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Understanding your leading
indicators for better results
MEASURE
WHAT MATTERS
According to a recent Gartner
survey 80 percent of companies only
measure results. In other words,
they measure past performance by
looking at the results in the financial
statements. But they dont know
what impacted these results, or what
is best done to improve them going
forward.
Does your company analyses or reports allow
you to ask why did this happen? and which
area of my business needs most attention, if I
want to improve profit? If yes, congratulations
on being a modern, data-driven business! If not,
keep reading, and well give you a few hints
on how to reach that end-state.
According to Gartner,
executives still report a
huge gap between the
information they need and
the information they get.
The data they get describes what happened. But it doesnt predict
what will happen. And it doesnt prescribe which actions to take.
In most cases, data is already being registered and logged through
decentralized transactional systems such as the ERP solution or the
CRM, marketing, or warehousing solutions. Information is managed
by each functional area, but it may be siloed and not accessible for
executives to understand right away. And it may not allow for analysis
across the diverse transactional solutions within the company. This
requires a dedicated setup that is built for analytics.
But how do you differentiate which data is most valuable for
you to use?
They get the results -- and the data that looks into the past without
allowing them to understand what in their internal processes and
external environment they need to focus on -- to improve for the future.
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For all of the good that data can do for businesses, theres one
major issue that it presents: information overload. Many companies
try to focus on too many different metrics without focusing on those
that truly matter.
They have an ocean of data inside the company from every
transactional system thats supporting the business processes. In
our experience, marketing departments typically have three to five
different systems and manufacturing departments have even more.
As the big data tsunami overflowed the media and blogs over the
past years, many companies try to grasp what to do with all that
external data that is becoming available. Some companies have
started to collect external data, but are not yet properly utilizing it.
According to Gartner, the confusion around big data is so apparent
145
Dep
artu
res
99
Dela
yed
Think of the data that makes up your Business Intelligence as being made
the effect
data that
makes
up your
Business
as beingand
up ofThink
causeofand
factors.
Those
two factors
areIntelligence
lagging indicators
made
up
of
cause
and
effect
factors.
Those
two
factors
are
Lagging
leading indicators. The difference between them isnt complicated,
but it is
Indicators and Leading Indicators. The differences between them are:
critical.
Lagging
Indicators
= Effect
Lagging
Indicators
= Effect
These are also historic, but look at internal processes and external
events
occurbut
prior
examples
of what events
they
These are
also that
historic,
looktoatrevenue.
internal Some
processes
and external
areprior
include
the number
of qualified
leads,
market,
that occur
to revenue.
Some
examplessales
of what
theytime
areto
include
conversion
ratios,
employee
satisfaction,
etc.
These
are
the
the number of qualified sales leads, time to market, conversion ratios,
indicators
you should
worryare
about
if you wantyou
to improve
results.
employee
satisfaction,
etc. These
the indicators
should focus
on if
you want to improve results.
Financial, historic
data
Results/Objectives
Lagging indicators
Consumer
index
Google
trends
Google ranking
Visitors
Conversion
ratio
Qualified leads
per sales reps
Revenue
Costs of goods
sold
Currency
fluctuation
Inflation
Discounts
Promotions
Price changes
Contribution
margin
Taxes
Supplier
compliance
Commodity
prices
Overhead
Procurement
Fill rate
Costs
Customer
satisfaction
Competitor
prices
Market growth
Employee
retention
Sales person
productivity
Basket size
Profit
Data sources:
ERP
Once youve prepared the string of events that will most likely impact your final goals, youll have
a great starting point for identifying which data sources to include in your Business Intelligence
solution. Map the indicators to the data sources where they belong. Those are the data and data
sources you should worry about connecting in an analytical environment. Measure what matters.
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Data sources:
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Data sources:
Results/Objectives
Lagging indicators
Dashboards >
Analytics >
Reports >
Storyboards >
Emails >
Alerts >
Mobility/Web/desktop >
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