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.

The best dashboard ever

There's hunger for dashboards outside. You can buy books about creating dashboards, you can hire consultants to create dashboards, you can spend a lot of time and a lot of money hunting your dashboard dream. The truth is, the best dashboard is very simple.

The only dashboard that anyone would ever need has three pieces.

At the top, there's a line chart, and the line goes always up. There's no explanation of axis or whatever (you can guess time is running to the right and money is running to the top but who knows and who cares). The only goal of the chart is to make you happy. The line's going up, hurray!

Then there are traffic lights on the left. The light tells you how you're doing. Is it green? Perfect. Is it yellow? Do something. Is it red? It's too late to do anything (however the line's going up, so you have enough time to pack your box and quit the job in a decent way).

Finally, there a text box telling you what to do. If the light is green, it's telling you what to do to keep it green. If the light is yellow, it's telling you what to do to make it green again. (If the light is red, don't waste your time reading the text box, just go, go!)

Now there's more than a joke in this dashboard. A friend of mine who's running a very small business has recently told me that BI tools are useless for her. "I don't need to slice and dice my sales, I don't need to measure how good my campaigns are," she has complained. "I just need to know what to do next."

Her point was clear: It's good to know your sales are decreasing for the last 6 months. And it's better to know that it's all because 85% of your existing customers in South Africa have declined your renewal package. Maybe you knew it without BI, maybe not. However even if it's a new fact for you, it's not telling you how to deal with it, how to fix it.

Davenport, Harris, and Morison are describing it in their recent book Analytics At Work as a shift from information to insight. Fully automated BI tools can help you with information: what happened, what is happening now, and what will happen.

To understand how and why did it happen, what's the next best action, and what's the best/worst that can happen, you need something more. You need people who can make the shift: understand information, and get insight out of it.

These people will create the dashboard discussed above, and it will be the best dashboard ever.

Register for Good Data beta version!

Last weeks were hectic. You have probably noticed that Good Data secured the initial funding totaling $2 million (read more about it at BusinessWire). We have also released so-called private beta version of our business intelligence tool. The feedback was pretty good, so we have switched to the public beta today - anybody can request an invitation at our registration page. You should receive your invitation within several days, or several hours, if you're lucky.

What can you expect from our beta? We have prepared a warehouse you could be familiar with (it was used in our first video) - Foodz.com is a fictitious retailer (check out the schema). We have prepared sample reports and you can try how easy it is to create one yourself. (Read more about our beta.)

Release early, release often

We want to release often. I'm very happy that our users can cooperate with us on Good Data improvements at our GetSatisfaction forums. Please share your ideas, report problems, or just write us what's your feeling about Good Data.

Good Data team is developing according to the Scrum model, and we started another sprint yesterday, so new features are implemented almost every day.

On a personal note, I like musicals. Julie Andrews sings the following lyrics in The Sound of Music:

Let them bring on all their problems
I'll do better than my best
I have confidence they'll put me to the test
But I'll make them see I have confidence in me

I can tell you we'll definitely do better than our best.

New twist on data analysis

BI failures tend to be at least as spectacular as the successes. Some companies spent the GNP of several small countries a few years back producing "decision support" systems and data warehouses that never matched up with rapidly changing user requirements.

Things have changed. A multitude of products and tools to build BI applications are available today, and their cost is plunging. The whole BI and online analytical processing market changed irrevocably.

BI is one of the fastest growing segments of the software business. The fact that BI vendors are flourishig, despite the distractions and budget drains caused by Y2K preparations -

Stop! Y2K? Well I have something to admit. The previous paragraphs were cited from the Enterprise Development magazine, September 1999.

A lot of interesting stuff is written there: Newest releases appeal to a diverse user base and feature an adaptable architecture for deploying BI solutions. Decision support for the masses, finally. OLAP goes on the Web. Put the spreadsheet out to pasture.

Wayne Eckerson, director of research and services with TDWI, noted that for the past 10 years BI has targeted the technological-savvy employee—the super-user. He pointed to TDWI data showing that a mere 24 percent of users actually access BI tools. "It’s a huge problem [underscoring] why BI is not invasive," Eckerson told the crowd.
However, a common theme projected throughout Information Builders keynotes and sessions is the idea that BI is no longer just a back-office tool.

Lauren McKay: Business Intelligence Comes Out of the Back Office

These words were written today, and you can find the same thoughts in the 9-years-old magazine. The magazine does not exist anymore, Y2K is over, and the BI issues, mmm still the same "new twist", n'est-ce pas?

Don't improve things you're not asked to

Image by 96dpi via FlickrRecently I worked as a BI consultant for a big bank. I was responsible for their metadata warehouse solution.

We would like to integrate our data dictionary with your solution, they told me.

Data dictionary? I asked and they explained.

Oh I see, I replied, you're talking about business nomenclature. And I explained what business nomenclature means in terms of metadata warehouse, the CWM standard etc.

Then there was a presentation where I explained everything once more. I believed my presentation was quite good but I missed a point. I was strict in using "business nomenclature" because hey, I was right, wasn't I?

I understand you but where is our data dictionary? That was the first question.

So don't try to narrow paths that are given. Especially when you're not asked to do it.

Mark Madsen writes about the same issue although his issue is the ideology of bad non-centralized Excel data in BI:

We're facing the incomplete data problem because of another piece of BI ideology: all the data must be centrally managed. This is unrealistic. We can't possibly house every last bit of data. Because of this reality, BI tools like Business Objects added the ability to bring outside data into reports. Other vendors moved the BI processing to the PC.

Our ideology has failed us by setting up a paradox. If we do use these features or tools, then we contribute to our biggest complaint about Excel — manipulation of data outside the centrally integrated view. If we don’t use them then users will continue to circumvent BI tools.

Mark Madsen: Spreadmarts and the Ideology of BI

Mark is right, people use and will use Excel. Don't try to convince them they're wrong because they are not. Just take it as a fact and build on it. Put the twisting path to use.