Chapter 2 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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Chapter 2 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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2-2 “Applying the Balanced Scorecard to Small Companies”
(Note: This article is referred to in the text of chapter 2)
The use of the balanced scorecard for developing and evaluating progress for a strategy is illustrated in
these examples of four different companies. Each firm was actively involved planning or implementing
the balanced scorecard at the time of the study, and agreed to discuss its strategic goals, the relative
importance of the goals (ranked by scorecard perspective), and the key performance measures for these
goals. The results are shown in the Tables in the article. The firm’s perspectives are shown in order of
importance from top to bottom in each table.
We can infer the firm’s strategy from studying each balanced scorecard. For example, consider
the scorecard for the firm in the food ingredients industry. The firm puts the financial perspective first,
and emphasizes market growth. This makes sense for a company in a commodity type industry (food
ingredients) where profit margins are small and sales volume is important. Also, cost control is important
for profitability, as noted in the strategic goals within both the customer and operations perspectives. In
effect, the exhibit shows the outline from which a strategy map can be developed. Goals in the learning
and growth perspective support goals in the internal perspective, which in turn support goals in the
customer and financial perspective.
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2-3: Social and Environmental Impact
We cannot ignore social and environmental responsibility, which in turn affects how companies handle
their investment and operation strategies. However, often a win-win situation of making profits while
meeting social goals presents quite a challenge. The author uses the Corporate Sustainability Model to
address tackling this challenge. The model involves inputs, processes, outputs and outcomes.
Discussion Questions
1. Why do challenges exist when companies try to improve their performance while focusing on
social and environmental factors as well?
These challenges exist because implementing sustainability is fundamentally different from
implementing other strategies in an organization. For operating goals, the direct link to profit is
2. What are the inputs of the Corporate Sustainability Model and how do they fit into the corporate
business world?
Inputs include the external context (regulatory and geographical), the internal context (mission,
strategy, structure, and systems), the business context (industry sector, customers, and products),
3. How did Canon attempt to improve costing of their environmental and social impacts?
At Canon, each department bears the financial burden of its own waste processing. With this new
program, waste generated by each workplace is collected at a recycling center where the
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2-4: “The Use and Usefulness of Nonfinancial Performance Measures”
Firms often use financial, quantitative nonfinancial, and subjective performance measures to run the
organization. The authors provide a discussion on these measures pertaining to specific companies and
various case studies. One case study in particular revolves around the manufacturing industry in which the
authors use data and a survey to support their argument.
Discussion Questions
1. Can every company apply the same methodology to use financial, quantitative nonfinancial, and
subjective performance measures? Explain.
No. The results indicate that companies with different manufacturing strategies use different
mixes of the three types of measures. This is consistent with each type of measure performing a
2. Describe a quality initiative implementation and how its attributes support nonfinancial measures
instead of financial measures.
In the specific case of quality-focused manufacturing, proponents of quality initiatives have
argued that such initiatives tend to change the focus of work (e.g., prevention vs. inspection)
within subunits of the firm and intensify the degree of interdependence among organizational
3. In Table 3, what measure is seen as the least effective in all but one dimension? Why does this
result occur?
Surprisingly, subjective measures are seen as being the least effective among the three
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2-5 “Every Manager Can be an Innovator”
The article provides a comprehensive discussion of how companies can use the value chain as a tool to help guide
their efforts to provide on-going innovation in their companies.
Note: This article is also included as Problem 2-61 in the text.
Discussion Questions
1. Explain briefly the difference between disruptive and sustaining innovation.
Disruptive innovation changes completely the nature of the market or business. Examples
2. What are the five activities in the value chain depicted in the article?
The five value chain activities mentioned in the article are:
a. Market analysis
b. Product development and design
replacing “Product Development and Design” with “Assess Current and Potential New Services,”
and replace “Procurement, Production and Distribution,” with “Operations.”
3. What is the role of strategy in looking for innovation at each of the activities in the value chain?
While not mentioned in the article, strategy plays a key role in the review of the activities for
areas – procurement, production, and distribution.
4. Explain an example of an opportunity for innovation in market analysis.
product or service features are most important.
5. Explain an example of an opportunity for innovation in product development and design.
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Innovation in the product development and design activity can be aided by encouraging everyone
6. Explain an example of an opportunity for innovation in sales and marketing.
Innovation in sales and marketing might use for example, integrated marketing efforts in which
and the use of predictive analytics and business intelligence (see chapter 8).
7. Explain an example of an opportunity for innovation in procurement, production, and
distribution.
Innovation in procurement, production, and distribution is an area wherein many firms can
used.
8. Explain an example of an opportunity for innovation in after-sale customer service.
Innovation in the after-sale customer service activity could also benefit from the application of
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2-6: “Sustainability and the Balanced Scorecard: Integrating Green Measures into
Business Reporting”
The article explains three ways that sustainability can be incorporated into the BSC. Also, the article explains key
issues in developing and using sustainability metrics.
Note: This article is also included as Problem 2-62 in the text.
Discussion Questions
1. What are the three options for incorporating sustainability into the BSC? Explain briefly the advantages
and disadvantages of each.
The three options are:
a. Adding a fifth perspective to the BSC
b. Developing a separate sustainability balanced scorecard
c. Integrating the measures throughout the four perspectives: financial, customer, internal
efforts that firms such as Ford, Shell and Nike are looking for. So for these firms, a separate
scorecard is more desirable. For other firms, that wish to show a comprehensive single BSC,
approach (a) works well since it puts all of the firms goals in a single, comprehensive system.
Option (a) is the option we focus on in chapter 2.
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2. Explain briefly each of the seven BSC measurement considerations identified by the authors.
The seven BSC measurement selection considerations for a sustainability scorecard are:
a. There is an underlying objective for the measurement. That is, the measure reflects an
important goal for the company.
b. Measurement terminology is defined and used consistently throughout the organization.
This step provides the needed comparability, so that measures from different units within
measures can be linked to strategy and goals.
e. While there will likely be a combination of lagging and leading indicators, leading
indicators are more appropriate to help predict how the organization will perform in the
future.