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Gail La Grouw is an international corporate performance consultant, based in Auckland, NZ.

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By LogicEvangelist | December 3, 2009

Continuing on from the previous blog ‘Simplifying Business Measurement‘

Each business function has a core set of decisions that define it, and its connections with the decision-making processes of other functional areas. For each decision area there are:

These result areas are measured by metrics.

Metrics and Measure

The terms Metric and Measure are often used interchangeably. To measure performance we need to understand:

1.    What to measure – attribute
2.    How to define its performance – measure
3.    The degree which the element being measured possesses the attribute – metric
4.    A context, useful for comparison – dimension

For example:

Sales performance is commonly defined in terms of dimensions, for example ‘Sales x Week’, where the measure is ‘the number of sales’ using the dimension of time, in this instance one week.

Thus, metrics define the parameters in which performance is measured. They may be directly measured, or calculated using a combination of measures. For instance, if a sales goal is to be defined in terms of net sales, the metrics used to define performance include gross profit, fixed costs, variable costs, tax and interest. From these direct metrics, the Net Profit metric is calculated.

Metrics also help define performance that is not always directly measurable, often being subjective and intangible. A metric may be also composed from two or more measures, generally providing more meaning to the information.

Dimensions

Dimensions act like a context filter by defining performance to goals in terms of time, product, sales channel, territory, customer type, market segment, promotion etc.

Indicators

An Indicator is a metric or set of metrics that provide insight into a process or product. This is often a ratio of two measures across a dimension such as Year on Year sales.

Key Performance Indicators [KPI] are indicators that have strategic importance. They indicate performance that directly contributes to achieving high level corporate objectives. It is important to understand the difference between a KPI and Metric. A KPI is a Metric but a

Metric is not necessarily a KPI.

A KPI:

This extract was taken from ‘SELL MORE – AND HAVE YOUR CUSTOMERS LOVE YOU FOR IT‘

Topics: Measurement | No Comments »

Simplifying Business Measurement

By LogicEvangelist | November 30, 2009

When we attempt to measure the performance of a business we need to understand two things:

  1. How the business is defined – the terms we use for various items and attributes
  2. The measurement system to be used –

Business Terminology and Definitions

A business is defined in terms of functional systems – for example, Finance, Manufacturing Ops, Purchasing, Logistics, Marketing, Sales. Each of these systems is a series of processes. Some of these processes are contained within the functional area, and others connect with other functional areas.

Each process is defined by a series of Tasks or Activities. Each Task creates, consumes or destroys data.

Since the same item of data may be used by various functional systems, we must understand how making a change in that data impacts another system or task. We can only do so if the data is connected by definition in some way.

The easiest way to do this is to define or ‘name’ that data item the same for every part of the business. For instance ‘Income’ or ‘Revenue’. If both terms are used by different parts of the business, there is the risk that slightly different definitions are afforded to the terms. This can lead to miscommunication between business groups, and misleading assumptions read into reports.

In technology systems, if these data items are both used, the data management system must map them together in a mapping table to ensure that disparate systems know how each data set relates to another.

So you see, by having common business terminology and definitions across the whole business not only makes it easier for human communication, it also makes it easier for technical communication.

See Next Blog: The Measurement System

Topics: CPM | 1 Comment »

Review of New Media Analytics for the Obama Presidential Campaign

By LogicEvangelist | November 6, 2009

I finally had a chance on my weeks holiday to catch up with some reading and review and wanted to share this gem with you.

This video shares the experiences with Dan Siroker, previously of Google, then head of the New Media Analytics team for the Obama Campaign. Dan describes how the campaign used data to win the presidential election and shares the lessons his team learned along the way. One can apply these lessons to any data-driven decision one needs to make — whether it be in developing, designing, or even marketing.

 

Evidence, facts, science and feedback and how it was used interactively in the Obama campaign. Learn the top 5 lessons that should define the methodology of any new media campaign.

The five key lessons were:

  1. Define quantifiable success metrics
  2. Focus on your weakest links
  3. Never over-generalize
  4. Take advantage of circumstances
  5. Question assumptions

Topics: Campaign Management, Marketing | No Comments »

The Serious Business of People

By LogicEvangelist | October 19, 2009

It is always mindful to remember that we must balance the powerful outputs of business intelligence technology, with the collective wisdom inherent in those minds which convert BI insight into decisions.

The machine we use for thinking, our brain, networks with other brains in a kind of collective consciousness – where often what we say is not always perceived by others in terms of what we meant. So how does one judge the minds of others. Men have beeen struggling with this for years, as they seek to understand just an inkling of how to interpret the brains of women! In business, where decisions are often made in collaborative enviornments, understanding these various in thinking communication is serious stuff.

This interesting video provides insight into how a special brain region for thinking, right temporal parietal junction [RTPJ], controls how we judge other peoples thoughts. So just what can one do to enhance collaboration – should everyone be wired to a TMS machine during decision making to make sure we get the decision we want?. I will leave that judgement to you – just remember check the sugar!

Topics: The Logical Organization | No Comments »

Cloud & BI – Together Driving Intelligent Leadership

By LogicEvangelist | September 21, 2009

In a world that is complex, globally interdependent and massively interconnected, business strategies are becoming increasingly accepted as having a shorter time focuses and being adaptable within that period. Thus, strategic decisions must be based on real time evidence-based insight and collaborative expertise.

Traditional command and control leadership models are outdated, and are evolving towards a more collaborative and process-oriented culture. The same culture that is underpinning the evolution of the Cloud. BI tools provide the market transparency to identify ‘triggers’ and evidence-based decision making support needed to ensure more appropriate and timely decision making, and the Cloud is providing the rapid adaptability needed to deploy new tools needed for the rapid deployment of new strategies.

Businesses are continuously being forced to revisit three critical strategic questions:

  1. What business are we really in?
  2. What triggering signals should we be measuring?
  3. Do we have the business tools to plan investments and operational activities with the lowest possible risk and enable us to react quickly to the triggering signals?

And yet transformational system must also incorporate the vital elements of control – visibility, compliance and governance.

As businesses realize that importance of the information value chain to their needed agility, capturing the collective wisdom of their organizations and markets is a core business capability. Yet for many, their enterprise systems are not capable of supporting business intelligence systems.

The value of BI relies on intelligence being captured and automatically applied at key decision points. Operational BI is the key driver to optimizing business processes that enable the best possible response to customer needs, often before a customer is even aware of that need. In turn, that drives the productivity of the business.

Operational decisions today must be based on real-time insight, often the result of analysis of a complex set of events, any one of which is capable of altering an existing decision making model. Thus, decisions have become fluid, and are only ‘true’ for moments in time.

Before the latest advanced business intelligence tools, business leaders were reliant on information systems built on transactional data models. In many cases, due to the lesser speed and complexity of business, this provided adequate decision support. Not so today.

 Business today must have the ability to rapidly change processes and react to events without delay and with minimal resources. With the web driving vast change in the blink of an eye, change, adaptability and visibility are now key drivers to business success.

The typical suite of business applications – ERP (Enterprise Resource Planning), SCM (Supply Chain Management), CRM (Customer Relationship Management), HRM (Human Resources Management), PLM (Product Lifecycle Management), MRO (Maintenance,

Repair and Operations), MES (Manufacturing Execution Systems), have proven solid infrastructures to run global organizations, but are inadequate in design and processing capability to perform the real time analytics needed to support these business drivers. Nor, are the infrastructures that support them capable of supporting the needs of BI tools.

Thus, just as business drivers have changed, so too must IT drivers to support the business. One of the major constraints of implementing and deploying BI databases,  applications and tools has been the lack of capability to readily extract data from numerous disparate data sources, aggregate it and format it to support real time analytics.

Cloud computing changes that!. Whilst cloud doesn’t deal with the data issues, the virtualization inherent in cloud architectures makes a significant contribution. Accessing transactional records are a simple query, requiring little in the way of processing power. However, the large complex queries common to analytics requires bursts of processing power necessitating instant scalability.

New sets of metrics [Key Performance Indicators] must extend beyond the enterprise walls to capture social and market drivers not previously in existence, adding further complexity to the data streams that must support business decisions.

As business leaders make new kinds of strategic and operational decisions, CIO’s in turn are faced with the new challenges to change and adapt corporate technology at the same pace.

The disconnect between the agility needed by the business and the agility inherent in enterprise platforms has been a major constraint in business success and growth. Cloud computing provides that agility faster and easier than ever envisaged even a few years ago. This has elevated IT out of the basement and into the boardroom as a competitive differentiator that will determine which companies are the winners emerging from the current recession. The economic climate, coupled with this new technology capability offers a seldom seen environment for previously struggling companies to take leadership roles in their industries, leap-frogging over less agile incumbents.

One trailing constraint continues to cause me some concern, executives who still struggle with new technology, many using more than the basic functions of desktop applications. Coupled with the poor representation of CIO’s in board membership, and the problem is obvious. How can business leaders give directions to their CIO’s when they no longer fully comprehend the environment in which they are operating and the resources that will keep them competitive. We have moved beyond the era where cost reductions will significantly impact business competitiveness. Today it is about building deeper customer relationships to drive more revenue at higher profit margins. An entirely possible goal to meet – with the right technology. Without it, it just won’t happen, or at least it won’t happen fast enough to make a difference. CEO’s and COO’s are tasked with embarking on their own journey of discovery to move beyond the parameters of resource allocations, and into one that is driven by process and predictive insight. The Cloud will help to remove the complexity of technology and enable business leaders to think more in terms of strategic output than servers and desktop systems.

As the business and IT move closer together we can expect to see new terms such as process oriented clouds, intelligent clouds, functional clouds etc beginning to emerge as bundling of computing capability, application suites and data needs are created. This will emulate the industry vertical bundling of software packages to provide complete plug and play solutions, but in the cloud it will be play and pay.

I for one, who has worked alone in the trench between IT and the business for many years am looking forward to the new B-IT collaborative model – where sales, distribution, innovation, financial, logistics, talent and manufacturing processes will be based on infrastructure which exists in a virtual context. Where applications and data will connect to others through heterogeneous structured and non-structured environments.

Cloud provides an ideal point of connection between both individuals and processes that require rapid online connections to other processes without invasive techniques. It is a place where business people can iteratively describe what issues they are tackling and speak a common language with their IT counterparts in a setting which can deliver the constant innovation, without having to wait for complex and slow development techniques.

The above is an excerpt from my upcoming book “Getting to Cloud – The Essential Guide to Decisions About Cloud Computing” – by Gail La Grouw

Topics: Cloud computing, Decision Making, Leadership | No Comments »

Aligning KPI, Business Rules and Decisions

By LogicEvangelist | September 15, 2009

Many businesses struggle with identifying their key performance indicators, from just performance indicators, and then reducing the number of KPI to those 3-4 that should be the primary focus at a particular time. They also fail to add one critical component to their KPI schedule that makes the difference as to whether performance to those KPI targets is met. Let’s start off with looking at how KPI should be selected and arranged in a logical hierarchy.

A KPI is a key measure that is linked directly to a strategic outcome. With a fast moving market, strategies can change significantly more often than just ten years ago. This means that KPI must also change and be monitored using a transparent performance management system. The key in selecting and filtering KPI are the decisions that the organization makes, and which of those decisions are most critical at any one time.

There are effectively three kinds of decisions made in any organization:

  1. Strategic decisions – these are the small group of ‘big’ decisions, made by the small executive group, that involve big investments, with significant outcomes. For instance, developing a new product line to attract a new market or acquiring a competitor.
  2. Tactical decisions – those decisions made by a larger, but still contained group of managers that determine exactly how the strategic decision will be put into play, in terms of approach and offering. For instance, a product manager making decisions around a pricing schedule and launch bonuses relating to the new product line.
  3. Operational decisions – the business decisions made by many people, on a daily basis, that have a smaller business impact when measured independently, but when aggregated with multiple operational decisions add up to a lot of value. For instance, a sales person may offer an additional discount to add leverage to a significant account to sign up to the new product.

Using the above example, the new product group, the executives will be making strategic decisions around meeting EBIT targets, the product manager will have KPI focused around profitability and portfolio contribution to EBIT, and the sales person will be tracking to sales targets related to account revenue and profit. If this discount was offered to his entire account portfolio, the impact on profitability and EBIT contribution could be significant, and could drive decreased performance to KPI up through operational and strategic levels. And this is where the critical missing component comes in.

KPI’s must have business rules attached. Business rules help to define how performance to a KPI must be implemented, and will in this case restrict the offering of additional discounts to drive revenue at the expense of profit. Implementing KPI without business rules definition is a common occurrence in businesses, and accounts for many instances of targets not being met. This is the reason that The Logical Organization focuses very much on decision making when defining its business intelligence strategy.

Topics: BI Strategy, Decision Making, Leadership, Management | No Comments »

Leadership Judgement vs. Rational Decision Making

By LogicEvangelist | August 27, 2009

Making judgement calls is an everyday activity for most leaders. But often, decisions are too complex to rely on gut feel or instinct. They require sufficient information to drive more logic based decisions.

We start making judgement decisions from the day we are born, taking in all the environmental, comfort and influence factors around us. We get comfortable with this style of decision making, and oftentimes overlook just what and who is influencing our decision making.
Every person has their own filters, biases and personal agendas – it’s human nature and for most, a subconscious participation in decision making. With less time for making decisions today, and even less time to make and correct mistakes, leaders need to use more reliable frameworks fo making complex decisions. Regardless of the tools one uses, not all decisions will have perfect outcomes. But leaders can certainly tip the odds to their favor using tools such as Business Intelligence Analytics.

Since leaders are judged largely by the quality of the decisions they make, it makes sense to use all the data and tools available today to drive that quality higher. Decision quality is measured by speed, considerations of all drivers and stakeholders, and the impact of the outcome on the strategic goals of the business. And, just as important today, decisions need to be transparent for the protection of both the business and the leader.

If you are still making decisions based on judgement, you are tempting fate in ways that have repercussions on not only the business, but also yourself and your family. The best decision any leader can make right now is to protect all stakeholders by implementing a sound analytical application from which reliable, relevant and real time information can be accessed and applied to problem solving and opportunity conversion. Logic driven decisions support evidence based management. Not only will your decisions be smarter – they will be auditable.

Topics: Decision Making, Leadership, Logic | No Comments »

The Role of Change Networks

By LogicEvangelist | August 12, 2009

The world is fast becoming  densely connected,  introducing both new promise and new peril.

With data flowing openly across most international borders, consumers have become creators, and new innovation, risks and news cascade through the system immune to local politics. For organizations to prevent innovation turning from promise to peril, they need to implement new strategies, management models and processes to facilitate innovation staying within the corporate walls until as a collective group they are ready to share it. Unfortunately, many organizations are relying on outdated IT policies as the governing force.

When new promises are constrained by old policies and practices, the effectiveness of these constraints tend to break down as individuals self-organize into movements in an attempt to circumvent barriers to the progress of ‘new promise’. So what is holding corporates back from harnessing promise and preventing peril?

At the moment, many organizations are in what can only be described as data crisis. For years, data was only seen as a transactional historical record. With the introduction of business intelligence capability, data is now finally being recognised for its strategic and highly competitive value. However, outmoded IT policy constraints restricting access to that data is turning opportunities into points of frustration. In addition, social networks are being viewed as disruptive to corporate productivity, rather than a new pathway to universal interconnectedness at the physical, software, and social level.

Networks are core channels to global change. There existence is beyond the control of individual organizations. As such, organizations must change to support associated technology innovation, such as:

• Device innovations – such as iPhone, ebook readers and netbooks
• Open source and open standards – two growing powers
• Social networking – in all its forms
• Location awareness
• Online video

Each of these elements has the potential to create new kinds of businesses, and business networks must be configured to support these new business models. In my last blog I covered how innovation today is no longer seen in terms of products and innovation, but rather in innovation of business models, business processes and management models.

Underlying each of these innovations is a robust information technology platform that is more than just about standard corporate services such as computing and communications. IT policy-makers and stakeholders need to pay more attention to keeping their policies up to date with the technologies and business models they are designed to support. One way of doing this is through an integrated Change Network. Change networks help to link together all aspects of change within a business – technology, process, people, products & services, markets, policy etc. As a cross organizational collaborative function they serve to signal where policies are acting inappropriately, whilst at the same time serving to protect competitive IP from inappropriate circulation. If a business model releases the points of frustration, users become more open and collaborative, and trust that good ideas will not die due to poor policy. Everyone wins!

Topics: Change Management, Collaboration, Innovation | No Comments »

Performance, Innovation and Complexity

By LogicEvangelist | August 4, 2009

When looking at performance we need to consider the role of innovation and complexity in business.

Innovation is no longer solely focused in traditional products and services, but in business processes, business models and management models. Innovation in these areas are far more sustainable and competitive that innovation in products and services. With product development cycles down to mere months, there is little left in ‘first mover advantage’. Innovation comes from both within and beyond the corporate walls, and in many cases is redefining how we get work done. We have to ask ourselves is the ‘enterprise’ as we know it a sustainable model. In most instances, in spite of companies hanging onto this outdated model, work is being done through networks of experts beyond the corporate walls. Yet sadly, too many IT policies prevent effective collaboration in a timely and open manner. Innovation networks can follow various models – but largely fall into two broad groups:

The open world, fast communications and volatile market all serve to add significant complexity to business – so we need to find simple and effective models and processes to accommodate these within our operational frameworks.

A common error when attempting to deal with complexity is trying to measure everything. Most managers are presented with too much information on a daily basis. In some instances, managers themselves create this overload by insisting on having a view of performance across every aspect of their business unit. In doing so, they not only create additional work for themselves, but also additional work and complexity for the people who must provide this information. Managers today need to accept a balance of trust and risk. Trust in their business data and their reports to do the work they require, and risk in letting them get on with it without micromanagement. When business teams have a clear view of how the work they do links directly to corporate objectives, workflow becomes much more aligned, and measures simplified down to 3-4 key goals and metrics. Using a hierarchy or metrics from strategic to operational means that each person in the chain can focus on become more efficient in the performance in just a few key result areas. Once trust builds, collaboration becomes more intrinsic, innovation occurs more organically, performance becomes more possible and measurement and management become simpler. Everyone wins!

Topics: Collaboration, Innovation | No Comments »

Do You Need a Chief Performance Officer [CPO]?

By LogicEvangelist | July 19, 2009

You are no doubt aware of Obamas appointment of a CPO. It has raised an interesting discussion on Harvard Business Review Online as to whether this role is essential or whether it falls under the role of COO or CEO.

Check out the article and comments and let me know your views – I like to know what you think?  The Rise of the Chief Performance Officer

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Topics: BI Strategy, Leadership, Management | No Comments »

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