M A RKETING M G T S I

M A RKETING M G T. S I M U LA T I ON As soon as he said“Money isn’t Everything” - I knew we were in trouble

M A RKETING M G T. S I M U LA T I ON It is important to focus on the means used to achieve the ends … …. . not just on the ends themselves… To only focus on traditional financial accounting measures (such as ROI, ROE, EPS…) …. . does not give mgt the whole picture….

Performance needs to be judged thru mix of both financial & non-financial measures…. M A RKETING M G T. S I M U LA T I ON As - nonfinancial measures are drivers of financial outcomes Will Make $$$ - if sell product Will sell product if consumer wants, knows about , can get, & LIKES product To achieve “above’ everyone must effectively do their job To effectively do job must know what to do

Organizations Often Have A Gap Between Strategy and Action Strategy Is a Step In a Continuum MISSION Why we exist VALUES What’s important to us VISION What we want to be STRATEGY Our game plan STRATEGIC OUTCOMES Satisfied SHAREHOLDERS Delighted CUSTOMERS Efficient and Effective PROCESSES Motivated & Prepared WORKFORCE

The Balanced Scorecard Is A Bridge To Close That Gap Strategy Is a Step In a Continuum MISSION Why we exist VALUES What’s important to us VISION What we want to be STRATEGY Our game plan BALANCED SCORECARD Implementation & Focus STRATEGIC INITIATIVES What we need to do PERSONAL OBJECTIVES What I need to do STRATEGIC OUTCOMES Satisfied SHAREHOLDERS Delighted CUSTOMERS Efficient and Effective PROCESSES Motivated & Prepared WORKFORCE

M A N A G E M E N T S I M U LA T I ON

M A N A G E M E N T Strategic Thinking- the ten big ideas S I M U LA T I ON 9 9. Metrics that matter Balanced score card- a system that attempts to balance financial performance w/ consideration of customer's perspective, learning & growth perspective, & internal business process

Balanced Scorecard History Measurement and Reporting 1992 § § 2000 1996 Articles in Harvard Business Review: § Enterprise-wide Strategic Management Alignment and Communication Acceptance and Acclaim: “The Balanced Scorecard — Measures that Drive Performance” January - February 1992 § “The Balanced “Putting the Balanced Scorecard to Work” September - October 1993 § Selected by Harvard Scorecard” is translated into 18 languages “Using the Balanced Scorecard as a Strategic Management System” January - February 1996 Business Review as one of the “most important management practices of the past 75 years. “ 2000

Balanced Scorecard Hall of Fame Implemented Strategies and Achieved Breakthrough Results… Fast Mobil 3 years Saatchi & Saatchi + $2 b • Last to first • Cash flow +$1. 2 b • ROI 6% --> 16% ATT Canada 3 years + $7 b 2 -5 years Cigna Brown & Root 2 -5 years 3 years • #1 in growth & + $3 b 3 years profitability Duke Children’s City of Charlotte • Customer Satisfaction = 70% • Public Official Award • Customer Satisfaction #1 • Cost/Case 33% 3 years Wells Fargo Southern Garden 3 -5 years • # Customers 450% • Best Online Bank • Least Cost Producer 3 years 2 years 3 years Chemical Bank • 99% Merged Target Asset Retention UPS Hilton Hotels • Customer Satisfaction • Market Revenue Index • Revenues • Net Income © 2002 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. 9% 33% 2 years 9

M A N A G E M E N T S I M U LA T I ON Today … ~ 70% of Fortune 1, 000 companies utilize a Balanced Scorecard to help manage performance— What is measured gets noticed What is noticed gets acted on What is acted on gets improved

M A N A G E M E N T S I M U LA T I ON Perspectives Encompass all Respective Functional Domains

M A N A G E M E N T S I M U LA T I ON

M A N A G E M E N T For Each Perspective: S I M U LA T I ON Financial… Objectives Measures Targets Initiatives Responsibility Budget 1. 2. 3. Customer… Business Processes…Learning & Growth Objectives Measures Targets Initiatives Responsibility Budget 1.

M A N A G E M E N T Basic Scorecard Terminology (Southwest Airlines Example) S I M U LA T I ON Strategy Map Strategic Theme: Operating Efficiency Profits and RONA Financial Grow Revenues Customer Fewer planes Attract & Retain More Customers On-time Service Objective s: What the strategy is trying to achieve Measures Targets Initiatives How performanc e is measured against objectives The level of performan ce or rate of improvem ent needed Key action programs required to achieve targets Lowest prices Objectives Internal Fast ground turnaround Learning Ground crew alignment • Fast ground turnaround Measures • On Ground Time • On-Time Departure Targets Initiatives • 30 Minutes • Cycle time • 90% optimizati on

M A N A G E M E N T A Complete Scorecard is a Program for Action S I M U LA T I ON Strategic Theme: : Strategic Theme Objectives Operations Efficiency Operating Excellence Profits and RONA Financial Grow Revenues Customer Fewer planes Attract & Retain More Customers On-time Service Lowest prices Internal Fast ground turnaround • Profitability • Grow Revenues turnaround Ground crew alignment Targets Initiatives • 30% +/yr • 20% • 5% • Fewer planes • # Customers • More Customers • FAA On Time Arrival Rating • Flight is on time • Market Survey • Lowest prices • Fast ground • On Ground • Ground crew Learning Measures Time • On-Time Departure • 12% growth • Customer • Ranked #1 loyalty • Ranked #1 program • Quality management • 30 Minutes • Cycle time • 90% optimization • % Ground crew • yr. 1 trained • % Ground crew stockholders 70% yr. 3 90% yr. 5 100% • Ground crew training • ESOP

The Complete Balanced Scorecard Strategy Map Improve Shareholder Value Financial Perspective: the drivers of shareholder value Customer Perspective: the differentiating value proposition Productivity Strategy Improve Cost Structure Increase Asset Utilization q Cost per Unit Learning & Growth Perspective: role for intangible assets – people, systems, climate and culture Enhance Customer Value q Customer q Asset Turnover Market and Account Share q Internal Perspective: how value is created and sustained Revenue Growth Strategy Shareholder Value ROCE Profitability q Customer Acquisition Customer Retention q Create Value from New Products & Services q New Revenue Sources Customer Satisfaction Product Leader Customer Solutions Customer Value Proposition Product/Service Attributes Price Quality Time Low Total Cost Relationship Function Service Image Relations Operations Theme Customer Management Theme (Processes that Produce and Deliver Products & Services) (Processes that Enhance Customer Value) Brand Innovation Theme (Processes that Create New Products and Services) Regulatory and Society Theme (Processes that Improve the Environment and Communities) Human, Information, and Organizational Capital Strategic Competencies Strategic Technologies © 2002 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. Climate for Action 16

Mobil NAM&R Strategy Map Increase ROE to 12% Financial Perspective Increase Customer Profitability Through Premium Brands New Sources of Non. Gasoline Revenue Customer Perspective q q Share of Targeted Segment Mystery Shopper Score q Productivity Strategy ROCE Net Margin (vs. industry) Revenue Growth Strategy q q Non-Gasoline Revenue & Margin Become Industry Cost Leader q Volume vs. Industry Premium Ratio q Differentiators Clean Safe Quality Product Trusted Brand Speedy Purchase “Build the Franchise” Friendly Helpful Employees Improve Hardware Performance q q Best-In-Class Franchise Teams q Help Develop Business Skills “Achieve Operational Excellence” Understand Consumer Segments New Product Acceptance Rate More Consumer Products Recognize Loyalty “Increase Customer Value” Create Non. Gasoline Products & Services q Cash Flow “Win-Win Dealer Relations” Basic Internal Perspective q Cash Expense (cpg) vs. Industry “Delight the Consumer” q q Maximize Use of Existing Assets Yield Gap Unplanned Downtime q On-Spec On-Time Improve Environmental, Health and Safety Inventory Levels Run-Out Rate Industry Cost Leader q Dealer Quality Rating “Be a Good Neighbor” Improve Inventory Management q q Dealer Profit Growth Dealer Satisfaction q q Activity Cost vs. Competition Environment Incidents Safety Incidents A Motivated and Prepared Workforce Learning & Growth Perspective Climate for Action • Aligned • Personal Growth q q Personal BSC Employee Feedback Competencies • Functional Excellence • Leadership Skills • Integrated View q Strategic Skill Coverage Ratio © 2002 Balanced Scorecard Collaborative, Inc and Robert S. Kaplan. All rights reserved. Technology • Process Improvement q Systems Milestones 17

Capstone's Balanced M A N A G E M E N T S I M U LA T I ON Scorecard

M A N A G E M E N T S I M U LA T I ON

M A N A G E M E N T S I M U LA T I ON

M A N A G E M E N T S I M U LA T I ON

Additional – AFTER-the-FACT Tools for Managing & Assessing Your Performance: 1. Company Round Analysis 2. Analyst Report

M A N A G E M E N T S I M U LA T I ON Round Aanalysis -example

M A N A G E M E N T S I M U LA T I ON Simulation Scoring System