cover story
BALANCED
Harvard professor Robert S Kaplan is probably best known as the creator of both activity-based costing and the balanced scorecard – the renowned tool for linking a company’s actions to its strategic goals, first presented in his bestselling book TheBalancedBusinessScorecard in 1996. His model aims to help business leaders clarify their corporate vision and align people, business units and resources with a unified strategy. He was in Dublin in October addressing senior execu-
tives at an event organised by StaffBalance, and we caught up with him afterwards to discuss some of his thoughts on how Irish leaders can get their companies through these tough times. He began by telling me that in growth times, people
become very exuberant – recruiting customers, launch- ing products and spending widely – something that of course happened during the boom of recent years. “In an expansionary environment, what Keynes called
the ‘animal spirit’ of businesspeople gets aroused and they go hunting into new territories and you see an expansion of product lines, new customer segments, new geographi- calmarkets,” saysKaplan. “With enough growth all these things seem to be working well. “Then when growth stops, companies really have to
examine their operations, and get back to their core and find out with their product lines, with their customers where they literally have some type of advantage that enables them to retain the customers they want and also to make money from them. “It is this second part that is difficult to identify. It’s
easy to measure customer retention and customer loy- alty and satisfaction – the challenge is whether all those customers are making money for the company. Often times the company, in order to attract and retain cus- tomers, has offered lots of services or features, and made the offering more customised, more individualised to customers’ needs. The question is are they getting paid for all the features and the services that they’re offering the customer?” Not that Kaplan is saying companies should not offer
such elements. “I would actually encourage companies to follow differentiated strategies, and to get out of just offering commodity-type products and services,” he says. “However, it is important that the value you create from this exceeds what it costs you to create and deliver that differentiation.” The problem, he points out, is that you cannot know this unless you have an accurate costing system that’s
14 Irish Director Winter 2010
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