Innovation lessons from a railroad

Bsc_1

This is the framework for the Balanced Scorecard, from the website of the Balanced Scorecard Institute, and here’s their definition,

The balanced scorecard is a management
system
(not only a measurement system) that enables organizations to clarify
their vision and strategy and translate them into action. It provides feedback around both the
internal business processes and external outcomes in order to continuously improve
strategic performance and results.  When fully deployed, the balanced
scorecard transforms strategic planning from an academic exercise into the nerve
center of an enterprise.
[…]
"The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create
  future value through investment in customers, suppliers, employees, processes,
  technology, and innovation
."

While I had been aware of the balanced score card, as a topic studied in Strategic Planning & Control, today I was introduced to it’s full capability by an evangelist who applies it in her daily work. Cherie Coles, Manager, Technology Services, Planning & Cost Control for the BNSF Railway Company (Burlington Northern Santa Fe) was waiting for her hotel room to be ready for occupancy at my neighbourhood cafe where I had wandered down for brunch this morning. We entered into the most fascinating conversation as she was in San Francisco, flying in all the way from Texas, for a conference on the balanced scorecard as a tool for strategic planning and control.

Fascinated by her description of it’s power to help a railroad plan and manage logistics in the face of major shifts in the landscape of late – the destruction of NOLA alone has resulted in major rerouting and planning – as well as the increasing growth in freight movement seen due to goods flowing in from China, I asked her to tell me a little more about this seemingly powerful tool for strategic planning and forecasting for future resource allocation. Unlike, say Typepad, whose continued growth results in their ability to invest in a new server farm in a relatively short period of time, a railroad, on the other hand, must often plan for 10 to 20 years when it comes to capital investment in resources. Railroads are not built in a week or even a year, and revenue, fixed costs and pricing models take on a different timeframe when you are laying tracks, buying locomotives and worrying about the cost of diesel.

Taking a leaf from Brad‘s book, I promised Cherie that I would look into the Balanced scorecard in more detail, as her examples of it’s usage in strategy and forecasting made me think that while this system "seems" to be developed for tangible industries, why couldn’t we bring it into the field of design and innovation? And taking the thought one step further, apply it as a framework for the management and measurement of innovation initiatives, even design projects, both within the industry itself as well as a tool for creating a powerful business case for design as a strategic force for increasing shareholder value.

More, obviously, as I read and research this new tool 🙂

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One Response to Innovation lessons from a railroad

  1. The balanced scorecard system and the management of innovation

    In this special feature for the FORTUNE Business Innovation blog, Niti Bhan, a strategic design consultant who recently contributed a feature on What the CEO Should Know About Recognizing Good Design, weighs in on the merits of using the balanced score…

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