Do your KPIs Reflect Business Insights?

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 were 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 KPIs are often defined as static metrics for an enterprise and can easily become outdated.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 challlenge with KPIs is that there are too many of them. Modern technology has gven 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 KPI’s are most relevant to success? An often overlloked 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 aproach is a good way of weeding out items which are not relevant to what we want as a business and avoid adverse surprises. At a more deeper level, building a robust Business Analytics solution requires answers to questions such as:

1. What events have the greatest impact on the busiens and how are they measured?

2. How often do you validate that you are measuring the right parameters ?

3. What instrumentation do you need to create the right dashbords for your KPI’s ? Can this instrumentation be updatd as teh KPIs change?

4. What is the process for collecting, synthesizing, manipulating and presenting the data to represent thsese metrics? How does the process change when if the metric change?

5. 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 inegration between the business owners and IT acrchitects. A recent study by Gartner says that ”IT collaboration initiatives fail because IT leaders hold mistaken assumptions about basic issues…..rather 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 from both business and IT and shared objectives. The CoE defines the blueprint for implementing BI, Performance Management and Analytics aligend 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 busienss data is much more complicated than it has ever been in modern busienss 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. Furthernore, understanding technologies such as Big Data for unstrcutured data analysis requires business leaders and IT eimplementors to work together.

The CoE is the ideal structire to implement a Business Perspective Solution.  A well implemented Business Perspective Solution takes into account the key objectives of the busienss, 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.

 Further Reading

1. Six Web Metrics / Key Performance Indicators To Die For by Avinash Kaushik, Occam’s Razor

2. Practical BI – What CEOs want from BI and Analytics by Ravi Kalakota, Business Analytics 3.0

3. The Stupidity of KPIs in Business Analytics by Mark Smith, Ventana Reasearch

Harry Potter, The Elephant, The FBI and The Data Warehouse

In the ancient Indian parable of the elephant, six blind men touch an elephant and report  six very different views of the same animal. Compare this scenario to a data warehouse that is getting data from six different sources. “Harry Potter and the Sorcerer’s Stone” as a field in a database can be written as “HP and the Sorcerer’s Stone” or as “Harry Potter I” or simply – “Sorcerer’s Stone”.  In the data warehouse these are four separate movie titles.  For a Harry Potter fan, they are the same movie.  Now increase the number of movies to cover the entire Harry Potter series and further include fifty  languages.  You now have a set of titles which may perplex even a real Harry Potter aficionado.

What does this have to do with data analytics?

Traditional BI – 57 Channels (and nothin’ on)

“Dissatisfaction is the basis of progress. When we become satisfied, we become obsolete.”   J. Willard Marriott

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We talk to customers often about their dissatisfaction with things as they are and hear the same pattern of complaints.  Despite increasing adoption of BI and data analytics tools, the current sets of tools are inadequate to meet the needs of users.

The market of BI is enormous.  According the recent Census 2010, there are over 20,000 large and medium-sized enterprises (organizations with over 500 employees) and ~ 7 million small businesses (organizations with ten to 500 employees) in the United States alone.  Now include Europe and Asia and you can see the potential.

However, most organizations face the following limitations:

Data Visualization- The Medium is the Message

Marshall McLuhan‘s enigmatic phrase – medium is the message-  from the sixties gives him credit for predicting the World Wide Web 30 years ago.  He could have just as well have been talking about Data Visualization for Business Analytics. While information management technology has grown at a blistering pace, the human ability to process and comprehend numerical data has not.

Visualization opens up the channel of communication between the technologists who create the data and the business people who act upon it.  Data visualization tools, such as mashups, executive dashboards, KPI and performance scorecards and other data visualization technology, are becoming more popular and necessary to deal with mind numbing charts and exponential data growth.

However, the C-Suite has heard about the promise of dashboards and interactive scorecard for a few decades now and is typically dissatisfied with what they get from IT and the speed at which they get it. The big difference is that visualization technologies have finally advanced to a level where they can give actionable intelligence to the right people at the right time at the right place.

Lets take for instance an a mobile BI solution using a tool such as an Apple iPad. This gives the business executive the ability to manipulate the data with the ease of reading an e-book.  The visualization library that you can draw upon to create an interactive experience on the iPad includes:

There are three critical business requirements addressed by such a solution. These are: