The Metrics

that Matter
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.

WHY BUSINESS ANALYTICS IS STILL A TOP PRIORITY

According to Gartner,
executives still report a
huge gap between the
information they need and
the information they get.

Business Intelligence is high on the agendas of modern executives.

At the 2014 Gartner Business Intelligence & Analytics Summit, Gartner
Analyst Michael Smith reported that a survey of CEOs and Senior
Business Executives in North America had shown that their two top
technology investment focus areas were:
Business Analytics (71%)
Enhanced Business Reporting (56%)
There can be a number of different factors that are driving executives
to make the investments in Business Intelligence, but one main reason
stands out. According to Smith, 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.
3

DATA, DATA, EVERYWHERE! BUT WHAT DATA TO USE?

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

that they indicate companies will delay spending on analytics

and Business Intelligence in general until they figure out how to
handle data better. Actually, most of big data investments made to
date have been big data services, such as consultancy projects
to clarify what they should be examining. And only 8 percent of
respondents in a recent Gartner survey of CIOs say they have
deployed big data investments.
But big data -- or any data for that matter -- doesnt have to be a
daunting task if you start from within.

The big data confusion delays analytics spending.

This is a costly mistake.

LAGGING AND LEADING

INDICATORS
- THE
LAGGING AND
LEADING
DIFFERENCE
BETWEEN
INDICATORS
THE DIFFERENCE
LOOKING
BACK
AND LOOKING
BETWEEN
LOOKING
BACK
AHEAD
AND LOOKING AHEAD

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 made up of accounting and historic measures.

In other
these are the
you build
based
These are
madewords,
up of accounting
andfinancial
historic ratios
measures.
In other
words,
on
the
income
statement.
these are the financial ratios you build based on the income statement.
Leading
Indicators
= Cause
Leading
Indicators
= Cause

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.

Why the big difference?

According to Smith, 80 percent of current Business
Intelligence content is made up of lagging indicators.
However, all of that current Business Intelligence
content should actually be made up of leading
indicators. Why the big difference? One word: value.
Lagging indicators are valuable if you only want to
look at current conditions, but its important to look at
future projections in order to better guide a company
toward greater success. Leading indicators give a
company the ability to look into the crystal ball and
take proactive instead of reactive action, which can
save both time and money.

DETERMINE YOUR END GOAL

As with anything else in life, the way to successfully
move forward, even with developing KPIs and
identifying leading indicators, is to first determine your
end goal.
That can be anything from increasing revenue to reducing costs. Next,
consider what in your internal and external environment can truly impact
whether you are capable of reaching those objectives.
Internal
Has to do with the internal processes of the business (product design,
corporate vision, etc.). You most likely own this information inside your
company solutions already. Otherwise, it is time you start tracking and
registering.
External
Has to do with economic factors outside of the company that still
have an effect (the needs of customers, competitor actions, etc.).
The data needed to understand the external indicators is whats
traditionally referred to as big data or external data sources.
Dont worry too much about whether its big or small data;
worry about what impacts your company.

80 PERCENT OF BUSINESSES ONLY MEASURE

RESULTS, BUT THOSE WHO UNDERSTAND THEIR LEADING
INDICATORS HAVE BETTER RESULTS
Look at the table below and think of each row as a connected string
of events that each impact the final goal.
What in your external environment impacts the results?
Non financial metrics.

What in your internal environment impacts the results?

Non financial metrics.

External leading indicators

Internal leading indicators

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: Big Data, Social media,

Public data

Data sources: CRM, Google Analytics, Marketing

Automation, CMS, HR, Warehouse, Manufacturing, excel

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.

WHAT CAN LEADING

INDICATORS DO
FOR THE BOTTOM LINE?
The old adage you have to spend money to make money couldnt
be truer when it comes to investing in Business Intelligence and
analytics. When you have the right information and understand what
truly impacts success and failure in your business, the investment
brings dividends quickly and abundantly.
Leading indicators are truly valuable for
businesses of any size because they:
Define whats critical for businesses.
Direct where investment is needed.
Direct where focus is needed.
Act as a big data filter - only worry about what matters.
Point you to company-specific data
sources that are relevant.
Business Intelligence and analytics is what one insurance
company uses for comprehensive competitive analysis. This lets
them analyse big data outside their company and discover trends
daily so they can adjust their prices for optimal competitiveness
and profit.
Its also what a clothing retail company uses to closely monitor
whats hot and whats not in stores throughout Europe. The
precise control of inventory, turnover, and production has
delivered improvements to the companys bottom line by an
estimated 30 percent.

HOW DO YOU MOVE FORWARD?

TWO WORDS: ACTION PLAN
Having the information that you need is great, but thats not
the end of the process. That information needs to be used to
move forward and create an action plan. We recommend six
steps for developing that plan.
1. Identify your ultimate business goals. This
exercise will help you understand your lagging
indicators and provide you with a starting point.
2. Brainstorm the internal and external factors that
could possibly affect your goals. Allow yourself to
put everything on paper without limitation.
3. Prioritize indicators based on your existing
knowledge and data.
4. Group your indicators according to similarities or
the business processes that they support.
5. Find the right Business Intelligence solution and
strategy that empowers you to analyze all your
data, measure your objectives, and achieve your
goals. (Remember: 80 percent leading indicators
and only 20 percent lagging indicators.)
6. Embrace self-service analytics so everyone in
the organization is able to strategically plan
and track leading indicators to achieve
their specific role/department objectives, tied
directly to the companys goals.

THINKING BIG AND

ACTING SMALL
You might be looking at all of this information and
thinking that this is a daunting task, but it shouldnt
be. Start by thinking big and acting small.
Becoming an intelligent business isnt about
building thousands of reports, but rather finding
whats important to you and your business. We
like to look at a company through a maturity model
we call the TARGIT Journey. This is where we
guide you from initially streamlining your data
to turning it into easy-to-use, visually engaging
analyses that can then be used by everyone from
the CEO to a salesperson, and even by external
business partners and customers.

10

We want you to be comfortable with

your data while getting as much
actionable information as you can
from it along the way.
Our best advice is to start with the internal
data, and work your way to the external data
sources as you get to know the ins-and-outs
of your own business.

THE NEXT STEP

Ready to take the next step towards growing
your business into a more efficient and
profitable organization? Take time to visit
www.TARGIT.com for information about how
our Decision Suite software can tame your
data and enable you to fully understand your
leading indicators. Its one of the best business
moves you can make.

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BRAINSTORM, PRIORITIZE, GROUP

Print out and use this space to map out your leading indicators
and business goals. Its time to take action.
What in your external environment impacts the results?
Non financial metrics.

External leading indicators

Data sources:

12

What in your internal environment impacts the results?

Non financial metrics.

Internal leading indicators

Data sources:

Financial, historic data

Results/Objectives
Lagging indicators

Data sources: ERP

TARGIT IS BUSINESS INTELLIGENCE AND ANALYTICS

SOFTWARE MADE FOR ACTION
Gather Your (any) Data

Learn From Your Data

SQL, ERP, CRM

Review your KPIs against your goals.

Excel, External stats

Google Analytics, Social media

Dashboards >

Analytics >

Understand what happened,

why it happened, and whats coming next.

Reports >

Share Your Data

Storyboards >

Motivate employees by showing

progress on display TVs.

Emails >

Improved collaboration with one-click

distribution of analyses via emails.

Alerts >

Get a heads-up when metrics deviate and

action need to be taken. Anywhere.

Intelligent Wizard >

Tell the system what you want. The BI Wizard

tells you what you want to know and
remembers your preferences.

Batch report scheduling >

Build reports in less than one minute with

one-click-to-analysis integration.

Customize where your reports go and

distribute them automatically.

In-Memory Analytics >

Mobility/Web/desktop >

Analyze the crucial data that doesnt

live in your data warehouse.

Act On Your Data

Access your data when and

where you need it.

13

ONE SOLUTION TO COVER ALL ANALYTICS

AND REPORTING NEEDS
TARGIT is designed for your entire
organization, from the CEO who follows the
key metrics, to financial workers who need
accurate reports, to sales managers who
need performance analytics and customer
insights, to marketing who cares about the
cost of leads, to IT who wants data security
and smoothly integrated data processes.
TARGIT has everybody covered.
In fact, TARGIT is the most widely deployed
solution in the market, and customers rate
TARGIT higher in usability than any other
solution.

Thats why TARGIT is designed to get you

from dashboards and reports to analyses
with only one click.
Add to that the integration tools that
prepare your data for analysis in less than
a day and the intelligence that lets you
use natural language to ask for the report
or analysis you want. TARGIT takes you
from observation to action faster than any
other tool on the market.
TARGIT gives you the courage to act.

We believe that data should be connected

and available to decision makers when and
where they need it. There is always one
more question to ask of the data you see,
and if the answer is not immediately available
you run the risk of having to act on intuition.

www.targit.com