E-commerce can be considered one of the most rapidly growing industries in the market. Online shopping is no longer just a convenient alternative, but increasingly a standard practice. Therefore, it is so important for owners of such businesses to be able to stand out from the large competition and develop their businesses. A strategic scorecard can help you do this!
Balanced scorecard – table of contents:
- What is a balanced scorecard?
- 4 perspectives of the balanced scorecard
- An example of a balanced scorecard – e-commerce
- Benefits of a strategic scorecard
- Errors in the application of the strategic scorecard
What is a balanced scorecard?
The balanced scorecard is one of the tools to effectively shape the company’s strategy. You do it by defining the goals of the company or a single project, using quantitative data (KPIs) to measure progress, and then implementing selected solutions.
4 perspectives of the balanced scorecard
The starting point of this method is to look at one’s business from 4 different perspectives, which are interconnected and interdependent. By understanding each of them, you can meet the needs of your stakeholders (customers, suppliers, etc.) and achieve tangible financial benefits. These are:
- Financial perspective – focuses on financial performance (profits, expenses, liabilities, etc.);
- Internal process perspective – pays attention to the performance and quality of individual business processes (e.g., product production, customer service levels), controlling for the detection of any irregularities;
- Development perspective – refers to the way the company manages its knowledge, IT infrastructure or human capital (checking, among other things, whether the ways of storing information are secure enough, the effectiveness of training provided to employees, etc.);
- Customer perspective – is important because of consumer feedback and satisfaction, feedback is used to improve offerings, change prices, improve service quality, etc.
An example of a balanced scorecard – e-commerce
One industry where a balanced scorecard comes in handy is e-commerce. In this case, due to its nature and strong dependence on the Internet, the customer perspective will be particularly noteworthy. Internal efficiency is no less influential, as it is closely related to the quality of services offered affecting the satisfaction of the recipients of the offer.
- Identify your goals against 4 prospects
For each of the previously mentioned perspectives, match the strategic goals you would like to achieve. They should be precisely specified and realistic to achieve. E.g.:
- Financial perspective
- An internal process perspective
- Development perspective
- Customer perspective
Goal: increase sales revenue by 20% and reduce costs by 10%
Purpose: to diversify product or service offerings
Goal: increase employee satisfaction, increase training
Goal: increase customer base by 5%, raise customer satisfaction with services to 95%
To meet the above goals, you need data so that you know where you are starting from and whether the decisions you are making are translating into results. What indicators are worth using?
- Financial perspective – gross/net profit, average revenue per user, free cash flow, marketing expenses;
- Internal process perspective – number of new products launched in a given year, revenue from new product sales;
- Development perspective – measurement of employee performance, employee turnover, the ratio of internal promotions to external recruitment, number of employees participating in a given training, training satisfaction rate, measurement of job performance before and after a given training;
- Customer perspective – measuring customer satisfaction with products/services through surveys, return rate, retention rate, customer life cycle.
Monitor statistics systematically and compare them from time to time with past data. Are the actions taken producing the expected results, what needs to be improved? Make the needed changes.
Perhaps the previously stated goals will prove impossible to achieve at a given moment. In that case, adjust them to your situation. You can divide one goal into several smaller ones, which will be easier to achieve, in a short period of time, or extend the time to complete individual activities.
It is worth using the strategic scorecard from time to time to be able to examine on an ongoing basis whether our actions allow us to achieve and later maintain a good position in the market.
|Financial perspective||Increase sales revenue by 20% and reduce costs by 10%||Gross/net profit; average revenue per user; free cash flow||Improve conversion rate, outsourcing, streamline payment and accounting system|
|An internal process perspective||Diversification of product or service offerings||Number of new products launched in a given year||Look for opportunities to work with different brands, promote the offer keeping in mind the characteristics of your customers, find a niche market, sell through different distribution channels|
|Development perspective||Increase employee satisfaction, increase training||Measuring employee performance; Employee turnover; Training satisfaction rate; Measurement of work effectiveness before and after training||Ask for feedback, reward top employees, improve onboarding process, offer flexible working conditions and training|
|Customer perspective||Increase customer base by 5%, increase customer satisfaction to 95%||Measuring customer satisfaction; Return rate; Customer lifecycle||Find out customer feedback about the product/service (reviews, newsgroups, etc.) and use it to implement improvements, establish active communication on social media, use email marketing, improve your search engine visibility, raise the quality of customer service|
Benefits of a strategic scorecard
What are the advantages of using a strategic scorecard in your business? These are primarily:
- Comprehensive insight into the company’s financial and non-financial performance, which will be used to review goals and improve;
- Optimize costs, as well as inefficient processes;
- Allows you to perform benchmarking ;
- It helps to know and understand the customer’s needs;
Errors in the application of the strategic scorecard
- Selecting KPIs before defining strategic goals;
- Misalignment of indicators with stated goals;
- No tracking of progress;
- Treating the BSC as a one-time project rather than a component of a long-term management strategy.
The strategic scorecard is a way to detect errors and shortcomings in e-commerce processes. By highlighting 4 perspectives relating to different areas of your business and analyzing selected data, you can make the needed changes in managing human resources, internal processes, customer relations or improving your financial situation.