Business Perspective Lessons from the One-eyed Stag
Obsolete KPIs can be Lethal
In the Aesopian fable of the one-eyed stag, a deer overcomes his visual handicap by grazing on a cliff near the sea with his good eye facing the land. Since all his known dangers are on land, this keeps him safe from predators for a very long time – until he is killed by a hunter in a boat.
The relevance of our KPIs can make or break our business. KPIs are often defined as static metrics for an enterprise and can easily become outdated. Economic uncertainty and competitive pressures are prompting questions on the validity of KPIs and performance management processes. To stay competitive requires a process of continually validating metrics with the business environment.
Another common challenge with KPIs is that there are too many of them. Modern technology has given us the ability to measure a very large number of parameters in the business. Some of these are more relevant than others. Jack Welch is known to have said, “Too often we measure everything and understand nothing.” Monitoring some metrics and ignoring others are decisions we make based on our business perspective.
Relevance Enabled by Process
How do you decide on which KPIs are most relevant to success? An often overlooked first step is to understand that primary business goals before looking at the technology solution. Avinash Kaushik defines KPIs simply as “measures that help you understand how you are doing against your objectives.” This fundamental approach is a good way of weeding out items which are not relevant to what we want as a business and avoiding adverse surprises. At a more deeper level, building a robust Business Analytics solution requires answers to questions such as
- What events have the greatest impact on the business, and how are they measured?
- How often do you validate that you are measuring the right parameters?
- What instrumentation do you need to create the right dashboards for your KPIs? Can this instrumentation be updated as the KPIs change?
- What is the process for collecting, synthesizing, manipulating, and presenting the data to represent these metrics? How does the process change when/if the metric changes?
- What technologies and architecture are necessary to support those decision-making patterns? Is there need for a “single source of truth” or a federated model possible?
Centers of Excellence
Needless to say, this approach requires a tight integration between the business owners and IT architects. A recent study by Gartner says that “IT collaboration initiatives fail because IT leaders hold mistaken assumptions about basic issues…..[R]ather than making technology the starting point, IT leaders should first identify real business problems and key performance indicators (KPIs) that link to business goals.”
Many business executives believe that IT is unable to deliver results where it counts. At the same time, IT organizations spend an incredible amount of time, money, and resources simply reporting obvious data within their business process and workflows.
An organizational solution to this problem is the creation of a Competency Center or Center of Excellence (CoE) with representation from both business and IT and their shared objectives. The CoE defines the blueprint for implementing BI, Performance Management, and Analytics aligned with KPIs. Some of the obvious benefits include
- Cost savings from eliminating Silos
- Better collaboration between Business and IT
- Joint ownership of corporate objectives
There are other aspects of the CoE which make it a practical approach to creating an effective vehicle for deploying analytics solutions. The sheer volume and texture of business data is much more complicated than it has ever been in modern business history. The world’s data doubles every two years, creating more opportunities for analyses. Understanding this data even at an aggregate level requires a business perspective combined with technological expertise. Furthermore, understanding technologies such as Big Data for unstructured data analysis requires business leaders and IT implementers to work together.
The CoE is the ideal structure to implement a Business Perspective Solution. A well implemented Business Perspective Solution takes into account the key objectives of the business, leverages sophisticated analytics technologies, and focuses on sustainable processes to support decision-making in an organization.
Superior decisions based on business perspective separate winners from losers.
Are your KPIs in sync with your business perspectives? Please share your comments below.
- Six Web Metrics / Key Performance Indicators To Die For by Avinash Kaushik, Occam’s Razor
- Practical BI – What CEOs want from BI and Analytics by Ravi Kalakota, Business Analytics 3.0
- The Stupidity of KPIs in Business Analytics by Mark Smith, Ventana Reasearch
By Shirish Netke, Carpe Datum Rx
This blog post was originally published on www.CarpeDatumRx.com.