The Tyranny of the Balanced Scorecard in the Innovation Economy

The balanced scorecard (BSC) has developed as a very useful managerial tool from the mid1990s, and has met with general (and often enthusiastic) acceptance in both business and academic circles. In the knowledge-networked innovation economy of the early 21 century, which is increasingly characterized by globally integrated supply and demand chains, outsourcing of traditional business competencies (even innovation itself), and an emphasis on intellectual capital in contrast to physical capital, the BSC is now showing serious deficiencies. The tyranny of the BSC as a measurement ‘straightjacket’ is beginning to jeopardize the survival of firms, and hinders much-needed business ecosystem innovation, thereby negatively affecting customer value rejuvenation, shareholders’ benefits, and other stakeholders’ as well as societal benefits in general. This article traces the rationale, features, development and application of the BSC in the past ten years, and then provides a critical review of its key problematic effects on firms and their stakeholders in today’s changing business environment. Five major problem areas are identified and discussed, with selected business examples. An alternative to the BSC is proposed and motivated, involving drastic change in both the underlying assumptions of the BSC and moving from a systematic, single enterprise focus to a systemic, dynamic framework – a systemic management system, including a systemic scorecard.