Post on 23-Jan-2015
description
A JOURNEY FROM A BAD KPI TO AN EXCELLENT STRATEGY
Based on http://www.bscdesigner.com/a-journey-from-a-bad-kpi-to-an-excellent-strategy.htm
By Aleksey Savkin, bscdesigner.com
BSC DESIGNER
PREPARING FOR THE JOURNEY
• I was reached by a potential client from a Spain-based manufacturing company.
PREPARING FOR THE JOURNEY
• I was reached by a potential client from a Spain-based manufacturing company.
• He asked me for advice about a better kind of KPI.
PREPARING FOR THE JOURNEY
• I was reached by a potential client from a Spain-based manufacturing company.
• He asked me for advice about a better kind of KPI.
• I asked the client a few questions about his needs.
PREPARING FOR THE JOURNEY
• I was reached by a potential client from a Spain-based manufacturing company.
• He asked me for advice about a better kind of KPI.
• I asked the client a few questions about his needs.
PREPARING FOR THE JOURNEY
• I was reached by a potential client from a Spain-based manufacturing company.
• He asked me for advice about a better kind of KPI. • I asked the client a few questions about his needs. • It became obvious for me that the actual problem
was not with a KPI, but with a strategy.• I will use a dialog style to tell a story about what
was discussed.
A NEED FOR KPI REVEALS A PROBLEM WITH A STRATEGY
A need for KPI reveals a problem with a strategy
Alex, we need some help to come up with better KPIs…
We need some KPIs that will track our progress in improving business
performance…
A need for KPI reveals a problem with a strategy
Alex, we need some help to come up with better KPIs…
We need some KPIs that will track our progress in improving business
performance…
What strategy are you going to execute to improve the performance
of your business?
A need for KPI reveals a problem with a strategy
Well, our strategy is the elimination of any poor business
performance… Do you have a KPI for this?
A need for KPI reveals a problem with a strategy
Well, our strategy is the elimination of any poor business
performance… Do you have a KPI for this?
I could have found an indicator that would show you the level of the underperformance
that you have, but it won’t help you to perform any better.
A need for KPI reveals a problem with a strategy
In my opinion, what you actually need to do first is to come up with a good strategy.
AN APPROACH TO FINDING A BETTER STRATEGY
Isn’t “elimination of the poor performance” a good strategy?
AN APPROACH TO FINDING A BETTER STRATEGY
Isn’t “elimination of the poor performance” a good strategy?
Well, it is not a strategy.
“Poor performance” is a very vague definition of the problem that your business
has experienced. “Elimination of the poor performance” can be a goal, but a strategy is more about objectives than about goals.
AN APPROACH TO FINDING A BETTER STRATEGY
If you want my advice I would suggest the following:
1 Start with an analysis of the reasons of the
problem.
3Formulate these factors as actionable
objectives.
1. Invest time in researching the reasons for the poor performance;
1 Start with an analysis of the reasons of the
problem.
3Formulate these factors as actionable
objectives.
2Map results to show a
connection between factors.
2. Map results to show a connection between factors
1 Start with an analysis of the reasons of the
problem.
3Formulate these factors as actionable
objectives.
3. Come up with some good actionable objectives that will address the
underperformance problem;
2Map results to show a
connection between factors.
1 Start with an analysis of the reasons of the
problem.
3Formulate these factors as actionable
objectives.
2Map results to show a
connection between factors.
4. Find key points that will tell if a hypothesis actually works.
4 Find key points that will tell if a
hypothesis actually works.
1 Start with an analysis of the reasons of the
problem.
3Formulate these factors as actionable
objectives.
2Map results to show a
connection between factors.
5. Add some indicators that will help to keep track of your progress towards
achieving these objectives.
4 Find key points that will tell if a
hypothesis actually works.
5 Track metrics, numerical
values for these key points.
STRATEGY IS NOT A GUARANTEE OF SUCCESS
Do you guarantee that this will work?
STRATEGY IS NOT A GUARANTEE OF SUCCESS
Do you guarantee that this will work?
Here we are talking about making an informed assumption about what might
be the reasons for the poor performance and what might be good solutions to this
problem.
Do you guarantee that this will work?
STRATEGY IS NOT A GUARANTEE OF SUCCESS
This is a kind of business hypothesis. As any hypothesis it might work or might not
HOW-TO GUIDE FOR GETTING BUSINESS INSIGHTS
Do you suggest using a certain business framework to analyze the current situation and come up with solutions?
Something like SWOT?
HOW-TO GUIDE FOR GETTING BUSINESS INSIGHTS
Do you suggest using a certain business framework to analyze the current situation and come up with solutions?
Something like SWOT?
Business tools like SWOT, 7-S, Balanced Scorecard, Competitive Analysis, etc. will
guide you and your team.
HOW-TO GUIDE FOR GETTING BUSINESS INSIGHTS
Although the best business insights will be rather spontaneous breakthroughs based
on the experience of your team.
SOME TOPICS TO STIMULATE CREATIVE THINKING OF YOUR
TEAM
1STIMULATING CREATIVE THINKING
Put yourself in the customer’s shoes. What can be done better?
2STIMULATING CREATIVE THINKING
Have a look at your competitors, their products and services. What can you learn from them?
3STIMULATING CREATIVE THINKING
What limiting factors (constraints and bottlenecks) do you have in your business environment?
4STIMULATING CREATIVE THINKING
Instead of adding something to your business consider removing something that might be holding you back.
5STIMULATING CREATIVE THINKING
Model your processes on the paper or in software, visualization helps
WHY IT DID NOT WORK IN THE PAST
HOW-TO GUIDE FOR GETTING BUSINESS INSIGHTS
We did something similar in the past and it did not work out well…
HOW-TO GUIDE FOR GETTING BUSINESS INSIGHTS
We did something similar in the past and it did not work out well…
What exactly happened?
HOW-TO GUIDE FOR GETTING BUSINESS INSIGHTS
What exactly happened?
Well, we did a kind of brainstorming and we had a list of excellent ideas. In few months I understood that we had progressed in just few of them that were really close to what we have been doing before
HOW-TO GUIDE FOR GETTING BUSINESS INSIGHTS
I guess we just lost focus. I thought that some new KPIs could help us…
HOW-TO GUIDE FOR GETTING BUSINESS INSIGHTS
But after trying some I’ve found that they worked as another formal routine that our employees hated. KPIs were reported, but no one had an idea about what to do with this information
HOW-TO GUIDE FOR GETTING BUSINESS INSIGHTS
But after trying some I’ve found that they worked as another formal routine that our employees hated. KPIs were reported, but no one had an idea about what to do with this information
I think the first step when you brainstormed ideas was the right one. The problem appeared because those ideas were
neither aligned with each other nor with a problem.
HOW-TO GUIDE FOR GETTING BUSINESS INSIGHTS
Actually, the problem itself was not properly diagnosed.
HOW-TO GUIDE FOR GETTING BUSINESS INSIGHTS
Actually, the problem itself was not properly diagnosed.
It went sort of like this…
HOW-TO GUIDE FOR GETTING BUSINESS INSIGHTS
Sales department suggested developing a discount program; marketing told us that we needed to add two more products to satisfy our clients’ needs;
HOW-TO GUIDE FOR GETTING BUSINESS INSIGHTS
Engineering argued that we needed to try a new technology.
HOW-TO GUIDE FOR GETTING BUSINESS INSIGHTS
We did just a superficial analysis of the problem and started shooting out solutions.
MAP THE FACTORS OF FAILURE
MAP THE FACTORS OF FAILURE
I suggest you to start with the proper diagnosis of the problem.
MAP THE FACTORS OF FAILURE
It won’t be as simple as “this prevents us from performing well.”
MAP THE FACTORS OF FAILURE
Most likely you will find a number of interconnected factors.
MAP THE FACTORS OF FAILURE
Moreover, some connections and correlations won’t be really clear to your
team
MAP THE FACTORS OF FAILURE
Moreover, some connections and correlations won’t be really clear to your
team
What can we do to stay focused?
MAP THE FACTORS OF FAILURE
What can we do to stay focused?
Creating a map where factors are linked to each other to represent a cause-and-effect connection between them (BSC Designer
software can help with automation of this).
MAP THE FACTORS OF FAILURE
These factors can be easily transformed into objectives. And your goal is to focus the
company’s efforts on a few objectives that will be more likely to lead
you to success.
MAP THE FACTORS OF FAILURE
These factors can be easily transformed into objectives. And your goal is to focus the
company’s efforts on a few objectives that will be more likely to lead
you to success.
It appears that the ideas of marketing to add two more products had nothing to do with our poor performance. Our clients would only be confused with new products.
MAP THE FACTORS OF FAILURE
Can an opposite idea (removing some products) work for us?
MAP THE FACTORS OF FAILURE
Can an opposite idea (removing some products) work for us?
Normally reinventing a product line helps to focus a company’s efforts on what matters.
Take Apple’s strategy as an example, when Steve Jobs focused on
cutting their product line.
THE ROLE OF KEY PERFORMANCE INDICATORS (KPIS)
THE ROLE OF KEY PERFORMANCE INDICATORS (KPIS)
It appears that the major part of the job is about making a careful diagnosis of why things happened as they did…
THE ROLE OF KEY PERFORMANCE INDICATORS (KPIS)
What about KPIs? Which ones do I need?
THE ROLE OF KEY PERFORMANCE INDICATORS (KPIS)
What about KPIs? Which ones do I need?
When you put all parts of the diagnosis together you can come up with a strategy to address these problems. KPIs will help you
to see if you are on the right track.
THE ROLE OF KEY PERFORMANCE INDICATORS (KPIS)
Yesterday this answer would sound logical to me. But after our conversation I’d like to ask you to be more precise…
THE ROLE OF KEY PERFORMANCE INDICATORS (KPIS)
What exactly do you mean by “seeing if we are on the right track?” Can you give me some examples?
THE ROLE OF KEY PERFORMANCE INDICATORS (KPIS)
What exactly do you mean by “seeing if we are on the right track?” Can you give me some examples?
For example, what problem do you want to solve by eliminating some of the products
from your product line?
THE ROLE OF KEY PERFORMANCE INDICATORS (KPIS)
Would you like to cut some engineering and marketing expenses, or do you plan to make
your customers pay more for advanced versions of your product?
THE ROLE OF KEY PERFORMANCE INDICATORS (KPIS)
Indicators are supposed help you to track your progress towards these goals. You can
use indicators that will measure certain types of engineering expenses and/or …
THE ROLE OF KEY PERFORMANCE INDICATORS (KPIS)
… you can come up with an indicator that will confirm that customers are buying an
advanced version after the old one was removed from your product line.
Now I see how pointless my initial request was for a KPI! Thank you for focusing my efforts in the right direction.
THE ROLE OF KEY PERFORMANCE INDICATORS (KPIS)
By the way, why do you say “indicator,” and not a “KPI?”
THE ROLE OF KEY PERFORMANCE INDICATORS (KPIS)
By the way, why do you say “indicator,” and not a “KPI?”
THE ROLE OF KEY PERFORMANCE INDICATORS (KPIS)
I’m trying to be careful about using terms like metrics, indicator and KPI. People tend to call a KPI any metric, but not all metrics
are KPIs.
THE ROLE OF KEY PERFORMANCE INDICATORS (KPIS)
Metrics might become a KPI only when placed in a certain business context. By the way, that’s why a long list of KPIs from the
Internet don’t work.
Let me summarize what I have learned:
THE ROLE OF KEY PERFORMANCE INDICATORS (KPIS)
SUMMARY
1 • Start with an analysis of the reasons of the poor performance problem that we have.
• Use various business methods to stimulate the creative thinking of my team.
SUMMARY
2 • The results of this analysis need to be mapped to show a connection between various factors.
• The strategy map automation functions of BSC Designer can be used.
SUMMARY
3 • Formulate these factors as actionable objectives where it is possible;
• Together with my team we will come up with an action plan.
SUMMARY
4 • Find some key points that will tell us if our hypothesis about what needs to be done to solve the initial problem actually works.
• Track metrics, which are the numerical values for these key points.
SUMMARY
That’s an excellent summary! With BSC Designer you can actually automate not only
a strategy map, but also the KPIs. Your action plans can be aligned with KPIs and
business objectives.
SUMMARY
Most people download and try the software just to manage KPIs, but now you see that one will spend more time on the “Strategy
map” tab on KPIs.
SUMMARY
Most people download and try the software just to manage KPIs, but now you see that one will spend more time on the “Strategy
map” tab on KPIs.
My first thoughts about the software was exactly as you described. I’m happy that my understanding of how business challenges need to be addressed was changed.
SUMMARY
Thank you for your help and for your excellent software!
SUMMARY
Thank you for your help and for your excellent software!
You are welcome! Nice to see you among the users of BSC Designer!
MY QUESTIONS
Have you faced the same problems in your business? What are your favorite methods
to get business insights?
MORE ABOUT THE BALANCED SCORECARD
Find more insightful articles about the Balanced Scorecard in ”Articles” section at www.bscdesigner.com
BSC DESIGNER
THANK YOU!
Feel free to send us your questions using the contact form at www.bscdesigner.com