The Customers Perspective of the Balanced Scorecard

According to what we see daily, “Customer” is one of the most problematic perspectives of the Balanced Scorecard framework. And it is not customer KPIs that cause strategists the most problems… One needs to clearly understand:

  • Who is the “customer” in customer perspectives
  • How to come up with objectives for customer perspectives
  • How to not confuse customer objectives and desired business outcomes

Let’s have a look at “Customer” perspectives and discuss the details.

Who is the customer?

Authors of the BSC concept [1] formulate the question of the customer perspective as:

  • To achieve my vision, how must I look to my customer?

Customer in the Balanced Scorecard perspective

View Customer Perspective online

But who is the customer in this case? The answer is not always obvious. The Balanced Scorecard is strategy execution framework (not a CRM), so here we are talking not only about those who pay for your products or services, but about your partners as well.

On the Customer perspective of the Balanced Scorecard you need to reflect expectations of:

  • Partners (dealer, distributor), and
  • Customers

For example, in health care industry you put here not only expectations of patients, but of physicians as well. In some cases (for example, non-profit organization), customer perspectives might also include stakeholders.

Customer expectation vs. business response

Another typical difficulty is formalizing the expectations of the customers. A company strategist starts formalizing the response that a company plans; this approach converts your strategy into a complex list of things to do.

Phil Jones in his Excitant blog [2] illustrates this idea on the example with Strategic Balanced Scorecard in Hospices:

“It (the customer perspective) should contain “what they want.”  It should not contain what you are planning to do to deliver what they want, but should clearly state their needs from their perspectives.”

Vague objectives vs. specific ones

The idea is clear, but sometimes it is really difficult to formulate “what they want.” In “The Strategy Focused Organization” [1] authors share an example of Charlotte City Council’s Strategy Map, where one of the objectives in customer perspectives is formulated as an “Increase perception of safety.”

It is obvious that Charlotte City habitants don’t want to see a change in the perception of safety, but in the safety itself. The issue here is that one needs to find a balance between the abstract idea of safety (“Increase safety” objective) and more specific ideas of safety perception (“Increase perception of safety” objective).

It’s hard to be specific when we are talking about relationship with partners. For that very reason we often see on the customer perspectives such objectives as “Build strong relationship with partners.” This vague definition need to be decompiled into specific factors of a successful partnership.

Let’s see what a typical customer perspective looks like.

A template for customer perspective

Basing on 3 generic strategies we can formulate three generic objectives:

  • Product quality (Product leadership strategy)
  • Customer (shopping) experience (Customer intimacy strategy)
  • Price, Time (Operational excellence strategy)

Template for customer objectives

View Customer Perspective online

Don’t forget that among customers you have partners as well; you can mark in customer perspective two umbrella-objectives:

  • Add and retain high-value customers. We need to support (see below how) this objective with customer value proposition details, such as product quality, shopping experience and other.
  • Achieve and retain win-win partner relations. This umbrella objective need to be supported with the specific objectives that form the value for the partners, for example reduced product price, product availability, and a partner support program.

Now, let’s discuss how to come up with specific objectives for customer perspectives.

Converting management outcomes into customer objectives

Here are some generic customer-related outcomes of business management:

  • Customer acquisition
  • Customer satisfaction
  • Customer retention
  • Customer profitability
  • Market share

Let’s compare this list to the question of the perspective:

“To achieve my vision, how must I look to my customer?”

These outcomes are not objectives yet, so we need to go ahead and build a strategy hypothesis around a question like:

What customer’s need do we have to satisfy in order to achieve this outcome?

For example:

  • Your customers might be expecting better quality, and timely service (strategic objectives) and these objectives are connected to the “customer retention” outcome.
  • Your customer might need a community to learn from each other, and that might help you to increase your market share.

Converting customer value into objectives

Another approach is based on formulating objectives via customer value propositions. It is formed by:

  • Attributes of products, such as functions, price, quality (derived from Product leadership strategy).
  • Customer relationships (derived from Customer Intimacy strategy).
  • Product brand (image and reputation) is also often mentioned among customer value propositions.

These parts of customer value proposition can be used on a strategy map directly and later be supported by specific initiatives.

Cascading exercise for product quality

Let’s do an exercise for one of the objectives from a customer perspective.

Define objective for the Balanced Scorecard

View Customer Perspective online

We can start with the question: “To achieve my vision, how must I look to my customer?” And go directly to the answer: “Provide high product quality.”

Or we could start with the desired outcome (“Customer retention”) and then ask “What customer’s need do we need to satisfy to achieve better customer retention? Which might obviously bring us to the same strategy hypothesis of “Provide high product quality.”

Or, we could have looked at customer value propositions, and selected a “Quality” aspect that we want to address.

In this or another way, we have an objective for a top level scorecard:

  • Provide a high product quality

Before continuing, we need to come up with leading and lagging measures, and with strategic initiatives:

  • Lagging: product return rate, %
  • Leading: quality control & assurance, hours (I’m using a generic one)
  • Initiative: quality management.

Cascading customer perspective

View Customer Perspective online

Let’s translate this objective to the Research and Development department:

  • Lagging: critical problems reported, %
  • Leading: repeat problems, % (this will actually show the quality of the quality process itself)
  • Leading: quality control & assurance, hours (I’m using a generic one)
  • Initiative: analyze quality problems, suggest an appropriate quality control plan

Finally, this might be translated to a particular engineer in this form:

  • Lagging: the number of cases when A problem appeared, #
  • Leading: repeat A-type problem, %
  • Initiative: analyze and prepare quality control measures for A-type problems

Strategy definition steps

View Customer Perspective online

Doing all this I’m implying that in a real business situation top managers and R&D specialists will pass through several strategy definition steps, e.g.:

  • Discuss current business challenge (can be “Low returning customers rate”), and
  • Come up with a hypothesis that product quality is the reason, and then
  • Build another hypothesis about how quality can be addressed.

Respective strategy definition can be described in a separate strategy document.

Premium Balanced Scorecard TrainingFor now, all of the discussed ideas might sound like very complex ones. We have an online training called “Building Balanced Scorecard Step by Step” where under our guidance and following our examples you can build a prototype of your own balanced scorecard. Check out the training schedule and details.

Main take-aways

  • Your “customers” are those who buy your products and your partners (sales representatives, distributors)
  • In customer perspective think about their problems, not your actions (yet)
  • To come up with an objective use one of these approaches:
    • Start with desired outcomes. Ask: what customer’s need e have to be satisfied to achieve this outcome?
    • Start with customer value propositions.
  • Be sure to align customer objectives with respective metrics and initiative.
Use Customer Perspective project discussed in this article as a starting template for your own scorecard! Access this example project online or download .BSC project file for BSC Designer PRO.

View Customer Perspective online

Other perspectives of the Balanced Scorecard

Did you find this article useful? Feel free to share your opinion and thoughts in the comments.

References

  1. ^ The Strategy Focused Organization, Robert S. Kaplan, David P. Norton, Harvard Business School Press, 2001
  2. ^ Strategic Balanced Scorecard in Hospices: Some advice from experience, Phil Jones, 2014, http://www.excitant.co.uk/2014/09/strategic-balanced-scorecard-in-hospices-some-advice.html

Related Articles

Strategy and KPIs Scorecard Expert | Speaker | CEO. Aleksey Savkin (LinkedIn, @bscdesigner) is helping companies to better formulate their strategies and make the process of strategy execution more tangible with KPIs. His areas of expertise are Balanced Scorecard, Key Performance Indicators, business performance management. Aleksey is a frequent speaker at conferences; the author of a number of articles and books on Balanced Scorecard.

Posted in Introduction to BSC
Tags: ,

What is BSC Designer?

BSC Designer is a balanced scorecard software available as a cloud-based service and Windows desktop application.

Getting Started with BSC Designer

Try BSC Designer for free

Download BSC Designer

Who uses BSC Designer

According to our users, BSC Designer is easy to install, configure and it helps a lot with Balanced Scorecard, strategy maps, and KPIs.

BSC Designer Customers

Training for the software

To make it easier for the users to get started, we have a lot of free training materials for the software.

Video manuals for BSC Designer

Customer support

Should you have any questions, we are at your disposal.

Pricing and buying

How much does BSC Designer cost? It depends on the configuration that you prefer. Use this price calculator to find out the total cost, get an official quote, and buy the software.

What Balanced Scorecard is all about?

Fast Track explains complex ideas in a simple way Check out Strategy Scorecard Fast Track to find easy explanation of the most important complex ideas.
  • What is a Balanced/Strategy Scorecard?
  • How to build a good strategy map?
  • How to find winning KPIs?
  • How to cascade strategy?
  • How to implement scorecard
Learn all the nuances quickly and ask follow-up questions to BSC expert. Learn more...

What are your current challenges?

We help our users to get started with Balanced Scorecard, strategy maps, and KPIs. Here is a list of frequently asked questions and respective answers to them.

Q: What is the Balanced Scorecard?

Big picture about Balanced Scorecard A: Check out: Get the big picture about Balanced Scorecard article.

Q: I'm looking for a KPIs... how do I find good ones for our business?

How to find a KPI for... A: Check out our recommendations.

Q: Do you have some examples of the Balanced Scorecard?

Examples of Balanced ScorecardA: Sure, we have some here.

Q: Balanced Scorecard is about strategy execution, right? But what is a strategy?

Define strategy, create strategy mapA: Check these articles about strategy definition and creating strategy map.

Q: How do we cascade our top level scorecard throughout the company?

How to cascade a strategy mapA: Do it by business goals, some examples will also be useful.

More questions and answers...

BSC Lessons

Download BSC Designer and we will follow up with you with lessons about the Balanced Scorecard:

BSC Designer experts

Aleksey Savkin Performance Management and Balanced Scorecard

Kazim Ladimeji HR KPIs and Performance Expert

Levi Newman Effective KPIs and social metrics

Oana Boteanu Performance Management

Oleg Tumarkin Business Measurements

Upcoming events and talks

We organize, sponsor, and participate in various events related to the strategy execution.

  • "Building Balanced Scorecard Step by Step." 15th April, 2017, online training. Read more...
  • "Strategy Execution Master Class by Jeroen De Flander." 12th-13th June, 2017, Brussels, Belgium. Read more...

Drop us a note if you want to meet up at these events.

Online training: Build BSC step by step

The best way to get started with the Balanced Scorecard is to join our online training.

Balanced Scorecard Training Online Strategy map, KPIs, cascading - it might be hard to put it all together. In the online training "Building BSC Step by Step" we explain all the nuances in simple words and help companies to build a prototype of their balanced scorecards.

Find us on Google Plus

Thank you for sharing!

Whether you are looking for a professional Balanced Scorecard software, or just researching information about Balanced Scorecard and business strategies, we recommend you to download and try our BSC Designer software (no credit card is required).

We will follow up with you with lessons about the Balanced Scorecard and will keep you informed about the trending articles on bscdesigner.com

Follow us in Social Media

Send this to friend

More in Introduction to BSC
A Financial Perspective of the Balanced Scorecard

There are normally no problems with defining objectives for the financial perspective of the Balanced Scorecard for profit-oriented organizations. Any...

Extend Your Balanced Scorecard up to 8 Perspectives

What are the strengths of this framework and where do we need to yet improve it? I have already alluded...

Close