Practicing the noble art of cheating (part I)

Yesterday, during a night walk, almost tropical, I was surprised to discover 4 geckos in Vila Nova de Gaia where I live

Along the same walk I read "Method for Strategic Objectives in Strategy Maps" by Luis E. Quezada, Felisa M. Cordova, Pedro Palominos, Katherine Godoy and Jocelyn Ross, published by Int. J. Production Economics 122 (2009) 492–500.

I'm a big fan of the balanced scorecard and even more of strategy maps.

"The BSC establishes cause–effect relationships among strategic objectives, even though they do not state the way to establish and quantify those relationships. The relationships are represented  in what the authors called strategy map, which is the main subject in this work.
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The objective of this paper is to present a simple tool for identifying strategic objectives in order to build a strategy map. A strategy map is a component of a balanced scorecard that represents the cause–effect relationships among strategic objectives. Performance measurements are defined for each strategic objective."

This figure shows an example of a strategy map:

The authors studied 12 companies and describe 3 methods used to develop strategy maps:

"Method 1 carries out a strategic process, including the definition of a vision and mission, internal and external analysis from which a SWOT (strengths, weaknesses, opportunities, threats) analysis is undertaken. The strategic objectives are defined from the SWOT analysis. Fig. 2 depicts the process."

"Method 2 is similar to method 1, but the difference is that two types of objectives are defined: global and specific. Global objectives are defined directly from the vision and mission, while specific objectives are defined from the SWOT analysis. This method has an advantage over method 1; it translates the vision and mission into general objectives, helping the organisation to identify the strategic directions within the strategy map.
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Method 3 identifies strategic themes from the organisation's vision and mission, which are the basis for defining the strategic objectives."

Then, the authors present their own method described by this figure:

When I saw using the SWOT analysis to develop a strategy map I smiled.
What is a strategy map?
A strategy map is a diagram that shows an organization's strategy as a chain of cause-efect relationships on a single page. And someone uses a SWOT analysis before getting the strategy? Come on!
Nothing is intrinsically a strength or a weakness, an opportunity or a threat independently of the strategy. I believe that only after formulating a strategy one can use the SWOT analysis. I can state that our organization has a tremendous strength: we have a very efficient high throughput production machine. But if our strategy is to work for customers that want small amounts, that want flexibility, that want customization... then that machine is not a strength. Most likely it is a weakness.

I smiled even more when I saw that the four methods started with "Vision and Mission". I smiled and while smiling I began to repeat Paul's words to the Corinthians: When I was a child (child-consultant) reading management books I also believed in these childish-scenes and I was amazed and said yes...

Then I started to work with SME's and I realized that it is a lot of BS.

Management books present this kind of method:

I learned long time ago that the order must be almost completly changed, and in October 2015 I wrote the blog post "From concrete to abstract and not the other way around" (in Portuguese).

A typical SME in Portugal cannot start with a blank sheet, and start from scratch in a rational strategy development exercise.
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Stay with me and try to put on shoes of a SME in need of developing a strategy. Why do they need to do that? Normally, for one of two possible reasons:

• to seize an opportunity that it inadvertently discovered; or
• to stop a competitive bleeding that is weakening it, and find a way to recover.

SME have no money, no culture, no resources to be free and go after the next big hit. They have to start with what they have at hand.

To avoid daydreaming and to motivate participation I start the strategic thinking with the result of a competitive advantage: one or more sustainable satisfied customers.

My approach is based on their clients. Please tell me the name of one or two good clients you have. Those clients are your best clients, or the clients with whom you have the best margins or make more money. Give me a name.

And I put that name on the whiteboard.

Now, look at that client as a person, look into their eyes and answer me: customers are selfish, they only think about themselves. Why on earth do these customers think it's best for them to work with you? What do they get in their life for working with you? Why do they continue to choose your organization?

I don't care about vision or mission, at least for now. I just want a safe rock on which to lay the foundation of their competitive advantage. And they have to have a competitive advantage, the proof is that customer satisfaction and loyalty.

So, we reverse the order:

• Satisfied customers with whom we make good money;
• What is our competitive advantage behind working with them?

Knowing the competitive advantage one can start climbing the abstract ladder and go from the specific and concrete into the more abstract to develop rules and to practice the noble art of cheating. I call it cheating when an organization realizes what make customers satisfied and start to do that in a systematic way, not just hoping for the luck.

I will continue this post showing how to go from a specific customer into a strategy map.

Acerca do Valor

Ao ler "The strategy map: guide to aligning intangible assets" de Kaplan e Norton e publicado na Strategy & Leadership, 2004, Vol. 32 Iss: 5 pp. 10 - 17.
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Fiquei a matutar nestes trechos:

"Creating value from intangible assets follows four principles
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(1) Value creation is indirect - improvements in intangible assets affect financial outcomes through chains of cause-and-effect relationships.
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(2) Value is contextual - the value of an intangible asset depends on its alignment with the strategy. For example, training employees in TQM and six sigma techniques has greater value for organizations following a low total cost strategy than for one following a product leadership and innovation strategy.
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(3) Value is potential - intangible assets, like employees trained in statistical quality control and root cause analysis, have potential value but not market value. Internal processes such as design, production, delivery, and customer service are required to transform the potential value of intangible assets into tangible value. If the internal processes are not directed at the customer value proposition or financial improvements, then the potential value of employee capabilities, and intangible assets in general, will not be realized.
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(4) Assets are bundled - the value from intangible assets arises when they are combined effectively with other assets, both tangible and intangible. ... Maximum value is created when all the organization's intangible assets are aligned with each other, with the organization's tangible assets, and with the strategy." 

Há aqui material que a service dominant logic agarraria anos depois. Por exemplo, recordar daqui:

"to adopt the view of not what resources are, but rather what they become. [Moi ici: O mesmo que escrever "Value is potential"] This is the essential nature of resources, and so we define them as anything, tangible or intangible, internal or external, operand or operant, that the actor can draw on for increased viability."

Relacionar "Value is contextual" com:

• "Transactions are replaced by interactions because contextual value creation cannot take place without interaction;" (aqui) 
• "Value is highly contextual." (aqui)

Interessante como Kaplan e Norton andavam à frente de muita gente que já então escrevia sobre valor.

Acerca do lucro

"profit maximization is rarely the sole objective for a firm but just one of many dimensions to be considered, [Moi ici: Nunca esquecer a lição dos nabateus] so a good starting point is to consider the company’s balanced scorecard and draw its strategy map.
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Then, as the focus shifts specifically to value capture, everyone should be reminded of some basic truths. First: Market share is a dangerous key performance indicator (KPI). [Moi ici: Nunca esquecer a lição de Hermann Simon] It is a backward-looking measure and likely to lead to price wars as soon as one competitor challenges the status quo with a low-price strategy. Second: Revenues and sales metrics should never be used in isolation [Moi ici: Nunca esquecer "Volume is vanity, Profit is sanity"] to determine rewards or decisions of any kind, but only in conjunction with the contribution margin and profit figures. Practitioners sometimes justify their top-line focus by arguing that revenue is much easier to measure than profit (which is sometimes even confidential). In such a situation, the company has to define proxy variables that prevent fighting for nonprofitable deals. Third: When value capture objectives are not aligned within a company, the result is inconsistent behavior and frustration. [Moi ici: E a triste procissão de números alarmantes na série "Tecto de vidro"] Conversely, a shared sense of what must be achieved creates the climate for productive cross-functional collaboration.

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poor alignment on priorities is a serious obstacle to capturing value.
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Managers should always try to maximize profits, except when they should not. The occasions when they should not are when other strategic priorities must be considered, and are explicitly taken into account."

E muito mais haverá a dizer sobre a importância do desenvolvimento das relações com os clientes, apostando na interacção e co-criação de valor para ganhar um maior retorno.

Trechos retirados de "8 Reasons Companies Don’t Capture More Value"

Acerca da monitorização do desempenho das organizações

Algumas reflexões interessantes sobre a monitorização do desempenho das organizações em "Measuring Organizational Performance as a Dependent Variable: Towards Methodological Best Practice":

"Implication 1: Measuring performance requires weighing the relevance of performance to focal stakeholders.
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Organizations are heterogeneous in their resources and capabilities and how and where they choose to use them. At the most basic level, small and large firms are likely to perform in quite different manners. Although linked by competition, these firms have very different resources and strategies. Evidence suggests that large organizations use both financial and nonfinancial performance measures, but favor financial measures. (Moi ici: Nem de propósito, em linha com "Concentram-se nos custos") Very small firms also use both financial and non-financial variables to measure their performance. In a cross-country survey, Laitinen and Chong found that small Finnish companies focused on profitability, product margins, customer satisfaction and liquidity. Small UK companies were similar, giving less emphasis to overall profitability but also weighing debt levels highly. This evidence supported earlier findings by Davig and colleagues that product performance is more prominent in the evaluation of performance for small firms.
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Performance itself is likely to be somewhat firm specific: as the strategic choices a firm makes will dictate which performance measures will reflect the latent performance construct. Understanding how different independent variables link to a dependent performance variable is then no longer trivial. Assuming away this dimensionality will lead to misdirected or biased measurement.
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The relationship between measures and performance is also influenced by which measures the firm uses internally and how these are embedded into incentive and control systems within the firm; e.g., the firm’s own key performance indicators (KPIs).
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Implication 2: Measurement of performance must take into account heterogeneity of environments, strategies and management practices.
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A number of empirical studies have confirmed that performance itself does not persist indefinitely. This warns against the adoption of short or medium term measures, as these can be heavily biased by random fluctuations.
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Implication 3: Measurement of performance requires an understanding of the time series properties relating organizational activity to performance.
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Implication 5: Measurement of performance requires an understanding of the relationship between measures.(Moi ici: E pensa-se logo no mapa da estratégia)"

Recordar "Não existem BSCs tipo-template"

Acerca do balanced scorecard

"How do executives expect to realize their strategic objectives if all they look at is financial results like product profit margins, return on equity, earnings and interest before interest, taxes, depreciation, and amortization (EBITDA), cash flow, and other financial results? These are really not goals – they are results. They are consequences. (Moi ici: aqui, aqui, aqui, a cereja no topo do bolo) Measurements are not about just monitoring the summary dials of a balanced scorecard. They are about moving (Moi ici: monitorizar para tomar decisões, tomar decisões é o essencial) the dials of the dashboard that actually move the scorecard dials.
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Worse yet, when measures are displayed in isolation of each other rather than with a chain of cause-and-effect linkages, then one cannot analyze how much influencing measures affect influenced measures. This is more than just leading indicators and lagging indicators. Those are timing relationships. A balanced scorecard reports the causal linkages, and its key performance indicators (KPIs) should be derived from a strategy map. (Moi ici: Ainda se vêem muitos casos destes, um balanced scorecard que não assente num mapa da estratégia é um embuste..., um balanced scorecard da 2ª geração) Any strategic measurement system that fails to start with a strategy map and/or reports measures in isolation is like a kite without a string. There is no steering or controlling.

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I repeat my earlier statement. Any strategy management system that fails to start with a strategy map and/or reports measures in isolation is like a kite without a string. There is no steering or controlling."

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Pessoalmente, gosto de começar pelo desenho do mapa da estratégia. Dentro do mapa da estratégia gosto de começar pela identificação dos clientes-alvo e do ecossistema de procura em que estão envolvidos. Depois, há que identificar a proposta de valor que vamos oferecer a cada um desses intervenientes no ecossistema, para que tenham algo a ganhar com o funcionamento da cadeia da procura. Por fim, segue-se a identificação das actividades que formam o mosaico sinérgico que vão produzir as propostas de valor e os investimentos em recursos e infra-estruturas que potenciarão essas actividades.
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Trecho retirado de "A Kite with a Broken String – The Balanced Scorecard"

Iniciativas estratégicas para transformar uma organização

Desenvolver objectivos estratégicos na perspectiva interna

Uma vez identificados os clientes-alvo, uma vez desenhado o seu retrato-tipo, e uma vez formulada a proposta de valor a oferecer-lhes, podemos iniciar o desenho do mapa da estratégia.

Que objectivos estratégicos, na perspectiva interna, devemos seleccionar, para concentrar a organização no que é essencial?

O princípio de Pareto, ajuda uma organização a concentrar-se no que é essencial. Onde devemos investir os nossos escassos recursos? Onde o retorno do investimento for maior!
Assim, aplicando o princípio de Pareto, podemos olhar para a cadeia de valor de Porter e perguntar:

Quais são os componentes da cadeia de valor que são críticos para a execução da estratégia?

Ou então, aplicando ainda o princípio de Pareto, podemos olhar para um modelo do funcionamento de uma organização, com base na abordagem por processos e perguntar:Quais são os componentes do mapa de processos que são críticos para a execução da estratégia? Um, ou mais processos estão a ter um desempenho que limita os resultados estratégicos da organização. O princípio de Pareto ajuda-nos a identificar esses elos mais fracos, ou mais relevantes para o sucesso.

Da "Service-Profit Chain" até ao mapa da estratégia

Quando fiz seis anos, um casal amigo dos meus pais ofereceu-me, como prenda de aniversário, dois livros que ainda hoje guardo comigo: "Como o homem se tornou gigante" e "História da Terra", o primeiro só o li, talvez por volta dos nove anos; o segundo, porque contava, entre outras coisas, a história da ascenção e queda dessas criaturas extraordinárias chamadas dinossauros, atraiu-me logo para a leitura.

Assim, desde muito cedo habituei-me a pensar em termos de evolução biológica. Hoje, olho para uma organização, olho para uma lingua, olho para a música, olho para conceitos de gestão e, vejo seres vivos em evolução quasi-biológica.

Aprecio ontologica e epistemologicamente o conceito, a ferramenta "mapa da estratégia", e vejo pragmaticamente os resultados da sua utilização. Foi pois com interesse, que há dias encontrei este artigo: "Putting the Service-Profit Chain to Work", da autoria de James L. Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser, e Leonard A. Schlesinger, publicado pela Harvard Business Review no número de Março-Abril de 1994.

Algumas passagens que sublinhei do artigo foram:

"... frontline workers and customers need to be the center of management concern"

"... when they make employees and customers paramount, a radical shift occurs in the way they manage and measure success"

"... managers can build customer satisfaction and loyalty and assess the corresponding impact on profitability and growth. In fact, the lifetime value of a loyal customer can be astronomical, especially when referrals are added to the economics of customer retention and repeat purchases of related products"

"The service-profit chain establishes relationships between profitability, customer loyalty, and employee satisfaction, loyalty, and productivity. The links in the chain (which should be regarded as propositions) are as follows: Profit and growth are stimulated primarily by customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfyed, loyal, and productive employees. Employee satisfaction, in turn, results primarily from high-quality support services and policies that enable employees to deliver results to customers."

O artigo propõe esta representação:

Ou seja, a ideia estava já a desenvolver-se...