Balanced Scorecard for Strategic Planning and Measurement

1. BALANCED SCORECARD FOR STRATEGIC PLANNING AND MEASUREMENT Case Study, Concepts and Debatable Ideas Kenny Ong CNI Holdings Berhad

2. Intro: CNI • 20 years old • Core Business: MLM • Others: Contract Manufacturing, F&B Retail, Export/Trading, eCommerce, Shared Services • Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan, Oman, United States, Vietnam • Staff force: ± 500 • Distributors: 200,000 • Products: Consumer Goods and Services

3. Introduction to Balanced Scorecard and Strategy

4. "The digital watch didn't come from established watch companies, the calculator didn't come from slide rule or adding machine companies, video games didn't come from board-game manufacturers Parker Bros or Mattel, the ballpoint pen didn't come from fountain pen manufacturers, and Google didn't come from the Yellow Pages" Bob Seidensticker, Futurehype

5. What’s wrong with Strategic Planning Today? Long-term Plans Objectives Strategies Enablers Resources Also known as L.O.S.E.R.

6. What’s wrong with Strategic Planning Today? • Biggest Threats often come from OUTSIDE your normal industry • Planning from the base of an ‘Existing’ organization vs. zero-based • Traditional Analysis (e.g. SWOT) based only on known or existing assumptions or knowledge • Spending too much time in market research and analysis • Defining the company from a Product/Service perspective vs. Category vs. JTBD (e.g. Coca-cola) • Wrong Benchmark – already successful vs. what made them successful • Implementing BSC and PMS to improve Business Model and Strategy • New strategy, same people

7. Why BSC? • Reason 1: Balanced • Reason 2: Cause-and-Effect www.myCNI.com.my www.OOBEY.com

8. Balanced Scorecard: Corporate Customer “Who are our target customers? What is our value proposition?” Learning & Growth “What capabilities and tools do our employees require to help them execute our strategy? Internal Process “To satisfy our customers, in which internal business processes must we excel?" Financial “To satisfy our stakeholders, what Financial objectives must we accomplish?”

9. Balanced Scorecard: NGOs, Non-Profits, Governments Internal Process “To satisfy our targets, in which internal processes must we excel?" Learning & Growth “What capabilities and tools do our staff require to help them execute our strategy? Financial “To fulfill the Mission, what Financial, how do we fund Internal Processes?” Mission “Who are our targets? What is our value proposition?”

10. Side notes on BSC • BSC should be a Thought Process and a Toolnot a Religion (e.g. Excel™ vs. Budgeting) • BSC ≠ Appraisal • New BSC implementations should start linking with Budgeting right from the beginning • The ‘proper’ BSC approach should rightly fully be heavily customized to the organization • ‘Strategic Planning’ trainings should be provided before ‘BSC’ trainings • Clear definitions for Accountability vs. Impact vs. Influence vs. Assistance

11. Today’s Agenda

12. Summary: Today’s presentation 1. Business Model + BSC = Boundaries 2. Strategy + BSC = How 3. PMS + BSC = Execution

13. What is the Business Model? • Google • Air Asia • Tata Nano USP Profit Model Market Discipline

14. What is the Business Model? USP Profit Model Market Discipline

15. Business Model: Profit Model

16. Strategy + BSC Financial Revenue Cost Margin Cash Flow Asset Customers Internal Process Learning & Growth

17. What is the Business Model? USP Profit Model Market Discipline

18. Intro: Market Discipline "Exactly what I need" Customized products Personalized communications "They're very responsive" Preferential service and flexibility Recommends what I need "I'm very loyal to them" Helps us to be a success "They are the most innovative" "Constantly renewing and creative" "Always on the leading edge" Product Leadership Customer Intimacy Operational Excellence "A great deal!" Excellent/attractive price Minimal acquisition cost and hassle Lowest overall cost of ownership "A no-hassles firm" Convenience and speed Reliable product and service

19. Strategy: Value Disciplines Product Leadership(best product) Operational Excellence (low cost producer) Customer Intimacy (best total solution) Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995 www.myCNI.com.my www.OOBEY.com

20. Strategy: Value Disciplines Product Leadership(best product) Operational Excellence (low cost producer) Customer Intimacy (best total solution) Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995 www.myCNI.com.my www.OOBEY.com

21. Strategy: Value Disciplines Product Leadership(best product) Operational Excellence (low cost producer) Customer Intimacy (best total solution) Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995 www.myCNI.com.my www.OOBEY.com

22. Strategy: Value Disciplines Product Leadership • New, state of the art products or services • Risk takers • Meet volatile customer needs • Fast concept-to- counter • Never satisfied - obsolete own and competitors' products • Learning organization • Operational Excellence • Competitive price • Error free, reliable • Fast (on demand) • Simple • Responsive • Consistent information for all • Transactional • 'Once and Done' • Customer Intimacy • Management by Fact • Easy to do business with • Have it your way (customization) • Market segments of one • Proactive, flexible • Relationship and consultative selling • Cross selling www.myCNI.com.my www.OOBEY.com

23. Make it easy to eat 50% drive-thru Meals held in one hand Make it easy to prepare High Turnover Tasks simple to learn & repeat The McPlaybook* Make it quick • “Fast Food” • Tests new products for Cooking Times Make what customers want • Prowls market for new products • Monitored field tests *Adapted from: Businessweek , Februrary 5th 2007 www.myCNI.com.my www.OOBEY.com

24. Strategy: Disciplines Product Leadership(best product) Operational Excellence (low cost producer) Customer Intimacy (best total solution) Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

25. Strategy: Disciplines Apple powerful products, premium pricing, limited range Product Leadership(best product) Still Doing well in 2009 HP well-balanced portfolio, mass customization Acer super lean cost structure, aggressive pricing Operational Excellence (low cost producer) Customer Intimacy (best total solution) Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

26. What is the Business Model? • Google • Air Asia • Tata Nano USP Profit Model Market Discipline

27. Summary: Today’s presentation 1. Business Model + BSC = Boundaries  Done 2. Strategy + BSC = How 3. PMS + BSC = Execution

28. 2. Strategy + BSC = How ‘Hope’ is not a strategy

29. What is your Goal? • Cost Reduction • Growth • Both?

30. Growth Strategy “Double-Digit Growth”, Michael Treacy www.myCNI.com.my www.OOBEY.com

31. Growth Strategy • Increase switching cost • Customize products • Preempt Defections • Brand “Double-Digit Growth”, Michael Treacy • Neutralize Competitor advantages • Superior Value • Buy market share • Promising Market? • Make or Buy? • Spot growth opportunities • Organized search www.myCNI.com.my www.OOBEY.com

32. How Markets determine Growth Strategies (1) • Growth Rate www.myCNI.com.my www.OOBEY.com

33. How Markets determine Growth Strategies (2) • Churn Rate www.myCNI.com.my www.OOBEY.com

34. How Markets determine Growth Strategies (3) • Example: XYZ Sector www.myCNI.com.my www.OOBEY.com

35. Side Notes on Cost Reduction Strategy Business Model Operational • USP • Profit Model • Market Discipline • Invest/Divest • Finance, HR, IT • Supply Chain • R&D • Sales & Marketing Cost Reduction 30% - 80% 5% - 30%

36. Strategy + BSC Financial Revenue Cost Margin Cash Flow Asset Satisfaction Customers Base Retention Share Gain Positioning Adjacent Market New Business Internal Process Learning & Growth

37. Strategy: Disciplines, Priorities, and KPIs Product Leadership(best product) Operational Excellence (low cost producer) Customer Intimacy (best total solution) Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

38. Strategy: Disciplines, Priorities, and KPIs Product Leadership • New, state of the art products or services • Risk takers • Meet volatile customer needs • Fast concept-to- counter • Never satisfied - obsolete own and competitors' products • Learning organization • Operational Excellence • Competitive price • Error free, reliable • Fast (on demand) • Simple • Responsive • Consistent information for all • Transactional • 'Once and Done' • Customer Intimacy • Management by Fact • Easy to do business with • Have it your way (customization) • Market segments of one • Proactive, flexible • Relationship and consultative selling • Cross selling

39. Strategy: Value Disciplines • Operational Excellence • Move know-how from top performing units to others • Benchmark against best in class • Ensure operations training for all employees • Use disciplines like TQM for continuous learning to reduce costs and improve quality

40. Strategy: Value Disciplines • Customer Intimacy • Capture knowledge about customers • Understand customer needs • Empower front line employees • Ensure that everyone knows the customer • Make company knowledge available to customers

41. Strategy: Value Disciplines • Product Leadership • Reduce time to market • Commercialize new products fast • Ensure that ideas flow • Reuse what other parts of the company have already learned • Ensure there are multiple sources of funding

42. Strategy: Value Disciplines Product Leadership(best product) Operational Excellence (low cost producer) Customer Intimacy (best total solution) Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

43. Strategy: Value Disciplines Product Leadership(best product) Operational Excellence (low cost producer) Customer Intimacy (best total solution) Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

44. Strategy + BSC Financial Revenue Cost Margin Cash Flow Asset Satisfaction Customers Base Retention Share Gain Positioning Adjacent Market New Business Internal Process Investment Strategy Operational Excellence Product Leadership Customer Intimacy Learning & Growth

45. Alignment: 4-Wheels Model Person Structure Leadership Resources Business Model Strategic Planning Culture

46. Alignment: Framework • Focus point • Alignment • Quality • Innovation & Differentiation • Risk taking • Performance Management • Corporate obsession • Decision making Culture

47. Alignment: Framework Structure • Org Structure • Job Design • C&B • Policies & procedures • Decision making • Job fit • Management Systems • BSC and KPIs • Decentralized & Empower

48. Strategy: Framework Leadership • Role modeling • Vision/Mission/Philosophy • Leadership Style • Delegation & Empowerment • C&B, Promotions • Sense of Urgency • Speak regularly about Performance

49. Strategy: Framework Person • Recognition • Recruitment • Training • Profit sharing • Values • Motivation • Self Efficacy • Awareness • Useful Competencies • Career aspirations • Attribution (control)

50. Strategy: Framework Resources Enablers • Technology • Equipment • Materials • Human • Intellectual Property • Partners • Property • Funding • CAPEX • OPEX