Balanced scorecard

Robert S. Kaplan (rkaplan@hbs.edu) is the Baker Foundation Professor at Harvard Business School.

David P. Norton (dnorton@ thepalladiumgroup.com) is the founder and president of the Balanced Scorecard Collaborative, Palladium Group, in Lincoln, Massachusetts.

Bjarne Rugelsjoen (bjarne@rugelsjoen.no) is a director at GoalFocus, a performance-coaching consultancy based in London.

ManagingAlliances with the Balanced Scorecard
Fifty percent of corporate alliances fail. But you can increase your partnership’s odds of success by applying these techniques. by Robert S. Kaplan, David P. Norton, and Bjarne Rugelsjoen

114 Harvard Business Review January–February 2010

HBR.ORG

C
ILLUSTRATION: BRETT RYDER

orporate alliances are a 50/50 bet—at least according to a recent studyby McKinsey & Company, which found that only half of all joint ventures yield returns to each partner above the cost of capital. That’s worrying, given that partnerships and alliances are central to many companies’ business models. Originally used to outsource noncore parts of supply chains, alliances today are expected to generate a competitive advantage. So it is necessary to dramaticallyimprove their odds of success. Why do alliances fail so often? The prime culprit is the way they are traditionally organized and managed. Most alliances are defined by service level agreements (SLAs) that identify what each side commits to delivering rather than what each hopes to gain from the partnership. The SLAs emphasize operational performance metrics rather than strategic objectives, and all toooften those metrics become outdated as the business environment changes. Alliance managers don’t know whether to stick to the original conditions or renegotiate. By that time, the companies’ leaders have returned to run their own organizations and haven’t followed up to ensure that their vision for synergies is being realized. The middle managers coordinating the alliance, who have no clear way totranslate their leaders’ vision into action, simply focus on achieving the operational SLA targets instead of working across organizational boundaries to make the alliance a strategic success.
January–February 2010 Harvard Business Review 115

MANAGING ALLIANCES WITH THE BALANCED SCORECARD

The Alliance Strategy Map A strategy map brings together all of a company’s strategic objectives toillustrate causal linkages. It allows managers to see how attaining objectives at, say, the employee level helps the firm achieve business-process, customer, and, ultimately, financial objectives.
The chart to the right presents the strategy map created by Brusselsbased Solvay Pharmaceuticals and North Carolina-based Quintiles, a biopharmaceutical services firm, to manage execution of their alliancestrategy. It identifies the five strategic themes of the partnership and shows how achieving them would translate into real value for both companies. To reach consensus on joint objectives, measures, targets, and initiatives, participants engaged in candid dialogue, which helped to increase trust and improve collaboration. We have color coded the strategic themes to make it clear how each onerelates to the various strategic perspectives. Some themes reside only in one perspective; others span multiple perspectives. The project team regularly updates the map with traffic lights (red, yellow, green) adjacent to each objective to signal what has been achieved and which performance issues need executives’ attention. The chart reads from the bottom up.

Wins for Solvay Pharmaceuticals Compoundsto market; maximized value of portfolio Wins for Quintiles Expanded revenue base; milestone payments

Value for Both
STAKEHOLDER Dramatically OUTCOMES improve clinical development efficiency Create shareholder value for both organizations by bringing a significant number of commercially viable compounds to market Patients I want access to effective medications that treat my illness. Increase...