Data is the future and the future is now.
We live in the age of data. It seems that data is being collected in every business scenario. This is a trend that will only increase as we move into online experiences.
Although data is all around us, it is still very new. This means finding strategies in how to leverage this intelligence is scarce. Many entrepreneurs, marketers and project managers are eager to find practical strategies to make wise business decisions and influence executives and/or investors.
Key Performance Indicator’s (KPI’s) are a crucial component of data interpretations for strategy execution.
If you own a business and you look at your numbers solemnly, you’re walking in the dark.
According to the instructor Bill Bruno, CEO of Stratigent, there are many data metrics that are important to track, but only a few are KPIs. A metric is a KPI if it meets two criteria: it is tied directly to a business, marketing, or campaign objective; and there are time-sensitive targets that can be measured and rated.
Here are 5 tips to assist you in creating effective KPI’s.
KPI’s are always related to goals. Having KPI’s without concrete goals is as pointless as following a map without a destination. The first step in tracking data analytics is to choose the right goal. If you’re driving in the wrong direction, what value does speed have? None other than arriving at the wrong place faster.
To give an example, let’s say your goal is to increase revenue by 20%. You’ll want to ask yourself “what are the KPI’s in that process?”. It might be social media engagement, website clicks from social media, website subscribers, email clicks, leads and then sales.
You can see if you don’t have goals that are specific, tracking the KPI’s isn’t relevant. In fact, it’s a waste of money and time.
Limit The Amount You Focus On
Great KPI’s are backed up by reliable data, can be reported frequently and are easy for target setting. Many managers and executives dilute their vision by focusing on way too many KPI’s. Limiting your focus will allow you have a clear vision and you will be able to identify practical ways to problem solve.
Also, don’t be afraid to change KPI’s. For every business, they do occasionally change. Time is the enemy in data tracking. If a KPI is no longer relevant, stop tracking it.
The KPI has to be re-occurring. This is because we want to measure progress. A KPI is not finishing a project by June 12th or increasing traffic by 20%. Those examples are benchmarks. If our goal is to gain 2,000 new online subscribers in Q3, our KPI’s might be Website Traffic, Bounce Rate, & Page Views. These will be the factors in which we set specific benchmarks to meet our 2,000 subscriber goal by Q3. It’s important that we focus on the KPI rather than Benchmark because if our business were to change, meeting our benchmark might not get us to our goal.
Leading and Lagging Indicators
Leading and Lagging are two types of KPIs. Leading is when you are given insight into something that hasn’t occurred yet. This helps you understand what your business is about to experience if you stay on the same path. And, Lagging is when you receive insight into your past. This helps you understand where you’ve been and where you are right now. This gives concrete insight and is effective at influencing companies to change or stay the course. It’s important to have both of these indicators. Most companies have 99% lagging and 1% leading.
You should have enough leading indicators to predict where you are going and take corrective action if you’re not on track. This is why it’s important to not only have lagging indicators. Lagging indicators without leading indicators will limit your corrective ability and gives you a false sense of control.
Finally, it’s important to be efficient. Many managers and executives get sucked into data. Knowing data that doesn’t influence your decision is a waste of time. Automate as many processes as possible and don’t track a KPI unless it is necessary.
Management Guru Peter Drucker said ”What gets measured gets done”. This quote has become the sole focus of many managers. This makes measuring look like the most important factor of execution. It also gives them a false sense of security. Many managers will feel “As long as they’re tracking data, they’re maximizing business intelligence. Unfortunately, this couldn’t be farther from the truth.
Setting good KPI’s require a lot of trial and error. It’s hard work and it can be time consuming. Hopefully, with these 5 tips, creating the right KPI’s can be a little easier.