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Business Performance Management: 3 Keys to Enormous Value

Business Performance Management (BPM) is a concept that is not leveraged as it should be in many organizations.  There is a good write up about BPM in WikiPedia but I wanted to put down some thoughts to help evangelize and simplify the concept.  There are three key ingredients to BPM:

  1. Objective needing to measured
  2. Ability to dissect that objective into smaller components
  3. Drill Down Discovery
1. Objective

Within an enterprise there are activities, which have desired outcomes.  Possible activities could include outcomes like return on ad spend (ROAS) for a marketing campaign, employee performance, customer loyalty, etc.  Many of these activities can be measured.  They have a budget and/or an expected outcome that can be expressed in an objective metric.  For example, a retailer may spend $10,000 on a marketing campaign in hopes of generating $30,000 in sales or an ROAS of 3.  Or a call center may have an a goal for each representative of a 10 minute average handle to time to take care of customers’ issues.  Or a merchant may have an overall goal of 36% margin though the life cycle of the product from sales at full price through the markdown process to clear inventory.

Measuring these activities can range from simple such as margin calculations to highly complex such as measuring ROAS in an Omni-Channel retail world.  In my last article discussing Digital Banner Advertising, measurement of that strategy turned out to be very complicated since it is difficult to measure ROAS especially in relationship to other marketing and offline / online conversions.  Referring to marketing, there may many marketing touches that influence a conversion.  The ability to allocate the conversion dollars to marketing touches can be challenging (which is what the Marketing Performance Plugin for WordPress tackles).

However the first ingredient to BPM is a measurable business objective.

2. Dissection

The second ingredient is the ability to dissect an activity to finer grains.  In the example of a marketing campaign, there may be an email campaign, a product listing ad, and online display advertising that supports that campaign.  In the Marketing Performance Plugin for WordPress, we call these delivery events.

The ability to dissect spans more than just marketing.  In our call center example where the representative had a 10 minute handle time, we could perhaps dissect average handle time by call center location, time of day, or even down to the representative.

For the margin example, we could dissect by levels of the product hierarchy or selling season.  Let’s assume we did not meet the 36% margin goal for our entire product line, only seeing a 32% overall margin.  We have four major product lines: widgets, gidgets, doodads, and thing-a-ma-gigs which have dozens of SKUs each.  Dissection will allow us to drill down.  Perhaps widgets had a 45% margin, gidgets had a 36% margin, doodads saw a 33% margin, but thing-a-ma-gigs only saw a 20% margin.  We may want to take a look at the thing-a-ma-gig product line more deeply since it fell dramatically short of the 36% margin goal, perhaps there was an issue with stock, perhaps pricing was too high, or whatever.

3. Drill Down Discovery

The key ingredient that brings all this together is the ability to have a graphical interface to quickly drill down into the details.  The interface must be intuitive, quick, and comprehensive.  Most businesses have objectives and dissection.  The graphical discovery is the most common missing link.  It takes staff hours of research to compile data that should be presented in a straight-forward manner through a drillable dashboard.

Simplistically, let’s say we have a dashboard that contains key corporate metrics like sales, cost of goods sold, margin, inventory position, perhaps with breakouts by divisions, locations, etc.  This type of at-a-glance dashboard can be very busy so it’s good to have visual clues where problems might exist.  The dashboard should allow the user to click-through each item to discover greater detail about that metric.  In the case of margin, the manager should see that performance did not meet the goals through some type of symbol like a red circle.

Clicking on that metric should drill into the product lines. In two steps, we have discovered that our issue in in the thing-a-ma-jig product line. As simple as it seems, in this age of too much data (rather than too little), the most common mistake is attempting to tell too many stories with one view of reporting. The fact is that Pareto still rules, and 20% of your metrics and data will have 80% of the actionable insight. This also means that 80% of your data and metrics should be reserved for deeper drilldown, or should not even be displayed. Yes, that is right, some insightful, valid, well-constructed metrics should just simply be left out, if they don’t truly serve the objective or lead to a bunny trail.

Of course this example is extremely simplistic – businesses are much more complex with many metrics and many layers of drill down.  Also, the diverse data sources and calculations to bring this all together in a single presentation can be daunting.  Further, this is guiding the direction of where to look but doesn’t tell why something happened.  That ‘why’ answer could lead to more metrics and drill downs.  But this example simply explains the concept.  How this applies to your business varies but the concept when implemented can provide a valuable tool to those that are trying to keep track of the health of the business and where challenges exist.

So in conclusion, we’ve touched on one of the 7 steps to Trust Reporting™:

KPI simply reports the status of a measurable business objective, and requires drill down for additional details and dissection.

One More Note on Insightful Dissection

Finally, there is an art to dissection. Your first instinct on how to dissect, is not the only way and may not be the most informative. Often one of the key moments in generating really powerful insights is when someone suggests a new way to dissect an objective. Imagine your margin was in the 20-40% range for all products, but when you slice by team or manager, they range from 5% to 50%! That would be profoundly insightful data!

Furthermore, the art of dissection requires careful thinking about the whole system. You have to understand the business deeply to brainstorm the additional ways to dissect, to catch ways of dissecting that may be invalid or produce skewed results, and to understand potential special cases that make your results swing widely.

If you’re tired of ad hoc reports or KPI conflict and confusion, or not getting the truly insightful analysis you need to thrive, contact us about establishing Trust Reporting™ at your organization.

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