Strategy Map & Balanced Scorecard (BSC)

A strategy map is at the core of formulating a strategy and identifying primary strategic objectives.
As depicted in Figure 4, a strategy map accounts for competitive factors through multiple
perspectives including financial, customer, internal process, and learning and growth. Further, the
strategy map allows any linkages between objectives to be visually depicted.

Fig. 4. Strategy Map.

A framework to measure the progress for any organization is highly desirable in assessing success.
The balanced scorecard (BSC), shown in Table 1, is a measurement tool with the goal of encouraging
businesses to measurement their strategies. The significance of the BSC is that many firms develop
strategies without a basis for evaluating, measuring and monitoring their success. More than 50% of
the Fortune 1000s use a BSC (Nair, 2004).
Consistent with the strategy map, the BSC has four perspectives: learning and growth, the internal
processes, customer value, and financial perspective in which the measurement metrics are
constructed (Callado & Jack, 2015). In a BSC, a SMART methodology (specific, measurable,
assignable, realistic, and time-related) should be applied (Yuanhong et al., 2015).

2.2.4 Amazon Strategy Map & Balanced Scorecard Strategy is about focus and choice, and a
strategy map is the cornerstone of strategy formulation.

Its function is to outline Amazon's primary strategic objective. To account for the entire set of
competitive factors, multiple perspectives are reflected: financial, customer, internal processes and
learning and growth.

The financial perspective concentrates on creating long-term value for shareholders. In Amazon's
situation, this should be achieved with Amazon-branded smartphone sales, up-selling retail
customers, reducing customer acquisition costs with improved targeting of advertisements,
promoting services with higher profit margins, and increasing overall conversion rates; each of these
would directly impact the bottom line.

In ecommerce, the conversion rate is a crucial KPI (Key Performance Indicator) that represents the
ratio of customers browsing products to completed transactions. Enhanced customer experience
and customer loyalty has a direct causation correlation with financial objectives, since satisfied
customers are more likely to purchase new products, be susceptible to cross-selling
recommendations, visit Amazon directly instead of through paid channels, and share their shopping
experience with potential customers. These are all key drivers of ecommerce conversion rates.
The customer perspective is linked to the aforementioned financial objectives. It articulates the
objectives most relevant to the customer. Material enhancements in the shopping experience are an
essential element of the sales process, since they impact customer perception of the brand and,
consequently, the future propensity to promote or disparage the brand.

Building loyalty and enhancing the customer experience is the result of Amazon's product offerings,
such as a smartphone that would create a captive audience for Amazon's logo and bundled
apps/services, superior delivery service like same-day delivery that would create a credible
alternative to purchasing products typically sourced in local stores, and a virtual assistant that could
answer questions, perform purchases, and arrange delivery through voice commands on mobile
devices. An international presence with decentralized warehousing has the potential to grow market
share through accessible supply and quick delivery.

The internal processes, grouped as product and services objectives and international expansion
objectives, are supported by investment in human capital where Amazon should focus on:
1. Recruiting top talent to create an elite team that supports the internal process objectives such as
the launch of new products and services which will require R&D and experienced talent in the field
of development of the new products.

2. The retention of the talent will be an essential part for the human capital objective as it would
increase the focus on the objective and avoid distraction and knowledge loss from employee
turnover

3. Data scientists will be the back bone of the agile teams able to data driven decisions with a higher
likelihood of success in supporting the business objectives.

4. While agile development will be the environment/framework where those teams should operate
to be able to quickly deploy, learn and reiterate on the products to achieve customer satisfaction
and ultimately have the desired financial impact on the business.

Coupled with a strategy map is a balanced score card which provides the measures and targets that
support the objectives identified in the strategy map.

The balanced score card for Amazon is shown in Table 3.

The NPS is the percentage of customers who wouldn't recommend the company subtracted from
the percentage of customers who would promote the company. This methodology is used by leaders
as a substitute for the customer satisfaction survey. The interpretation of the net promoter score
also depends on the sales stage at which it is placed. For instance, an NPS question asked at the end
of the transaction on an ecommerce site better indicates satisfaction with platform rather than
customer satisfaction with the product purchase subsequently captured by the product reviews.
Figure 14 depicts the application of big data analytics to Amazon’s strategy map and balanced score
card. Amazon’s measures are consistent with their strategic objectives that support market
leadership.
Customer growth, revenue gains, brand strength and the degree to which products and services
purchases continue and are repeated by customers are key measures for Amazon’s market
leadership. Strategically, Amazon seeks to generate revenue through the use of their devices rather
than the purchase of devices for better alignment with their customers. Typical industry programs
that rely on customers to upgrade products are not building relationships, learning from their
customers, and improving the customer’s experience in the way that Amazon seeks to accomplish. In
fact, real-time analytics, regression modeling, pattern recognition, and machine learning capabilities
allow Amazon to institute automated systems that actively seek instances where a customer’s
experience hasn’t met Amazon’s standard. In such instances, decision criteria is built into algorithms
that will automatically provide customer refunds. This practice is extended into their pre-purchase
programs that automatically refund customers the difference between Amazon’s guaranteed lowest
price and the release price of a product. Again, this is another way that Amazon builds relationships,
trust, and loyalty among their customers which is an important factor in increasing their customer
base.

Machine learning is at the core of many of Amazon’s capabilities to serve their customers efficiently
and effectively. Statistical properties of datasets are used to train models in finding patterns within
the data through machine learning algorithms. These algorithms are able to quickly optimize models
and can easily generate real-time predictions. In 2014 Amazon released the Amazon Echo, which
incorporates machine learning based on voice recognition. The device is connected to Amazon’s
cloud and supported by their web services to provide users with voice controlled access to
information, music and more, while continuously learning about its owner and adding more
functionality over time based on speech patterns and user preferences.

Big data will be central in guiding new deployments and objectives while acting as a foundation for
business decisions in achieving those objectives. By optimizing the search algorithm, Amazon will
have the foundation for a good visual assistant as it would mean it was able to answer the
customer’s “typed” query in an efficient manner which will be the step before converting from the
typed query to the “talked” query. Furthermore by leveraging historical data, optimization of the
turnover rate would assist with increasing warehousing efficiencies for products with higher
turnover rate and ROI. Amazon can also use this information to add efficiency to partners, especially
during international expansion which would result in bigger margins for Amazon. By using third party
data more accurate forecasting can be achieved in determining which products will be needed in a
specific period in a specific area. Such data may include information related to electricity outages,
natural disasters, or even medical data from pharmaceutical companies that inform which products
sell more, to who and which period.