Balanced Scorecard Gains Mindshare
As business intelligence (BI) tools mature, it is natural that the features that ushered them to success -- query, reporting, and OLAP capabilities -- would begin to take a backseat to more advanced technologies. One of these newer technologies, called balanced scorecard, is poised on the verge of wide acceptance among both BI and enterprise application vendors.
Originally publicized in a 1992 article titled "The Balanced Scorecard -- Measures that Drive Performance," the technology was the brainchild of Harvard University researcher Dr. Robert Kaplan and his colleague Dr. David Norton. Balanced scorecard effectively allows organizations to describe and explain metrics that must be measured to assess the effectiveness of corporate strategies. Because it doesn’t focus heavily on financial metrics, proponents say the balanced scorecard approach is applicable in both public sector environments as well as is in the private sector.
Alan Missron, vice president of marketing at BI vendor CorVu Corp. (www.corvu.com), says balanced scorecard tools are a natural outgrowth of the evolution of BI tools.
"What we’re seeing is a shift away from just tactical measurement and analysis of data -- or what you did with standard query, reporting, and OLAP tools -- and a shift toward strategic alignments," Missron says. "[If] a specific activity is going to affect or impact my ability to achieve my strategy, then I need to measure it. [Balanced scorecard] attempts to provide the means to do so."
Most experts describe the balanced scorecard as a methodology that lets corporations determine a strategy against which leading performance indicators can be measured. The balanced scorecard recognizes four dimensions that it identifies as essential for developing an enterprisewide view of performance: financial, customer, internal, and innovation. In its most basic sense, its proponents argue, implementing the balanced scorecard allows organizations to effectively map an otherwise abstract corporate strategy to specific goals and measurements.
"The idea is that we decide what our strategy is and what our strategic objectives are, then what we do is we look at each of our strategic objectives and we determine what kinds of activities we have to engage in in order to achieve this [objective]," Missron explains.
Most analysts and vendors agree that as BI tools become more sophisticated, the bread-and-butter technologies that originally sustained them will become less apparent. They will, however, still provide the foundation upon which more sophisticated technologies -- like balanced scorecard -- are based.
Henry Morris, vice president for data-warehousing and applications at International Data Corp. (IDC, www.idc.com), says technologies like balanced scorecard will help BI vendors create more value for customers -- and in the process generate additional revenue from pricier "specialized" tools.
"You’ll have BI tools that can be used for any subject matter that you want, versus packaged analytic applications, that are built on the foundation of business intelligence technologies [such as] OLAP," Morris says. "That’s more valuable itself than just the basic tools, and business intelligence companies will charge more for these tools than for standard business intelligence offerings."
Don’t dismiss balanced scorecard as another marketing flavor-of-the-month. The technology has grown substantially this year. In the past year, IDC’s Morris notes, established enterprise players such as PeopleSoft Inc. (www.peoplesoft.com), SAP AG (www.sap.com), and SAS Institute Inc. (www.sas.com) joined BI specialists such as Pilot Software Inc. (www.pilotsw.com), CorVu, and Gentia Software Inc. (www.gentia.com) to announce balanced scorecard solutions or strategies.
Mike Schiff, a director of data warehousing strategies at Current Analysis Inc. (www.currentanalysis.com), says this is a trend that will likely continue.
"With the trend among OLAP tools providers to transition themselves to be solutions providers, almost every vendor is trying to balance its analytic applications portfolio with a balanced scorecard offering," he notes.
There are other signs, as well. Since its launch in September 1998, the Balanced Scorecard Technology Council (BSTC, www.balancedscorecard.com) has attracted more than 8,000 members, says Martin McCann, vice president, worldwide marketing at Gentia Software, which sells its balanced scorecard under the name Renaissance.
"Global companies are turning to the council to kick-off enterprise balanced scorecard implementations or to evaluate the suitability of the balanced scorecard approach to help maximize corporate profitability and shareholder value," McCann says.
More than anything else, balanced scorecard technology provides organizations with the ability to empower individual employees by relating corporate measurements and goals in terms that are more easily quantified and understood. With a balanced scorecard solution in place, goals and measurements are disseminated throughout an enterprise and can provide a kind of blueprint indicator of how each employee contributes to the overall success of the organization.
"Ideally, the way to use these [balanced scorecard tools] is not to make the mistake of [leveraging them only as] executive monitoring systems, which are geared for business executives only," IDC’s Morris says. "I think it’s important in terms of being able to allow more broad access to a balanced scorecard, so that employees can understand what their contributions are to specific areas of business performance."