Creating the Organization 369
- Designing and developing new products
- Creating new applications for old products and services
- Finding new customers and markets
- Optimizing the product and service mix
- Developing new relationships and strategic partners
- Executing a new pricing strategy
- Through cost reductions and productivity improvements such as:
- Increasing productivity
- Reducing unit costs
- Improving distribution channel mix
- Reducing operating expenses and overhead
- Through superior asset utilization and investment strategies. These can be sum-
marized as:
- Improving the cash-to-cash cycle
- Increasing asset utilization rates
Typically, the specific measures of financial performance revolve around returns on
invested capital, returns on equity, and returns on assets. Other important measures are
gross and operating margins, market shares, and growth in sales.
As entrepreneurs construct their scorecards, they must remember that a good bal-
anced scorecard has a limited number of measures so that managers are forced to focus,
not try to achieve everything at once. Four or five measures in each of the four dimen-
sions are sufficient. A good scorecard brings all the dimensions together in an integrat-
ed way and shows how activity on one dimension leads to activity and better perform-
ance on another. By showing cause and effect in this way, it guards against sub-optimiza-
tion and enables all the managers to see what the others are doing.
The benefits of using the balanced scorecard have been shown in many established
companies over the years, and the same lessons apply for new ventures. An organiza-
tion’s performance must be integrated and balanced, but there are also other advantages
to using the balanced scorecard approach: The scorecard is not only a measuring tool,
but also a system of managing. Many companies have used the BSC to:
1. Clarify and gain consensus about strategy.
2. Communicate strategy throughout the organization.
3. Align goals (departmental and personal) to strategy.
4. Link strategic objectives to long-term targets and annual budgets.
5. Identify and align strategic initiatives.
6. Perform reviews (both periodic and systematic).
7. Obtain feedback to learn about and improve strategy.
THE ENTREPRENEURIAL WORKPLACE
The new venture is not just a vehicle for the entrepreneur and the top management
team to realize their dreams and ambitions; it is also the place where people work. The
