Dylan Salisbury’s weblog

First post in a series on applying Balanced Scorecard concepts to start-up companies.

It is widely known that a majority of start-up companies fail early in their life cycle. This may be an unavoidable result of risks associated with developing new technology and entering emerging markets. Balanced Scorecard (BSC) is a commonly known system for developing and implementing strategy for large corporations. However, there is no corresponding widely communicated approach to establish and manage a successful start-up strategy while mitigate the various risks that are particular to new ventures. The conventional wisdom is that venture capital investors mitigate these risks by preferring to back experienced entrepreneurs.

In a few upcoming posts I’ll discuss how the BSC approach to developing and managing corporate strategy can be applied to a technology-driven start-up company. Although methodologies for developing and implementing a BSC program have been widely documented in articles such as (Kaplan, 2000), special factors must be considered in setting goals or measurements for each of the four BSC perspectives for such a company. I’ll examine these challenges and present some recommendations for developing the elements of BSC and for evaluating corporate strategy in the context of the four BSC perspectives.

Categorization of start-up strategies

(Burgelman & Siegel, 2007) differentiate between ventures founded from technological breakthrough and those founded from insight into market need. In the former category, the early life of the company is spent turning technology into a practical product, and engaging with potential customers to understand how to the innovation can best be marketed and sold. Strategic success for these companies may be defined by maintaining innovative leadership and establishing initial sales.
In contrast, companies that are founded to capitalize on a new market opportunity are often concerned with being the “first mover” into a promising market segment.

These companies are more likely to define early strategic success in terms of sales, market growth, and competitive positioning.

Related research

There are few or no public accounts of a Balanced Scorecard being developed during the early stages of a technology-driven start-up company. In the late 1990’s Siemens AG took a Balanced Scorecard technique to develop and manage its Corporate Venture Capital (CVC) unit, Siemens Venture Capital. Although this scorecard was used to run an investment unit rather than to run an operating company, some of the lessons from the Siemens experience may be applied to a start-up that is funded by venture capital. Fundamentally this BSC experience can be used to help understand the goals of venture investors and how they differ from investors in established companies.

Siemens Venture Capital decided to combine the Learning and Growth and Customer perspectives into a single “Strategy and Market Perspective” because the processes for satisfying the unit’s customers were highly “people-related.” Goals in these sections focused on relationships between organizations, and measures included number of events attended, number of co-investments, and response times to external communications (Bassen, Blasel, Faisst, & Hagenmüller, 2006, p. 430).

Because Siemens’s strategy including developing technology that could eventually increase the profits of the entire company, the financial perspective included actions to create value that would not immediately be realized at profit contribution.

The internal process focus addressed the challenge of running a small but worldwide organization of knowledge workers. Measures and actions targeted successful and productive communication within the organization.

During the first seven years of its BSC process, the most significant changes to Siemens Venture Capital’s BSC were to adjust the goals of the strategy/market and internal process perspectives to react to changes in the venture capital industry (Bassen, Blasel, Faisst, & Hagenmüller, 2006, p. 434).

References in this post

Burgelman, R. A., & Siegel, R. (2007, Spring). Defining the Minimum Winning Game in High-Technology Ventures. California Management Review, 6-26.

Kaplan, R. S. (2000, September-October). Having Trouble with Your Strategy? Then Map It. Harvard Business Review, 167-176.

Bassen, A., Blasel, D., Faisst, U., & Hagenmüller, M. (2006). Performance measurement of corporate. International Journal of Technology Management , 33 (4), 420-437.