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Received March 5, 2014 / Accepted Sep 29, 2014 J. Technol. Manag. Innov.
2014,Volume 9, Issue 3
The Balanced Scorecard: Innovative Performance Measurement and

Management Control System
Ondrej Zizlavsky1
Abstract
The paper presents an overview of studies that have described the emergence of innovative performance measurement
systems. It is dedicated to the issue of potential implementation of Balanced Scorecard as a strategic management control
system in Czech small and medium-sized enterprises. The framework is based on literature review and analysis about
traditional management control systems, their pros and cons, and modern methods of performance measurement, such
as Balanced Scorecard. Numerous publications discuss its potential advantages and recommend its implementation. On
the other hand, there exist huge limitations for small and medium-sized enterprises, such as time, organization and
money. Benefits resulting from successful Balanced Scorecard implementation must overweigh the costs of designing,
implementing, and using it. Therefore, the paper is supposed to motivate researchers to conduct more large scale studies
in the area of innovative performance measurement systems implementation in different business sector and areas.
Keywords: balanced scorecard; performance measurement; management control; innovation; innovation management;
innovative potential; research and development; small and medium-sized enterprises; literature analysis; czech republic.
1
Institute of Finances, Faculty of Business and Management Brno University of Technology, Kolejni 2906/4, 612 00 Brno, +420 541 143 707,
E-mail: [email protected]
ISSN: 0718-2724. (http://www.jotmi.org)

Journal of Technology Management & Innovation Universidad Alberto Hurtado, Facultad de Economa y Negocios.
210
J. Technol. Manag. Innov. 2014,Volume 9, Issue 3
Introduction Methods
The old adage says: You cannot manage what you dont The scientific aim of the paper is to gain knowledge and
measure. This is especially true for innovations where it is analyze the present status of innovative activities and their
absolutely necessary to bring focus, intelligibility and disci- performance measurement as it pertains to the Czech and
pline, particularly to the initial, inventive phase of the innova- foreign professional literature. The objective of the article
tive process. Innovation is a continuous process. Companies rests in the summary and presentation of results of a litera-
continually create changes in their products and processes ture analysis of the relationship between innovative activities
and gather new knowledge. Measuring such a dynamic pro- and performance measurement of a company. In addition,
cess is much more complex than in a static activity. the paper is also important in terms of innovation manage-
ment, which is a field of science, and also of related disci-
Therefore, measuring performance and contribution to value plines, specifically strategic management.
of innovation has become a fundamental concern for manag-
ers and executives in the last decades (Kerssen-van Dronge- The paper is based on literature analysis of the Balanced
len and Bilderbeek, 1999). According to the abundance of Scorecard. The system approach, analysis, comparison and
books and publications that have been written over the past synthesis are applied in this paper. Analysis is used as a meth-
few years on the topic of measuring company performance od of acquiring new knowledge and for its interpretation.
(see Neely (2005) for an overview about the state of the art When processing secondary data, the secondary analysis
of performance measurement and further research perspec- method was used. The professional literature, and particu-
tives), it might seem that we know everything we need. In larly foreign resources, provided a source of secondary data.
last years, many studies have been written aimed at discuss- Comparison is used when various pros and cons of the Bal-
ing the issue and suggesting possible approaches to the per- anced Scorecard are compared. Synthesis is used for design
formance measurement, innovation and R&D management of future research.
literature (e.g. Bassani et al., 2010; Chiessa and Frattini, 2009;
Merschmann and Thonemann, 2011). The first part reviews the literature and presents a brief
history of management control systems development from
Theoretical and empirical researchers analysed perfor- traditional accounting control systems to the complex Bal-
mance measurement systems about continuous change, anced Scorecard performance measurement system. The
innovations (Boston Consulting Group, 2006) or relations next section is dedicated to the specification of the Balanced
between innovation and performance measurement sys- Scorecard model.The third section discusses benefits result-
tems implementation, with general and sector focuses (e.g. ing from Balanced Scorecard implementation in the Czech
Fiorentino, 2010). Despite this, many companies do not business environment as well as barriers and potential prob-
have this issue supported and it is often taken for granted lems incidental to its adoption. Finally, the last section sum-
and considered resolved within the scope of the existing marizes the findings and gives a proposal for future research.
information systems. From Traditional Accounting Control Systems to the Bal-
anced Scorecard
Efficient and complex measurement systems are crucial
to the success of innovations. It is not enough just to pick Management control was defined by Anthony (1965) as
a few areas, use random indicators and expect to obtain the process by which managers ensure that resources
the information needed for managing innovation. It ends up are obtained and used effectively and efficiently in the ac-
mostly in a situation where competent managers are over- complishment of the organizations objectives. Manage-
whelmed with analysis results that they do not use in their ment control systems have been commonly viewed as
work or that they use in a completely inefficient manner. mechanisms designed to support the implementation of
This approach is time-consuming and draining on productiv- strategy at management level, while conceptually separat-
ity. It can also lead to inconsistent analyses and incorrect ing management control from strategic and operational
measures (Davila et al., 2013). controls. Within this framework, management control sys-
tem research has focused mainly on accounting information
produced primarily to measure cost efficiency and financial
performance, while ignoring external aspects of the business
(Aureli, 2010; Raake, 2008).

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In Czech economics most managers still use mainly financial In this period leading global companies developed sophis-
indicators to assess business performance and its compo- ticated indicator systems measuring performance, which
nents. Some managers, due to their focus on economics only, proved to be ineffective in many cases it was the result of
have gone so far that they are trying to directly influence an effort to create a perfect system and hence employing a
these indicators instead of trying to change the quality of large number of indicators. Gradually it became clear that
their companys business, which in facts creates the indicator those companies that picked a limited number of indicators
values. This approach is also enhanced by the current infor- actively selected by their management did achieve success in
mation systems used in companies that are full of economic measuring business performance. Many new indicators were
information. It is because economic and financial values are also introduced and tested, and assessment methodology
easily measurable and most data can be taken from the was developed. The principle of balanced financial and non-
companys accounting. financial criteria became well established.
Other managers, focusing on matter-of-fact issues and Some of the most important management tools are for ex-
knowing less about economics and finance, are usually over- ample the Performance Measurement Matrix (Keegan et al.,
loaded by complex results of financial analyses supplied by 1989), the Performance Pyramid (McNair et al., 1990), the
the information system. In the end they usually do not em- Integrated Performance Measurement Systems (Bitici et
ploy the results of economic analyses in their work or use al., 1997), the Performance Prism (Neely and Adams, 2001),
them in an inefficient way. An economic approach to meas- Data Envelope Analysis (Charnes et al., 1978), Quantum
uring business performance is also preferred by the owners. Performance Measurement (Hronec, 1993) or Productivity
Since they have invested their money in the company, they Measurement and Enhancement System (Pritchard, 2008).
are expecting an appropriate return. From the owners point However, the most famous management model is the Bal-
of view a company is a money-making-machine and if it is anced Scorecard proposed by Kaplan and Norton (1992,
not fulfilling this role the owners blame the management, 1993, 1996, 2001a).
and from their point of view they are right.
The success of the Balanced Scorecard is documented by
Financial indicators are indispensable for assessing business its rapidly-growing worldwide popularity. In the more prac-
performance. Just they can inform the managers about the titioner-oriented literature (e.g. Sibbet, 1997), the Balanced
companys capability of creating value and allow them to Scorecard concept has been celebrated as representing one
check whether any employed measures contributed to the of the most important management instruments in recent
creation of value. Their main shortcoming is the fact that years. Surveys provide evidence for the rate of adoption
financial information reflects the results of managerial deci- of the Balanced Scorecard among the US firms up to 66%
sions made in the previous period and that their evolution (Rigby, 2007). Since 1999 the Balanced Scorecard has been
is influenced by a number of factors that cannot be specified introduced in the Czech Republic.
(Kislingerova, 2008). Complex financial indicators are also
very hard to combine with the evolution of basic internal A key factor of the fast spread of the Balanced Scorecard
processes and further areas conditioning the success of the was the possibility of using a measuring system to control
company. The rising criticism also covers aspects like miss- the implementation of company vision and strategy.Through
ing alignment to corporate strategy, the backward view, the this the Balanced Scorecard took up the role of a strategic
short-term perspective, insufficient customer orientation management system (De Geuser et al., 2009).
and misleading reference points for incentives (Gleich, 2001).
The Balanced Scorecard approach inspired the European
When business conditions in the 1980s changed as globali- model of business success known as the EFQM Excellence
zation, the demand for customization, quality and speed re- Model (European Foundation for Quality Management,
vealed the above-mentioned limitations in traditional man- 1999), which is currently very popular in the EU. It is based
agement accounting it became evident that a review of this on the initiative of 14 top West European companies that es-
concept was necessary (Hayes and Abernathy, 1980; Johnson tablished the European Foundation for Quality Management
and Kaplan, 1987). The development and improvement of (EFQM) with the aim of improving the position of European
systems used to measure business performance therefore companies in global competition (Westlund, 2001). EFQM
focused on adding non-financial indicators to accompany the Model Excellence is used to detect the problem points of a
financial ones companies used them to measure and assess company and to warn about its weaknesses.
the development of basic success factors in individual stra-
tegic areas of their companies (Chakravarthy, 1986; Ittner Similar to the Balanced Scorecard, although more than 50
and Larcker, 1998a; Kaplan and Norton, 1992; Merchant, years old, is the Tableau de Bord (Lebas, 1994) that has been
1985; Meyer, 1994; Nanni et al., 1992; Neuman et al., 2008; used for decades by French managers to control perfor-
Palmer, 1992;Vaivio, 1999).
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mance on the basis of key control parameters regarding dif- The advantage of this method is that the transition from
ferent organizational aspects of a company (Bessire and Bak- strategic to process level achieved through process perspec-
er, 2005; Bourguignon et al., 2004; Epstein and Manzoni, 1997). tive is very straightforward. Another advantage of this value
chain is that the innovation process stands at its beginning
Balanced Scorecard and that it includes the investigation of current and future
needs of the customers, as well as research and develop-
Following section is dedicated to the specification of Bal- ment of new ways how these needs could be satisfied.
anced Scorecard model, the most famous and widely spread
management control system. The above-described value-creating process is established
to fulfil the companys mission and it directly produces the
The Balanced Scorecard Model added value satisfying the needs of the customer. It is easi-
est to track it from its end from the added value for both
The better we understand innovation processes the better customer and owner, which must be balanced in the long-
our business model will be as well as the related system of term. It can be extended by auxiliary and supportive pro-
measuring performance, which will supply better informa- cesses. Key processes in the innovation process model must
tion for innovation management. This is why it seems best include identification of new product concepts, development
to use Balanced Scorecard (BSC) process classification, of product from new concepts, process innovation in pro-
which is based on the value chain and covers all the key duction, acquisition of technologies (development and con-
company processes: trol of technologies). Supportive processes are represented
by resources and their distribution, efficient use of relevant
Innovation process company is studying the de- systems and tools ensuring leadership or management.
velopment of customers needs and based upon the results
it organizes research and development of new products that The BSC concept transforms company vision and strategy
satisfy these needs. into a comprehensive set of performance indicators that
Operational process ensure production and sup- provides a framework for assessing its strategy and man-
ply of products and services to customers. agement system. BSC measures company performance us-
Post-sale services can represent an advantage in ing four balanced perspectives financial, customer, internal
business competition. It can be e.g. fast service of sophisti- business processes and potential (Kaplan and Norton, 1992;
cated and expensive systems or training programs support- Horvath and Partners, 2002). It allows for monitoring finan-
ing efficient use of these products. cial results as well as the ability of the company to source
Innovation Operations
Customer Customer
need Design Develop Make Market Service need
identified satisfied
Time to market Supply chain
Business processes
Innovation process
Operations process
Product design
Manufacturing
Product development
Marketing
Post sale service
Figure 1. The internal business process value chain perspective. Based on Kaplan and Norton (1996)

213
assets needed for its growth and increasing competitiveness, There are five basic principles for a strategy-focused organi-
ability to create value for current and future customers, and zation using the BSC, which can be summarized as follows
capacity of improving the quality of human resources, sys- (Kaplan and Norton, 2001b):
tems and methods of work necessary for increasing their
future performance. Translate the strategy into operational terms using
balanced scorecards and strategy maps;
Balance is the equilibrium between operative and strategic Align the organization to the strategy by cascading
(short-term and long-term) goals, required inputs and out- the highest-level scorecard to strategic business units, sup-
puts, internal and external performance factors, delayed and port departments, and external partners;
driving indicators, and also the already mentioned financial Make strategy everyones job with initiatives to cre-
and non-financial indicators. These perspectives are not se- ate strategic awareness and by using personal scorecards
lected without any purpose they allow for a comprehensi- with related incentives;
ble view of combining the companys success with the driv- Make strategy a continual process by linking budg-
ers of performance. BSC thus represents a flexible system ets to strategy, implementing a process for learning and
within a strategy. adapting firm strategy; and
Mobilize leadership for change to a strategic man-
BSC is one of the most popular and practical concepts of agement system.
systems used for measuring business performance. Although
its original idea focused on business strategy it can be ap- The key features in this system are the result indicators,
plied to any process in a company, including innovation (e.g. which are general and are applicable in different types of
Bremser and Barsky, 2004; Kerrsens-van Drongelen et al., company.They are also known as delayed indicators, because
2000; Neufeld et al., 2001). Innovative companies use it as they are used to measure past results. Such indicators are
strategic management system, i.e. to manage their long-term e.g. profitability indicators, sales revenue, customer satisfac-
strategy and to perform critical management processes. tion, market share, etc. The second type of indicator used in
Financial perspective Sales / Revenues

Costs / Assets
1. Objectives
2. Measures
3. Targets
4. Initiatives
Internal business Customer perspective

process perspective
Vision and 1. Objectives
1. Objectives 2. Measures
2. Measures strategy 3. Targets
3. Targets 4. Initiatives
4. Initiatives
Potential perspective
(Learning and growth)
1. Objectives
2. Measures
Internal processes 3. Targets Customer value creation
development 4. Initiatives
Figure 2. The Balanced Scorecard framework. Based on Kaplan and Norton (1996) and Horvath and Partnes (2002)

214
BSC are the driving indicators, which usually differ for each During the process of innovation a company uses strate-
company. They are sometimes known as advance indicators, gic marketing to investigate the development of customers
because their current development advances future results. needs and based on the results of such investigation it or-
These may include e.g. turnover increase, productiveness in- ganizes its research and development into new products to
crease, and value increase for the customer, staff requalifica- satisfy these needs. On the other hand, the operating pro-
tion, etc. The moving powers of long-term financial success cess represents a short wave of creating value in which com-
may ask for brand new products to satisfy the needs of cur- panies supply existing products to existing customers.
rent and future customers. The innovation process is un-
derstood as the long-term creation of values and for many The BSC Innovation process consists of two features (see
companies the future financial performance is a stronger Figure 1 in Innovation section). First of all managers use the
moving power than the short-term cycle of operation. From results of market research to learn about its size, character,
the perspective of future economic performance it is much customer preferences and bases for setting prices of the
more important for many businesses to be able to success- target products. Once the companies develop their inter-
fully manage a long process of developing a brand new prod- nal processes towards satisfying concrete customer needs,
uct or develop the companys ability to address a new group availability of the right information about market size and
of customers than consistent management of current opera- customer preferences is the main road to success. Besides
tions (Kaplan and Norton, 1996; Niven, 2005). investigating the needs of existing and potential customers
this segment may provide information about totally new op-
The BSC is a management system designed to link and align portunities and markets for products that could be supplied
the company with its strategy at all levels. After the balanced by the company. Information about markets and customers
scorecard is formulated at the corporate level of the com- serve as input for the second step in the innovation process,
pany, it is cascaded downward to strategic business units i.e. the process of new product development (Kaplan and
and support departments (Niven, 2006).These units develop Norton, 1996). The key tasks of the development team are:
scorecards to implement the strategy communicated by the
corporate scorecard. Full implementation of the BSC model Through basic research to look for sources of val-
requires cascading down to the individual level.This provides ue for brand new products.
for each person having a perspective on his or her role in Within applied research and development to pro-
strategy implementation. For each measure in the personal ject the results of basic research into the design of new gen-
scorecard, strategy implementation goals are set. Incentives erations of product.
such as stock options and merit pay increases are linked to To strive for introduction of new products to serial
their performance in implementing strategy. Measurements production and on the market.
are used throughout the organization to implement strategy
and achieve synergies. Cascading corporate BSC to the in- Development of performance criteria and product develop-
novative function and the R&D department aims to achieve ment received relatively low attention in the past. This was
integration of technology planning with business strategy because most attention in companies focused on produc-
(Bremser and Barsky, 2004; Kaplan and Norton, 2001b). tion and operation processes, not on research and develop-
ment. Production processes consumed much more money
The Balanced Scorecard Model & Innovation than research and development. Many companies nowadays
need to gain a competitive advantage by constantly launch-
BSC understands innovation as a critical internal process. ing new innovated products, which makes the research and
The higher priority of the innovation cycle over the oper- development process an important component of their val-
ating cycle is specifically notable in companies with a long ue chain.The success of this process should be verified using
term of development and design. Once the product reaches concrete goals and criteria.
the production phase here, the margins from operation may
be quite high. Opportunities for further cost reduction may The relation between inputs consumed during develop-
also be limited. Most costs occur during research and de- ment (salaries, equipment, material) and achieved outputs
velopment. Some estimates claim 70-80% (e.g. Serfling and (innovated products) is much more misleading than in the
Schultze, 1997). process of production where it is relatively easy to quan-
tify labour, material and equipment needed to make the
product. Applicability of different performance standards
and criteria also strongly depends on the length of the
development cycle.

215
Criteria for basic and applied research are determined upon Table 1 presents an example of specific metrics for innova-
the companies perspective by the importance assigned to tion in the BSC framework. The four perspectives of the
the individual aspects of the innovation cycle. Their dimen- BSC provide a context for the measures.The literature cited
sion can be either marketing: above suggests many possible measures.The BSC implemen-
tation process includes careful selection of measures to im-
percentage of new product sales from sales total, plement strategy. Measures will change over time due to the
percentage of sales of products protected by law strategic learning loop. If companies want to achieve their
from sales total, stated innovative vision, it is important that employees see
launching of a new product on the market com- how their responsibilities contribute to strategic success. An
pared with competitors, example shows strategic indicators at the company level and
launching of a new product compared with plan, measurements at the R&D Department level from the cas-
length of time needed for developing a new genera- cading down process.
tion of products,
or financial and analytical: Bremser and Barsky (2004) recommend a participative
profitability of R&D costs, cascading approach, which calls for consensus agreement
degree of operational cost before tax per concrete between managers at upper and lower levels. The process
period compared to total cost of development. starts with a statement of strategic indicators at the rm
level. These measurements and supporting documentation
on how they relate to strategy implementation are com-
municated downward to strategic business units, divisions
or departments, depending on the organizational struc-
ture. If the next level is the division in the organizational
structure, the division would prepare a balanced scorecard
and cascade it down to the departments below. The vari-
ous departments at the next level would review possible
metrics for their balanced scorecard that linked to the
cascaded down measures.
Strategic objectives Strategic indicators at company level Sample metrics at R&D department level
Financial perspective Return on capital employed R&D value creation at innovation stages
Customer profitability R&D value creation at commercialization stages
Revenue growth rate
Customer perspective Customer retention rate Percentage of sales from new products
Market share Product market life cycle
Customer acquisition (number and Customer satisfaction with new products
quality)
Internal business process perspec- New product profitability Number of new products approved for market launch
tive R&D efficiency (time to market) Average development cycle time
Percentage of resources to sustain Average development cost per product
existing products Percentage of ideas approved for test and validation
Other metrics not related to R&D phase
Pricing and profit planning accuracy
New product acceptance rate
Safety incidents
Potential perspective (Learning and Employee retention Number of patents awarded
growth) Employee development Strategic skill coverage ratio by competency category
Strategic skill coverage ratio by R&D competency vs. competitors (innovation level)
competency category Employee survey measures
Employee survey measures Employee training (hours)
Innovative culture surveys
Table 1. Application of the BSC to R&D. Based on Bremser and Barsky (2004, p. 235)

216
The BSC Model & Innovative Potential Discussion

Development
The effects and potential of implementing BSC may be great
The BSC methodology can be used also to characterize the and very tempting (e.g. Horvath and Partnes, 2002; Kaplan
company development potential, because its interpretation and Norton, 1996):
of the companys value is based on the mutual interaction of
four perspectives of change: The BSC indicator system will enable continuous
control over the meeting of strategic goals through fulfill-
change in workers behavior, ing performance indicators. This creates strong feedback
change of internal environment in the company, allowing for fast updating of an unrealistic strategy. BSC
change of consumer behavior of the customers, will provide an overview of the actual performance of all
change of companys economy. internal company processes, which enables efficient man-
agement of process performance enhancing, including the
According to Figure 3, published by Pitra (2006), business evaluation of actually achieved efficiency of investments. BSC
development is initiated by increasing work performance provides an overview of the causal structure of the compa-
of company workers (caused by their higher satisfaction ny, the main factors of performance, their development and
with their own work, higher level of their expert skill and mutual relations.
more efficient motivation), which is reflected in increasing BSC will allow for efficient communication be-
productivity and innovation development in the companys tween all organisational units of the company during the
internal environment. The result of this development is an implementation of a strategy, and implement feedback for
offer of products that bring higher value to the customers. adjustment of goals set for organisational units and individu-
Increased demand for quality, user-friendly, easily accessible als with the goals of the company.
and reasonably priced products offered by the company BSC concentrates attention of the management
leads to increased sales revenues. Higher revenues increase and all other workers on fulfilling the strategy, therefore on
profit and therefore also the earning power and value of the creating future prospects.The checking of past development
company. At the same time they create resources to finance is just a tool.
investment and operating capital for efficient financial man-
agement of the company.
Management
Earning power REVENUES REVENUES / VALUE OF

Profitability COMPANY
Liquidity
Customers
Satisfaction PRODUCTS
Loyalty
Operating capital / investments
Solvency
Innovation and
development
PERFORMANCE
Innovativeness
Quality
Price Employees
Satisfaction
Motivation
Competency
Figure 3. Company development through BSC. Based on Pitra (2006)

217
A well-implemented BSC system allows for efficient follow- Strategy is not communicated within the entire
ing of a company innovation strategy. However, its imple- company and workers lack motivation for fulfilling it.
mentation must be done properly with regard to companys The long-neglected issue of human resources
aims, strategy, advanced management system, information is becoming a critical factor of further development. The
support and communication. condition of further efficient company development is to
achieve agreement on distribution of created value between
A formal model of BSC implementation was presented by customers, owners, employees and suppliers (Horvath and
the Hungarian scientist Peter Horvath (Horvath and Part- Partners, 2002; Kaplan and Norton, 1996).
ners, 2004; Horvath and Partners, 2002). His experience
shows that in the preparation of a project the first step in The inventors of this method are aware of the mentioned
BSC implementation must be assessment of the companys limitations. They point out that it is a dynamic system, which
preparedness for the project implementation. Moreover, must flexibly react to the changing character of the business
successful BSC implementation, especially in small and me- environment (Kaplan and Norton, 2001a, b). BSC is thus
dium enterprises, is possible only in collaboration with a forced to undergo evolution (Cobbold and Lawrie, 2002;
specialised consulting company. An unbiased view from the Horvath and Partners, 2002). Being aware of these limita-
outside is needed mainly for the setting-up of the entire BSC tions many authors have contributed to the development
programme and first steps of implementation. For the final of the BSC model (e.g. Hoffecker and Goldenberg, 1994;
success of a BSC project it is necessary that during imple- Horvath and Partners, 2004; Chow et al., 1997; Epstein and
mentation the initiative must be gradually accepted by all the Manzoni, 1997; Kaplan and Norton, 2001a, b; Meyer and
internal team members, who will identify with the results Markiewicz, 1997; Niven, 2014).
and adopt them.
Conclusions and future research
During preliminary research in 20102011 the word score-
card was mentioned to several managers who immediately To summarize, in a dynamic and changing business environ-
recalled the Balanced Scorecard system. However, there are ment, implementing management strategies requires inte-
still just a few companies using the BSC system in the Czech grated performance measurement systems that capture
environment. The questioned companies did not use this changes in financial and non-financial measures. Performance
system, but had established different systems of measuring measurement systems have been developed due to science
performance. This misbalance reflects the reality of historic and experience have concluded that financially-oriented tra-
concentration on savings. Unfortunately, introduction of an ditional accounting control systems are of limited use for
integrated BSC system, although its philosophy is simple and the management of a company. The rising criticism covers
logical, is very difficult for small and medium Czech compa- aspects such as a disregard of non-financial factors, missing
nies in terms of time, organisation and money. In the current alignment to corporate strategy, a retrospective view, etc.
situation Czech companies must also deal with problems in Therefore, several new concepts have been developed.
company culture and motivation of workers towards an ac-
tive approach to increasing innovation performance. Based This paper draws upon the literature about the Balanced
upon contacts with managers and owners of Czech cor- Scorecard concept. It is a strategic control system that has
porations it can be said that although they are interested the merit of balance between financial and non-financial
in modern management methods, there are many barriers metrics and between internal and external factors affect-
preventing the implementation of BSC: ing business (innovation) strategy. It links strategic objectives
(long-term orientation) with annual budgets (short-term
Companies do not constantly perform benchmark- orientation), clarifies and gains consensus about strategic
ing and a deeper knowledge of competitors and the market goals, tracks individual and collective performances, and de-
is missing. Marketing information systems are not consist- fines and communicates company goals to its internal and
ently created and filled (Zizlavsky and Smakalova, 2011). external stakeholders.
Strategic company management is formal and has
a campaign character. Visions are very vague and strategic This paper is limited by several factors that should be ad-
goals are formulated generally and in terms of quality only. dressed in future research. First, this study is grounded in a
Due to poor knowledge of competitors the strategic goals theoretical secondary data analysis. Reviewing the empirical
do not focus on key factors of success. literature published on the topic of innovation performance
Due to generally formulated targets, investments measurement and Balanced Scorecard implementation, it
necessary for implementing strategies are spent upon has been found out both important evidence for positive
the managements consideration and without relation to effects of utilizing of BSC for innovative performance meas-
the strategy. urement (e.g. Bigliardi and Bottani, 2010) and results that

218
shed a more critical light on expected benefits stemming ment of the importance of individual variables in the de-
from its implementation in Czech SMEs practice. This has termination of future earnings, and will propose measures
to be examined by surveying companies with the help of for the improvement in innovation performance assessment
questionnaires or personal interviews. with the use of advanced mathematical methods and mod-
els. In this country, such an approach is missing and there is
Second, it should be noted that the measurement of innova- still a big gap in innovation performance measurement.
tive performance was, is and always will be encumbered by a
certain inaccuracy associated with the creative nature of this Acknowledgement
process. What is detrimental is the fundamental resistance
of creative workers to any form of measurement and stand- The author would like to thank Czech Science Founda-
ardization of their work. However, in view of the importance tion for its funding support within postdoc project No.
of the innovative process for the development of the com- 13-20123P Innovation Process Performance Assessment: a
pany and the amount of resources put into it, performance Management Control System Approach in the Czech Small
measurement in this area is necessary. and Medium-sized Enterprises.
Given the high popularity (e.g. Horvath and Partners, 2002;

Mooray et al., 1999; Rigby, 2007; Sibbet, 1997) of the Bal-
anced Scorecard on the one hand and serious criticism (e.g.
Ittner and Larcker, 2001; Norreklit, 2003) on the other, it
is not surprising that leading researchers have claimed to
systematically analyse Balanced Scorecard adoption in com-
panies and its effects (Atkinson et al., 1997; Burkert et al.,
2010; Faupel, 2012; Ittner and Larcker, 1998b; Otley, 1999;
Wang et al., 2010).
Future research on individual approaches to measuring and

managing innovation process performance in Czech SMEs is
the objective of post-doc research project of the Czech Sci-
ence Foundation No. 13-20123P. It will last till end of 2015
and includes more in-depth research. The substance of this
project is to design and verify measures and approach higher
credibility of future benefits prediction from innovation pro-
cesses. Future research is advised to collect, where possible,
objective quantitative and also semi-qualitative data on the
current state of the investigated issue.
The research focuses on Czech SMEs, since they are key

drivers of the Czech economy. They provide around 2 mil-
lion jobs, generate more than 36% of the Czech Gross Do-
mestic Product and represent more than 99% of all Czech
enterprises (MIT of the Czech Republic, 2012).
In-depth research can help understanding the complex in-

teraction between innovation and performance of a com-
pany. This becomes even more important in the conditions
of the current changing environment and economic situa-
tion of Czech SMEs. Well managed and successfully intro-
duced innovation into the market represents a tool for the
companies, by means of which they can achieve competitive
advantages and enabling their prosperity. Therefore, the ef-
fectiveness must be assessed by financial and non-financial
criteria in all stages of the innovation process, from the birth
of the idea to the final commercialization stage. Research
outcomes will help resolve the problem of empirical assess-

219
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Received March 5, 2014 / Accepted Sep 29, 2014 J. Technol. Manag. Innov.

The Balanced Scorecard: Innovative Performance Measurement and

ISSN: 0718-2724. (http://www.jotmi.org)

ISSN: 0718-2724. (http://www.jotmi.org)

Time to market Supply chain

ISSN: 0718-2724. (http://www.jotmi.org)

Financial perspective Sales / Revenues

Internal business Customer perspective

ISSN: 0718-2724. (http://www.jotmi.org)

ISSN: 0718-2724. (http://www.jotmi.org)

ISSN: 0718-2724. (http://www.jotmi.org)

The BSC Model & Innovative Potential Discussion

Earning power REVENUES REVENUES / VALUE OF

Figure 3. Company development through BSC. Based on Pitra (2006)

ISSN: 0718-2724. (http://www.jotmi.org)

ISSN: 0718-2724. (http://www.jotmi.org)

Given the high popularity (e.g. Horvath and Partners, 2002;

Future research on individual approaches to measuring and

The research focuses on Czech SMEs, since they are key

In-depth research can help understanding the complex in-

ISSN: 0718-2724. (http://www.jotmi.org)

ISSN: 0718-2724. (http://www.jotmi.org)

ISSN: 0718-2724. (http://www.jotmi.org)

ISSN: 0718-2724. (http://www.jotmi.org)

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