In 1992, by Robert Kaplan and David Norton’s account, Mobil’s U.S. marketing and refining business had a negative cash flow of $500 million, and its profitability, they wrote, put it in last place in its industry. It was, in their words, “a highly centralized, production-driven oil company.” Its product was gasoline, which looks the same from every pump.
Mobil’s marketing research found that the drivers buying it were not the same. Some cared only about price, and for them Mobil would have to match or beat the discount stations. Others, Kaplan wrote, would pay a premium of up to 10 or 12 cents a gallon for a better buying experience: quick service, paying by credit card at the pump, clean restrooms, friendly and helpful employees, a great convenience store.
Mobil could not be the best for both. Bigger stations with more self-pay pumps, better-paid and better-trained employees, and full-service convenience stores cost money that would have to come from higher prices, which would drive away the price shoppers. The lowest prices would leave no money for any of it. “Strategy is about choice,” Kaplan wrote of the case.
In 1993 the division began using a balanced scorecard to manage the change to what Kaplan and Norton called “a decentralized, customer-driven retail organization.” In their 2000 Harvard Business Review article, Mobil was the example they used to walk through a strategy map: a diagram linking objectives in four layers, from learning and growth through internal processes and customers up to financial results.
Some things could be left off. Mobil’s main suppliers sold crude oil or built refineries and pipelines. They were essential, Kaplan wrote, but did nothing to set Mobil’s strategy apart. He used them to show that suppliers like these need not appear on a scorecard.
The meetings changed. “In the past we were a bunch of controllers sitting around talking about variances,” said Bob McCool, one of the division’s top executives. “Now we discuss what’s gone right, what’s gone wrong. What should we keep doing, what should we stop doing?”
Norton described an annual employee survey that asked, among other things, whether people understood the strategy. At the start, he said, 20 percent of the workforce did. Five years later, 80 percent did.
The financial line came in the authors’ telling too. By 1995, they wrote, Mobil’s division had moved from last place to first in industry profitability, and it held the top spot for five consecutive years, through 1999. Its cash flow went from minus $500 million in 1992 to plus $900 million in 1998.
Kaplan added a note of scale in 2001: “We talk about Mobil, but that was really a division. It was a big division, $20 billion, but maybe only 20 percent of the company.”