How Metrics Can Predict the Future
Unlike other traditional measurement approaches, we’ve focus metrics on 4 unusual principles:
1. Scrutinize only on problems (don’t waste time measuring what you are good at)
2. Have at most 4 metrics (most metrics systems fail because they try to do too much)
3. Use light weight governance (15-minute stand up meeting check-ins every two weeks)
4. Engage working level cross-functional team to get to causal actions (measure ‘close to the ground’)
What Are the Benefits? Predictive metrics provide early notification of possible problems on many levels. Working with a small startup in the Pacific Northwest, we have applied specific metrics to predict future business outcomes. Through this process the business team found they can predict the following more accurately:
Predicted Sales: Marketing effectiveness through measuring number of face to face marketing interactions versus the discrete marketing plan, which will predict potential engagement because the cross functional design team knows without personal and direct exposure to the sales channel, they will not get mindshare (emails are easy to delete)
Predicted Customer Satisfaction: Projected capacity planned versus projected capacity utilized, updated bi-weekly will predict customer satisfaction because the scaling of the cloud was deemed to be the biggest single risk by the operations team, and measuring customer satisfaction after the fact is just too late
Predicted Market Share: Projected usage patterns versus actual usage patterns for cloud services was chosen as the best predictor by the sales & marketing team. The biggest risk in this new software product is will the product be used frequently by the targeted functions. This advanced metric can be measured much sooner and action taken much faster than looking at renew rates or post sales surveys.
What business problem is solved? Companies can anticipate and predict sales, and capacity requirements by monitoring causal actions – and taking action before it is a crisis – avoiding so called ‘Heroic Action’. This avoids costly and exhausting efforts to fix things when it is too late. Also, this is done without any support from Information Technology – it is desktop driven. It is light weight to implement, light weight to use.
What are the challenges? Employees don’t like to be measured and held accountable. They prefer “fuzzy” deadlines and more “vagueness” in determining exact targets with hard-fast deadlines and performance management implications. Human nature tends to put problems and blame elsewhere in the process. Because a cross-functional team will be engaged, it takes time and effort to get buy-in on all the causal actions. However, once causal actions are identified, any problem can be solved.
Wouldn’t you rather know about a revenue problem early in the quarter instead of fixing it late in the game?