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Strategy Simulation:

THE BALANCED SCORECARD

by V.G. Narayanan, Harvard Business School

FOR COURSES IN: Strategy

Implementing Strategy Managerial ing

Strategy Simulation: The Balanced Scorecard In this multi-player simulation, students experience the benefits and challenges of using a scorecard to implement strategic initiatives and monitor firm performance. Students work together in small teams to choose a strategy for their company, create a strategy map, develop a balanced scorecard, choose initiatives to

implement their strategy, and use from the balanced scorecard to adjust their implementation approach over time. At the conclusion of the simulation, each team’s company will be purchased by a private investor. The goal of the simulation is to maximize firm value.

Students must select initiatives that their company’s strategy.

PREREQUISITES AND PLAY Students should be familiar with the balanced scorecard concept before playing the simulation. Although it can be played by individuals, the author recommends dividing students into small teams. Each team will have

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1 Data Entry role and 1, 2, or 3 Data Analyst roles. The Data Entry player is responsible for submitting the team’s decisions. Due to the breadth and complexity of the simulation, the author recommends

allowing students to play 1 or more practice rounds before making their final selections. Instructors can do this by enabling the practice mode.

CREATING A SCORECARD Students prepare by reading the Delta/Signal Corp case to learn the company background. Each team then creates a unique stock ticker symbol, chooses a market segment, and selects 1 of the 4 possible strategies for their company: Customer Integration, Product Innovation, Low Initial Cost, or Low Lifetime Cost. Students select objectives and metrics that will match their chosen strategy and then create a strategy map.

FUNDING INITIATIVES The simulation consists of 8 rounds, each representing 6 months of elapsed time. In each round, teams decide which initiatives to fund in order to achieve their strategic objectives. Students review the different options and fund as many initiatives as they would like, up to a $25 million maximum budget. While the initiative choices from the previous round automatically carry over, students can make adjustments based on their analysis of the results. At the conclusion of the simulation, the team’s company will be purchased by a private investor. The buyout price will be based on the company’s financial position and future prospects.

The Strategy Map shows the cause-and-effect relationships between objectives.

FINANCIAL AND SCORECARD DATA Financial and scorecard metric data is updated after each simulation round. Students should analyze this data so they can determine which initiatives are creating the desired performance improvements and which are not. Students can review the Metric Dashboard, History, and Graphs screens to perform their analysis.

The Analyze screens allow students to determine the success of their initiatives.

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istration Tools for Faculty

A comprehensive Teaching Note covers key learning objectives. Students will:

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xplore how a good balanced E scorecard can help companies take midcourse corrective actions. ecognize that financial metrics R are often lagging, volatile, and noncontrollable measures of firm performance. xamine the advantages and E disadvantages of measuring a small or large number of metrics. nderstand how using the U balanced scorecard is like financial variance analysis extended to nonfinancials. earn how a well-designed strategy L map can help managers think about and communicate strategy.

The Private Equity Valuation debrief screen shows the various buyout prices for the class.

PRACTICE MODE Setting the simulation to practice mode allows students to play through the first 4 rounds repeatedly. Practice rounds allow students to experiment with possible choices prior to making permanent decisions for their company. CONTROL GROUP Instructors can assign certain student teams to be part of a control group.

Control group players will not select objectives or see a balanced scorecard, but they will see the financial metrics, and all other aspects of simulation play will be the same. RESULTS SECTION The instructor results section provides key statistics and graphs that summarize student performance.

Product #114701 | Multi-player | Seat Time: 75 minutes | Developed by Harvard Business School and Forio Online Simulations

PREVIEW AND FREE TRIAL ACCESS Visit hbsp.harvard.edu A Preview of the simulation is available on our web site at hbsp.harvard.edu. A Free Trial allows full access to the entire simulation and is available to Educators on our web site.

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Educator access is a free service for faculty at degree-granting institutions and allows access to Educator Copies, Teaching Notes, Free Trials, course planning tools, and special student pricing.

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nderstand that a strategy is more U likely to be effective if the initiatives implemented are synergistic with the strategy.

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earn how firms use the balanced L scorecard to define strategy, implement strategy, and measure strategy execution.

Printed on recycled paper.

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