Define, explain, measure, share, act

Here are five steps to metric-driven business.

Step 1: Define

That’s easy, I was told once by VP of Sales in a big company. We have only one KPI, and that’s the number of our clients.

Ok, I said, how do you measure it? The VP raised eyebrows. What do you mean, how? It’s just a number!

Well, I continued, so what’s the number today? In a minute, he realized it’s not a single number: Corporate clients should be separated, people with savings accounts should count more, etc. It actually took two weeks to discuss it in detail and define what they want to measure.

It’s hard to come up with a good definition but it’s worth to be as exact as possible.

Step 2: Explain

This is the most difficult step. It’s tricky because there are several questions hidden under the “why” stone.

Clients give us money, we need to measure the number of our clients! That’s a lazy answer. It’s our KPI! Even lazier.

First, with “why” you often realize your definition can be better. What does “we have 5,000 clients” tell about the performance of your company? (KPI should be about performance, right?) Not much unless you know what’s the goal (to have 10,000 clients) and what was the same number a month or a quarter ago (we had 4,000 clients a quarter ago).

Second, there’s a difference between having a set of KPIs and running a metric-driven business. Knowing the values of your KPIs does not mean you drive by it. It’s good to know you’re driving 65 mph and your target is 130 miles away but it does not tell you where to turn.

Hunt your “why”. It is good to measure your velocity because if you know it’s 65 mph and your target was 130 miles away an hour ago and now it is not 65 miles but 100 miles away, you also know your direction is wrong.

Answering “why” tells you a lot about your directions. Company momentum can be a great KPI.

Step 3: Measure

A lot of people do it the other way round: They look at what they are measuring or what they can measure easily at the moment, and they try to find their KPI there. That’s wrong. The goal has to be defined by business.  Don’t get dragged into numbers just because you have them. The important question is: Do you need them?

Not so long ago, CEO of a GoodData client was very strict about it: he was coming to meetings with a single consistent request: give me this metric. The events in the application were not logged: he didn’t care. The internal database was not ready for it: he didn’t care. He insisted on his metric and he got it: application was changed, database was changed, and today his morning ritual is simple: drink coffee and watch the numbers.

If you know what you want to measure and why, IT will follow.

Step 4: Share

You’re either Louis XIV of France (enchanté) or you want everybody in your company to move toward the same goal (even bigger pleasure to meet you, and congratulations to this wonderful idea).

Nothing can get you closer to your goal than sharing the number you drive by. This is what we measure, here’s why, and you can see our up-to-date numbers every day.

Being secretive helps if your goal is to know more than others. If you want to achieve more, you need to share. To have the numbers visible to everybody on your intranet homepage is great. To let them shine from big LCDs in the office is better. To talk about them every day is... guest what.

When you share, you motivate. Shared number is our number, shared goal is common goal.

Step 5: Act

Imagine you measure your great metric. The number grows constantly over the last two quarters and the value was 4,912 yesterday. Suddenly, it’s 4,073. And 2,885 the next day. And even lower the day after. You need to act, and you need to act quickly.

It’s great if you can dive into the numbers, break them down, analyze them, and understand the infamous “why”. It can be anything: wrong process alignment, lack of marketing campaigns, new competitive product, bad support. You can save yourself a lot of time if you’re prepared.

Imagine it happened right now. It’s a great mental exercise. How would you start to analyze the failure? I bet you would first like to know what was responsible for that constant growth during the last two quarters–and that’s the point.

When your numbers are on 50% of what you expect them to be, it’s a great time to do a retrospective, a post mortem analysis to understand what went wrong. However, you need to learn faster. Post mortem can also mean it’s too late because the company is already dead.

In a metric-driven business, acting is an integral and continuous part of the process. Why? Because that’s the driving, nothing else. All the previous steps are helping but without acting you’re not getting anywhere (and if somewhere, it’s definitely not where you want to be).

To be able to react to a failure, you need to know what drives your success. If your numbers move, it’s time to act. If your numbers stall, it’s time to act.

Define, explain, measure, share, and act. And measure, share, and act again. And again. Every day.

You don’t need to spend two weeks identifying your first KPI. Start small, grow fast, and hold your driving wheel.

No comments: