECUTION

1

3

5

6

2

• Key process

improvement

• Sales planning


• Budgeting

PLAN OPERATIONS

• Key process

improvement

• Sales planning


• Budgeting

PLAN OPERATIONS4

• Business Units

• Support Units

• Employees


• Business Units

• Support Units

• Employees




MONITOR & LEARN



MONITOR & LEARN




TEST & ADAPT




TEST & ADAPT





















Process Perspective



Sustained

Shareholder

Value

Operations

Management

Processes

Customer

Management

Processes

Innovation

Processes


Regulatory and

Social Processes


Human Capital

Information Capital






Process Perspective



Sustained

Shareholder

Value

Operations

Management

Processes

Customer

Management

Processes

Innovation

Processes


Regulatory and

Social Processes


Human Capital

Information Capital


Strategy Maps



Process Perspective



Sustained

Shareholder

Value

Operations

Management

Processes

Customer

Management

Processes

Innovation

Processes


Regulatory and

Social Processes


Human Capital

Information Capital






Process Perspective



Sustained

Shareholder

Value

Operations

Management

Processes

Customer

Management

Processes

Innovation

Processes


Regulatory and

Social Processes


Human Capital

Information Capital


Strategy Maps


Strategy Management is an emerging profession. It requires new organization and

leadership roles

“A New Way of Managing”

Enterprise Management

Office of Strategy

Management

Financial

ManagementHuman Resource

Management

Marketing /

Communications

Technology

Management

Strategic

Planning

Organizational

Unit A

Organizational

Unit B

Organizational

Unit C

Organizational

Unit D

Strategy Council

Theme Teams


Does it work? Research studies show that Balanced Scorecard users create

dramatically higher levels of shareholder value for their organizations.

Matching Criteria

BSC Firms

(mean)

Control Firms

(mean) Difference

Market value of equity

Market to Book

Net Assets

Sample: 164 publicly traded firms

Reference: “The effects of adopting the Balanced Scorecard on shareholder returns,” Aaron Crabtree and Gerald DeBusk, Advances in Accounting, June 2008, Elsevier (www.elsevier.com)

Three-year post-adoption performance (“Buy and Hold Returns”) of matched BSC firms vs control firms

50.72%

39.14%

41.05%

43.6%

23.60%

8.97%

13.47%

15.3%

27.12%

30.17%

27.58%

28.3%

The Execution Premium


Palladium Balanced Scorecard Hall of Fame for Executing Strategy®

By Industry 2000-2010


The Execution Premium: Behind every story of shareholder value, there is another

story of value creation. That is the real story of strategy execution.

Execution Premium

Valuation

Profitable

Growth

Brand

ValueCustomer

Satisfactio

n

Technolog

y Support

“Best

Employer”

Key Process

Effectiveness

Ranked #1 employer in

IT sector (Dataquest)

Ranked India’s best

managed company

Innovation (new

product revenues) up

48%

Active clients rose from

293 to 500

Big accounts ($20M+)

up from 6 to 27

Revenue up 310%

EPS up 305%Financial

Perspective

Customer

Perspective

Internal

Perspective

Learning & Growth

Perspective

“Our BSC helped us deliver superior performance consistently and

predictably in all facets of our operations.”

Kris Gopalakrishnan – CEO

Infosys®


SUMMARY: The Kaplan Norton Strategy Management System facilitates

successful strategy execution and dramatic execution premiums

FIN

AN

CIA

L + 200%

+ 150% + 225%Shareholder

ValueProfitability

Revenue

Growth

CU

ST

OM

ER

+ 2X #1

Customer

Satisfaction

Brand

Ranking

PR

OC

ES

S

+ 10X #1

Process

Execution

Performance

Awards

LE

AR

NIN

G

100% #1

Strategic

Awareness

Best

Employer

BSC Hall of FameComposite Results

The Vision

BHAG

The Strategy

“Grow The Profits of the Business by 50% by 2012”

(TNT Express)

The

Results

The Measures

The System

Executive

Leadership

Visit Palladium at:

www.thepalladiumgroup.com/apac

Join the Palladium Group Global Community of

Strategy Execution Practitioners:

www.thepalladiumgroup.com/XPC

For Strategy Execution excellence, visit the Hall

of Fame winners at:

www.thepalladiumgroup.com/about/hof

Palladium Asia Pacific Offices

APAC Head Office

Level 20,

44 Market Street

Sydney, NSW 2000

Australia

+61.2.8259.1010 T

+61.2.8259.1003 F

Indonesia

30th Floor, Menara Standard

Chartered

Jalan Prof. Dr. Satrio, Kav.164

Jakarta 12950

+62.21.2555.5798 T

+62.21.2555.5601 F

Singapore

Level 35, UOB Plaza 1

80 Raffles Place

Singapore 04862

+65.6248.4701 T

+65.6248.4501 F

Malaysia

Level 40, Tower 2,

Petronas Twin Towers,

Kuala Lumpur City Centre

50088, Kuala Lumpur

+603 2168 4720 T

+603 2168 4201 F

Thailand

36th Floor, CRC Tower

All Seasons Place

87/2 Wireless Road

Lumpini, Phatumwan

Bangkok 10330

+66.2625.3161 T

+66.2625.3000 F

Philippines

28th Floor, Tower Two

The Enterprise Center

6766 Ayala Avenue

Corner Paseo de Roxas

Makati City 1226

+63.2.849.3426 T

+63.2.886.5008 F

India

Level 1, Trade Centre

Bandra Kurla Complex

Bandra (East)

Mumbai 400 051

+91.22.4070.0191 T

+91.22.4070.0800 F

T M Nagarajan

South East Asia Director, Palladium Group Asia Pacific

eMail: [email protected] Phone: + 60 163 300 330

Palladium Group Asia Pacific

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