Wednesday, July 14, 2010

What Target Are You Aiming At?

On target by tony newell.I have been spending quite a bit of time on the KPI Library website lately.  This site originally was setup as a library of common metrics categorized by industry.  Over the past number of years this site has grown and changed to include interesting forums and expert blogs.  I highly recommend signing up for this service (it’s free) and taking a look around.

Too often we consider metrics an end in themselves, we put all our focus on discovering what data exists, acquiring that data, building reports and dashboards, and once it is up on your company’s BI portal we think our jobs are done.  This is a criminal waste of time if this is all you do.

We must think back to the original question that prompted us to do all this work to get this metric.  A common question in my industry is “Which customers are churning out of our services the most?”  We need to at a minimum define the following before we embark on our analytical journey:

  1. What results or objectives are we trying to achieve?  i.e. Improve profitability by lowering acquisition costs
  2. What measures can we track to see how we stand against the objective? i.e. do we only measure disconnecting customers or do we delve deeper to understand if the churn is desirable?  Some customers you are better off not having!
  3. What targets do we want to set to compare to our measures?  A measure is just flapping in the wind with nothing to relate it to.  i.e. Controllable churn target of 1.5% per month
  4. What actions are we going to take based on comparing our measures to targets? i.e. Contact our customers after their initial promotion expires with a value reminder communication

This sets up your framework to measure the right performance, analyze the results, determine actions to improve performance and then to act.  Rinse, repeat, rinse, repeat until you meet your objective.  The measure of success for any BI organization is that action is taken on the information you provide.

This is a personal weblog, and does not represent the thoughts, intentions, plans or strategies of my employer.