What's the point with KPIs and BI? Read this blog post to learn more about the power and responsibility that comes with business intelligence.
As a new era of how to visualize, minimize and utilize big data into small metrics is in full swing, the tools and the awareness have never been more powerful. Also, remember how best to use them.
They are Called KPIs for a Reason
Key performance indicator is a term that deserves a breakdown:
- Key: essential, important, crucial, fundamental, significant
- Performance: functioning, execution, operation, act, deed, feat, routine
- Indicator: gauge, value, pointer, marker, sign
Why the breakdown? KPIs are used to gauge the execution of fundamental elements of operations. They are discerning needles on the record, and they play the music of where it is currently connected on the album.
Remember, that needle is unaware of what music it’s playing. It does not know the musician’s effort in producing the album, and it does not know the music’s effect on the audience when listening.
KPIs are intended to provide an update and to focus attention. Where KPIs are used are to prove or disprove what is occurring. Your responsibility is to use them to dive down into what is occurring and understand the story.
It’s Not Good, It’s Not Bad… It’s a Number
When a KPI is signaling a difference, this is an indicator that research and conversation is needed. It is objective. Your duty is to consider if there is something subjective in addition to objective. View the results without any other emotion than healthy curiosity and remember that one gauge is often not enough on your dashboard.
A gym membership is an interesting example of objective and subjective data combined with multiple values:
- Average monthly cost of a gym membership: $58
- Percent of people with gym memberships who never use them: 67%
- Amount of gym membership money that goes to waste from underutilization: $39
Source: Statistic Brain
81% of people are satisfied with their gym
Source: J.D. Power
Whuuuut?!? 2/3 of people don’t use their gym, but 4/5 of people are satisfied? Now I want to understand the difference.
- Were only the people who do go the average of twice a week surveyed?
- What drives those who go to keep going vs. what impairs those who are underutilizing their membership?
- If the people who do not use their membership were surveyed, were they truly satisfied?
- Do they consider satisfaction as pride in the facility, equipment and personnel? Maybe personal pride in either results, or personal pride in simply having a card with an option to go or not?
We have indicators, but we don’t have a story, insight or wisdom based upon these surface indicators. As W. Edwards Deming said,
Key Indications Should Drive Key Conversations
If a KPI was truly a story behind the measurement, they would call them a KPS (key performance stories). A mental conversation should begin when looking at what stands out, then have the physical conversation with the subject experts, so you can intelligently understand and re-explain what is occurring. This rings true for what you interpret as positive as well, so do not just focus on the negative.
Business intelligence is about intelligently managing your responsibilities, being a leader for your personnel, and operating analytically and astutely vs. by assumption. BI is a dashboard, KPIs and trends are gauges, but you are at the wheel, so drive responsibly.