The Intangible Balance Scorecard

Since Robert Kaplan and David Norton’s hugely successful Balance Scorecard approach to strategic business management, first published in the Harvard Business Review in 1992, organizations have sought to measure a variety of different aspects of performance. While there are many different elements of a business to measure, ‘Quality, Cost and Delivery’ has always been a fantastic way to give an overall picture of the products and services that a company provides. Together, these components go some way to encapsulate value. Customers care about all these elements and consequently, organizations do too.

These metrics are very much grounded in the physical, though. As more and more of our work moves into the intangible, digital world, is there a need for a new digital Balance Scorecard?

In Eric Almquist, John Senior and Nicolas Bloch’s September 2016 Harvard Business Review article The Elements of Value, they argue that such dimensions appear merely within the ‘functional’ realm and that much of what we value is tied up in harder-to-define emotional, life-changing and socially impactful ways.

They cite Amazon Prime as an innovation, which in 2005 sought merely to deliver reduced costs and saved time by providing unlimited two-day postage services for an annual fee. As the product evolved though, it expanded to include streaming services and unlimited photo storage on Amazon servers, which all help users to feel they are part of an exclusive club, packed full of multiple benefits.

At a recent conference discussing the ‘Future of Services’, Rory Sutherland explained how David Rock’s ‘SCARF’ model, which seeks to describe the different social concerns that drive human behaviour and motivate people, is a great way to explore digital services.

1. Status – our relative importance to others.
2. Certainty – our ability to predict the future.
3. Autonomy – our sense of control over events.
4. Relatedness – how safe we feel with others.
5. Fairness – how fair we perceive the exchanges between people to be.

He discussed how Uber’s app appealed to customers on many of these levels. By enabling the customer to know about the driver they were about to engage – providing a name and picture, for example – the firm helped allay any fears the customer might have (sense of safety with others). They could track their driver on a map, turning ordering a taxi into more of a controllable act (sense of control over life, sense of what the future holds). The fact that no money changes hands also appeals to notions of ‘status’ and ‘fairness’. We can see that this digital example appeals to all five of the above SCARF aspects proposed by Rock.

It’s clear that these dimensions are very important, yet in nature they are very hard to quantify. Perhaps that’s why often some of the best digital leaders have an intuition and feel for the development of services that solve customers’ problems? I’d doubt that it’s as simple as that though, and when musing on the intangible alchemy of value, it’s worth discussing another elusive art – leadership.

There can be no doubt that in this ever-connected age, ‘Collaborative Leadership’ is critically important. It is built on the premise that ‘the sum of the whole is greater than the sum of its parts’, and that through inspiring cooperation, across functional boundaries between key organizational players, great things can be achieved.

Trust is paramount. Within a collaborative leadership space, personal crusades and preconceived notions of expertise should be left at the door, ideas should be shared and discussed, and real and honest feedback provided, all of which requires immense amounts of trust. Trust from the leaders that this process is worthwhile and trust from the teams that their voice will be heard meaningfully and fairly.

It seems to me that there are two key dimensions to building this trust: visibility and experimentation. In other words, does it look like they are being open and honest with me and are these observations proving to be correct?

So far, I’ve discussed that much of what comprises value can be seen to be ‘intangible’, trust to a feeling rather than a physical force, and yet I believe that the digital world, with its digital footprints and huge appetite for data, can really help to positively build trust. Sharing data across value streams can be hugely advantageous to all parties engaged in the work – for example, electronic point of sale data from a store is shared with suppliers to help them produce what’s required. Open-source software enables huge amounts of innovation to occur. Usage data, through ‘fail fast’ experimentation loops, also provides the visibility required for successful experimentation.

It’s here where I think that digitization can help to explore all of the mysterious ‘elements of value’. Through quick learning loops, achieved from limited releases and intensive customer monitoring, the business can quickly better understand the value of the services it offers through iterative feedback. So, while a great deal of alchemy is required to fully explore the value an organization provides, sharing data helps to build trust, cooperation and, most importantly, helps leaders to determine whether everything is moving in the right direction.