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Chapter 7: Metrics

This chapter discusses the metrics needed to implement the Balanced Scorecard strategy, focusing on financial, customer, internal business process, and learning and growth metrics. It also provides examples and steps to develop a performance dashboard.

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Chapter 7: Metrics

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  1. Chapter 7: Metrics

  2. The Balanced Scorecard Strategy Into Operational Terms Financial To succeed financially, how should we appear to our shareholders? Customer To succeed financially, how should we appear to our shareholders? Internal Business Process To satisfy our shareholders and customers, what businesses must we excel at? VisionandStrategy Learning And Growth To succeed financially, how should we appear to our shareholders? Source: Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review 74 (January-February): 76, 1996

  3. The Performance Dashboard Steps of Strategy Market Opportunity Assessment Business Model Customer Interface Branding and Implementation Evaluation Opportunity Metrics Business Model Metrics Branding and Implementation Metrics Customer Interface and Outcome Metrics Financial Metrics Performance Dashboard

  4. Market Opportunity Business Model The Performance Dashboard Steps of Strategy: Customer Interface Implementation and Branding Evaluation Performance Dashboard: Market Opportunity Business Model Implementation and Branding Customer Financial Areas Addressed: • Size of market opportunity • Attractiveness of target segments • Competitive landscape • Uniqueness of value proposition • Attractiveness of offering • Firm capabilities relative to competition • Sustainability of competitive position • Branding • Technology infrastructure • Internal organization • Relationship with suppliers and partners • Fulfillment capability • Customer acquisition • Changes in customer behavior • Site experience and usability • Revenue • Profit • Cost • Balance sheet

  5. Life Cycle of a Company Startup/Beta Customer Acquisition Maturity Monetization 6 Months - 1 Year 1 Year - 2 Years 2 Years - 5 Years > 5 Years Strategy Develop a platform for rapid growth by building a strong team and creating a flexible site Build market share as quickly as possible by aggressively spending on partnerships and promotion Increase revenues and customer lock-in by developing new revenue streams Control costs and optimize marketing expenditures to achieve profitable growth Schwab AOL Examples* Business.com tnbt.com Mvalue.com Paypal.com Evite.com Yahoo Amazon.com * February 2000

  6. Bill Gurley on the Power of Conversion Rates Source: J. William Gurley, “The Most Powerful Metric of All,” CNET News.com, February 21, 2000 URL: http://www.news.com/Perspectives/Column/0,176,403,00/html?tag=st.ne.

  7. Blueprint to the Performance Dashboard Step One: Articulate Business Strategy Step Two: Translate Strategy Into Desired Outcomes Step Three: Devise Metrics Step Four: Link Metrics to Leading and Lagging Indicators Step Five: Calculate Current and Target Performance Market Opportunity • Opportunity size? • Competitive environment? Market Opportunity • Market size and growth • Average age and income • Competitor concentration Business Model • Unique value proposition? • Capabilities vs. competition? Business Model • Customer perceived benefits • Exclusive partnerships • $ invested in technology vs. competition For each metric, determine the metrics that it affects and that affect it Map the linked set of metrics, indicating leading and lagging indicators Ensure that there is a balance between leading and lagging indicators For each metric, calculate current level of performance Determine target level required to meet outcomes described in Step 2 Ensure that targets are consistent with each other Implementation and Branding • How to develop brand? • How to go to market? Implementation • Customer brand awareness • System uptime percentage • Number of IT staff • % inaccurate orders Define goals and value proposition Develop resource system required to deliver the strategy Customer • How to acquire customers? • How will customers change? • The customer experience? Customer • Market share • Purchase/year • Success rate • Service requests/customer Financial • Financial consequences in terms of revenue, profit, cost and balance sheet? Financial • Revenue • Profit • Earnings per share • Debt to equity ratio

  8. US Top 25 Web and Digital Media Properties (March 2000) Source: Media Metrix (www.mediametrix.com/usa/press/releases/20000424.jsp), March 31, 2000

  9. Market Research Source: Bizrate.com

  10. Analyst Source: Forrester

  11. Financial Information Source: Hoovers Online

  12. Crossfire: Which is Better -- Online or Offline Data Sources?

  13. Crossfire: Which is Better -- User-Based or Expert-Based Research Content?

  14. Mapping Internet Research Onto the Performance Dashboard Financial Information Market Research Analyst Market Implementation Customer Financial

  15. Metrics for Seamless Online/OfflineCustomer Purchase Process Awareness Knowledge Perceived benefits of Web vs. offline offer Awareness of offline offer vs. awareness of online offer Pre-Purchase Information Available offering information online vs. offline Currency of information online vs. offline Evaluation of Alternatives Purchase Security and privacy associated with purchasing Purchase Customer service Response time online vs. offline Satisfaction Loyalty Post-Purchase Customer loyalty incentive programs online vs. offline Disposal Exchange policies online vs. offline

  16. Metrics for Seamless Internal Business Processes and Operations - Ability to open accounts online and offline - Ability to access accounts online and offline - Integrated customer databases Information Sharing Fulfillment Systems - Seamless order processing - Seamless order tracking - Integrated inventory keeping

  17. Schwab Learning Center • Live Events • Principles of Investing • Understanding Market Cycles • “Did You Know” Q&A Overall • General Goal Planner • Investor Profile • Sample Investment Plans Retirement • Retirement Planner • IRA Analyzer Product Offering Estate • Estate Tax and Probate Calculator • Alternatives Comparison College • College Planner Tax • Tax Strategies • IRS Withholding Calculator Online Investment Process • Get Educated About Investing • Online Chat with Customer Service Representatives • Customer Service via Phone • Customer Service via E-mail • Customer Service at Branch • My Watch List • Plan investments • Post Investment Support Overall • Quotes and Charts • Analyst Center Stocks and Options • Stock Analyzer Bonds and Treasuries • Schwab BondSource Services CDs and Money Markets • SchwabOne • Perform Research • Margin Loans • Money Transfers • Automatic Investing • Options Service • After Hours Trading • Account Protection • Bill Payment • Perform Investment • Decide on Investment Annuities • Schwab Select Annuity Life Insurance • Insurance Needs Calculator • Schwab Signature Services • Schwab AdvisorSource • Options Service • Global Investing Service Charles Schwab: Customer Acquisition StageStep 1: Articulate the Business Strategy “Use technology to offer innovative products and superior service at lower prices to investors unwilling to pay for investment advice” Innovative products 3. Resource System 1. Value Proposition Low price Technology Leadership 2. Marketspace Offering Superior service High-quality Investment Information

  18. Martket Opportunity Significant Opportunity Financially Attractive Segment Competitively Attractive Segment Financial Evaluation Revenue Profit Cost Balance Sheet Business Model Value Proposition vs. Competition Offer vs. Competition Capabilities vs. Competition Sustainability of Value Proposition Implementation and Branding Customer Interface and Outcomes Lower Customer Acquisition Costs Transition Customer Base Outperform Competition on Interface Perceptions Customer Satisfaction and Loyalty Brand Associations vs. Competition Best-in-Class IT Infrastructure Ability to Deliver Brand Promise Schwab Desired Outcome Summary BusinessModel

  19. Charles Schwab: Customer Acquisition Stage Market Opportunity Business Model Implementation and Branding Customer Financial Avoid crowded markets Provide unique VP Build brand Acquire new customers Increase revenue Target attractive segments Provide attractive offering Invest in technology Increase usage Increase system uptime Play in attractive market Leverage capabilities to deliver offering Increase number of IT staff Increase customer satisfaction Optimize cost Train branch staff Improve customer service Increase customer loyalty Increase profit

  20. Charles Schwab: Customer Acquisition StageCurrent and Target Levels for Select Metrics *Source: Nicole Tempest and Warren McFarlan, Charles Schwab Corporation (B). Case no. 9-300-507, Harvard Business School Publishing, September 13, 1999

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