Key Performance Indicators Simplified: Part 2 Tutorial

2.2 Introduction

Hi this is Avinash and I am delighted to present the second part of our key performance indicators simplified video series. In this video I hope to cover three things and the first one is how do you go about identifying great KPIs for your business, share with you my insights into how to make KPIs more actionable than you present them. And lastly share with you four lessons from my own life of pain and struggle doing being in the KPI business that I'm hoping those lessons might be valuable for you as you go about your own journey of creating new and different KPI's for your businesses. In part one of our video we covered some very important things and if you've not watched that already I highly recommend that you watch that first. We talked about the definitions of what a KPI is, which is what you see on your screen. Measures that help you understand how you're doing against your objectives. We also shared some important rules you should apply while you are picking KPIs. We walked through a number of examples, specific examples of KPIs that you could use for your business or and such as loyalty and recency. We also talked about using things like surveys and creating KPIs from that to get the customer voice onto the table when you talk to your CML or senior executives. These metrics like task completion rates, and we also talked about using other competitive intelligence metrics. And I gave one KPI there called which I think would be very interesting for any business to have. So if you haven't watched the first part of this video. Please go in and watch that then this video will make a lot more sense because I'm going to refer back to a bunch of things we taught there. So let's get going.

2.3 Identifying KPIs

So, you, you're all convinced, yes you want KPI's. You just got a job, first day, you're all excited, you have your pens and your computer and, and all the paper you need to do your job. You got access to, to to call metrics or Google Analytics [LAUGH] so how do we go about understanding what metrics, what metric you should be tracking in order to measure your success. And that's what we're going to cover here real quick. And at the end of the day, at the end of it all the lectures and all the things that you'll do, this is the most important question that you need to answer, and, and, and we might as well cut through all the other stuff and just start there. And the question that you need to answer is why do I exist? Well, why does your bad side exist? because remember, in the definition, the last word we have is objective, and I, I really believe that if you do not start with a rock solid answer to this question, then there is no way that you can end up identifying KPI's that will be actionable for your business. So go hound your boss and stalk your CEO and beg the VP's in your company and agree to drive their children around for a day, or doing their laundry, or something. But really, really get this answer the question because hidden in the answers that you're going to get, are going to be the KPIs that will, result in an improved customer experience and, oh by the way, a bonus for you when performance review time comes around so get this question answered. In the answer to the question I encourage you to think about both the concept of macro conversion as well as micro conversion. And macro conversion essentially is something that you are trying to do on on a website, so in so in this particular part this this sort of green part you see potentially could represent ecommerce conversion rate and, and that's great, but, but no website exists for only one purpose. And and that's when you get the answer back, put it against this test, is it only helping you measure one facet of it or is it also helping you determine what is success in the in this giant, vast unconverted, will never convert in their life, 90% of the traffic that's on your website. And the way to think about it is, every website will have one primary ecommerce conversion, but here are some examples of other purposes that the site could be serving, which is, it could be providing tech support, reducing call volume to your call center. It could be providing information data about your products and services that people research about it and maybe buy at Costco or offline or call you on the phone or buy through a catalog. Or of course maybe you're website exists there just to convince people of your greatness everybody wants to work there and take job applications and every job application you take online saves you $3,000 dollars of hr costs that come with hunting a candidate offline so identify all purposes of the website. And then frame up this idea of having one macro conversion, it's very important, track that but also identify your micro conversions. And, and, and when you have identified these macro and micro conversions your KPI will just come tumbling down the hill, boom boom boom boom, right away you'll be able to identify the KPIs that will be able to find the kinds of insights that will lead to actions on your website. So sort of remember this concept, once you identify this, the rest of your journey is going to be much, much easier. And remember, as you go through the evolutionary process it is to identify the KPIs as you have, apply the four rules razor. You know, in honor of my blog's name, Occam's Razor, apply the four rules that we came up with in the part one of our video that they should be uncomplex, timely, they should be, instantly useful. And I'll let you figure out what the fourth one is, go on, leave it and send it to us, the other one, but apply those four rules, and and, when you, when your metrics pass those four rules, then you know for sure that you have a KPI. And because the evolutionary part of the journey started with an understanding of the sites objective from a macro and micro perspective, there is no way, I guarantee you. That you're going to be able to make great, great strides from these metrics, from your web analytics data. So

2.4 Presenting KPIs

How do you present your metrics? You've created your dashboard, you've identified your matrix, you've created your dashboard, and it turns I'm still being auto deleted. So, let me share with you two tricks of the book that are very important. One actually uh,uh, the most wonderful trick in the whole wide universe, and the second is a presentation guideline. And, and, and the rule for, For presenting is, is, is, represented by this graph. So here let's KPI is revenue that is being delivered by your website and it's, you know, a couple million dollars a month and, and of course you create a graph and, and it looks like this and you're like start adding to dashboard and, and, then you're like oh my goodness, why is nobody using it? Nobody's using it, my dear friend, because it is useless it's only telling you things are going up and then they come down a little bit and then they go up again. And any market where their sold knows that for your business cyclical business sales go up in December boom boom boom happy birthday we made $4 million or 3.4 million. After December everything goes down and yes we have end of year sale everybody comes again, we make another 3.4 million and everything everybody goes down the toilet and, you know, people are waiting for our next product, and rinse and repeat the cycle. So, you've identified a great KPI, but you're not presenting it in a way that makes it more actionable. In this case, apply the magnificent rule of doing segmentation. I'll take the exact same graph and instantly I can make it a lot more actionable by identifying core acquisition strategies of my company and, and creating the stack bar of that. So, my acquisition strategy is, I'm spending a million dollars a month on YouTube, I'm spending lot's of money on PPC, lot's of money on the affiliate's area, yeah. Of course, I have some direct revenue and this data becomes suddenly so much more actionable, because you can see that the million dollars went spent on YouTube is actually not giving you as much revenue as you might have hoped. In fact it's fairly static across the months. Same thing with BBC it's such a small fraction even though you're spending millions of dollars. But affiliates, good old affiliate marketing that was written off five years ago, is still producing great rewards for you at, at very low cost, and, and, look at the revenue, proportionally, it was very critical to you during your peak selling seasons. So, and, and then of course the other sad part of this metric, this, this graph, is that while you're spending so much money trying to acquire new customers to your franchise, what, what the pink, the sexy pink in the middle is showing that consistently most people buy a new website are your existing customers, your direct traffic, your bookmarked marks on your URL. People who know you already are coming and buying, from you. So again, it could be posing a potential challenge if you're actually spending money on the right things. So, by simply taking away, by simply, doing a small trick, which is segmenting my KPI, by my acquisition strategy, I can take this boring line that is useless and make it immediately a lot more actionable. So, when you present KPI's remember it's a crime against humanity not to segment them, because segmentation is where you're going to find the action of our insights. When you present KPI's I wanted to share with you the slightly ugly way of presenting a KPI, but I want to share with you the principals that went into making this presentation on a dashboard a lot more actionable. So in this case, we're measuring a survey based map, KPI, that we collected, just customer satisfaction for people that are coming to our website, and that metric on this dashboard is represented very clearly, the number for the current month is 48. So, immediately you establish that, and then very, very easily right there there on the top is the executives is only few seconds is showing you end up by 8%, so boom 48, good went up by 8%, nice. Happy birthday it's a green arrow that's going up. So, in a very thin line we've established two really quick, easy to understand things, and this metric becomes instantly useful, but, we're not stopping that on our dashboard. We're actually created a goal for us. So, we had an objective and we're measuring if we're hitting against that objective. So here you can see it's 80%, and are we hitting against out objective, for, for this particular KPI. And the next thing we've done is created a trend over time, very, very, very important you want to show the trend. Now in number two upstairs, up, up top here, we're showing the trend in between just one month, but over here, we're showing the trend over three months, so, so to give our executives a bit more to chew on when they look at this metric on a dashboard, and the last thing we did is, is segment the, the, the KPI so while the overall satisfaction is 48 for people are on our website. If I segment by customer persona, the people who are there to research people are there to shop, you know, just, just browsing and looking around maybe,maybe, buy. People who actually end up buying on a website are usually purchasers, people I love and the last one is [SOUND] people over there for text support. We're calling them use in this category. Immediately, your executives will understand that while there is a, there is some, that there is some improvement in satisfaction, it was 48. The result for the pathetic 48 is mostly supported. This website sucks at provi- helping people who are there for support get their, be very satisfied. In fact, for the other three segments research, shop, and buy, the website is doing great against the goal. So, if you did not segment this metric people might think be very sad that they're only 48 out of a scale of a 100. But by segmenting it what you're doing is saying look, in three of our four personas we're doing great, let's celebrate that achievement. But here is one area where we suck, and let's focus on that and improve that. So, by applying these four, four simple present, five simple presentation rules, when you send the dashboard to your executives, it's not simply a data puke of a KPI. You're presenting lots of nuance and a lot of really insightful data, that without too much explanation will help understand performance free executives and at the same time make data actionable and get them to take some decisions. So in this case, the person who is running support needs to get fired, the second person needs to get another good competent person needs to get hired and, and things need to get fixed. And, and somebody deserves a bonus for the, for the other category. So, very, very important that simply finding the right KPI is, is not the way to just achieve greatness. The way you present it is also very important, especially for senior executives. Here's another one that was created for my friend Stephan and notice here, it's an ecommerce dashboard that's created, here are the various KPIs, customer's orders, items per order, average order of size. Notice in video one I, I, had shared the importance of sharing average order value, here he's using the same metric as well as our venue. But he's doing wonderfully is, here he is showing red and green arrows, red, green and yellow arrows to show which metrics are upper or down. So at a glance, you can understand performance of the current month and what look at what he has done wonderfully, he's segmented the data. Is comparing this segment of the data performance of the current year versus a same month last year to give additional insights, about how the performance was for the current month and is also very nicely created this little spark line, so you can understand a 12 month trend of when things were going up or bad. So this is a great way to not just puke out the data that our revenue was 672,000, but get, give additional incremental wonderful amounts of context to our decision makers, so they can understand that year over year we're at 52% and we should feel good about this metric, even though conversion went down slightly. So then you can say, oh, you know, what happened? Why did conversion go down? So, this is another wonderful way to present your data applying principles of segmentation, using arrows and colors, and, creating sparklines and the, the last tip in terms of presentation that I wanted to give you. A presentation to drive insights is, don't create metrics dashboards that look like this. This is a data puke, it's just a bunch of data puked out in a number, nobody wants to look at it. Nobody, will look at it, actually guarantee you and don't, don't also go over with it something cutesy, like here's a dashboard and this is sexy data puking. Which is the speedometers for god's sake and graphs. And when you look at this it, it, it, it breaks all kinds of rules and it's just lots of data but, but it's telling you anything can you find any insights, so a little while back I created this, this, way of presentation I call it the action dashboard where the metrics are front and center. Here is the segment to trend of that that particular metric, oh by the way this was created in Powerpoint sometimes it's not all about excel. Then here are the trends of insights in words that were identified by, by the, by the, by the analysts. And not only did they stop there, give you some insights, they actually identified what were the impact of these metrics going red. Notice there's a big red dot here of from the yeah red status, what is the metric? What was the impact on the company lost sales? Approximately, xx millions of dollars satisfaction dropped catastrophic eventually here. But more then that the thing that you need to do often, when you present KPI is, is actually this last core tile of the dashboard which is actually recommend actions that people should take. Now actions sometimes, as we saw two slides ago, could be, inherently presented the data as we saw in this case of customer satisfaction. But in this case it's written out in English that we should do is analyze this data, run tests on these stages where we are abandoning a lot of people, create a survey to get additional insight. So it's, it's very, very important that oftentimes with great KPI's we create dashboards, but the key thing you need to realize is if you want people to take action on your data, don't forget to include actions in your dashboards. It's really the only way to go.

2.5 Four Lessons

And then I want to lastly leave you with sort of four lessons that summarizes some of the important things I've learned, and it summarizes some of the try, some of the, the themes that we've presented and learned in part one and part two of our video series, on KPIs.

2.6 Different Strokes

The first lesson I have learned is what works for Jack does not work for Jane. And this goes back to this persistent theme through our video that every website is unique, every business is unique. Each one of us solves for different objectives, even if me and John are in the exact same business. It's very, very important to know that you need to put in the hard work. You need to, go in and identify the right kinds of questions to create metrics that are unique to you. If you simply copy, paste somebody else's metrics, don't be sad when nothing, actionable insightful is found for you, or worse, you start copy pasting somebody else's metric, and you're not measuring the right ones, and your business suffers due to a lack of insight. So remember this very important lesson.

2.7 Perfection

The number two lesson that I have learned is perfection is the enemy of good enough, and that this is very important. I've seen people spend six months on a project to identify the rights of the KPI. In fact, I, I believe that I was reading a study with Motorola, it took almost nine months to identify the KPI's for the business. Now Motorola is a complex, big business. Yet, nine months on KPI's? I mean, I think that if your strategy should be think smart, move fast. Go through the questions, identify the first set of metrics, start measuring them, start taking them, taking action and refine them over time. Do not execute a strategy where the first time around you do this, you want God's gift to humanity metrics for your business. Remember, the web moves too fast, there's too much to lose if you take too long to find metrics. Just go with the good enough, optimize overtime, and don't go for perfection.

2.8 Critical Few

The third one is there's this rule that you heard me talk about often. Which is critical few, baby, critical few. And this really when, especially on your dashboard when you are presenting, creating a dashboard for your senior executives, where you're identifying the core KPIs of your business. Remember, you cannot possibly have more than three or four. Even four might be too much. Then you find the harvest of the right KPIs for your business. Sit down, put a lot of thought in identifying the ones that are the creme de la creme, the mostest of the most important. In this first video, we used the example of gross margin per visitor as the critical field, one single critical field metric for when it came to measuring success. If you have way to many KPIs for your business, nobody will know what they're solving for. So work hard and find the two, three, at most four metrics that are crystal clear to every human being in your company. Everybody knows what we're marching towards, and those are your over metrics. Have metric KPIs underneath that, but everybody should have just a critical few metrics. Then we all know what we're focusing on and what we're driving towards.

2.9 Lifecycle

And the last tip that I wanted to share with you is that, you know, metrics are not set in stone. And, and they don't have to be perfect, as we talked about a few minutes ago. In your business, you should have what I call the metrics lifecycle process, that's your BFF! That's really the best way that any company will be successful. And it's really very simple, it was inspired from the Six Sigma process. That is very prevalent in traditional marketing world. And, and the process itself is defined metric start measuring the KPI, analyze the data and find the insights that are required, take action on that data then pause. Pause and see if that metrics is fine, helping you identify the kinds of actions that are having an improvement on your bottom line. Including revenue, conversion rate, customer satisfaction, task completion rate, and all these wonderful things. If you find during this pause phase, this important critical purpose phase, purple phase that you're not able to find actionable insights from the analysis that you've done for the KPI. Kill it, be brutal, kill it. And, and if you do find that It is finding new actionable insights. Think of ways in which could further improve the measurement of the KPI. Perhaps, different segmentation, perhaps something else, and then start the process all over again. Now, this does not have to be something you do every single day. You can take a pause, do this once a quarter, do this once a month. But it's very important to realize that KPIs are living breathing organisms. In fact, I have a rule for my life. That if on a dashboard that you have for a decent size business, if you've created a dashboard of your KPI's and 25% of your KPI's don't die every single year. It simply means that you're not trying hard enough. It means your not going through the metrics lifecycle process and scrutinizing your KPI's at frequently with enough intensity. Because 25% of the KPIs will die every year. And it's simply a function of the fact that businesses change, people turn over, competitors become stronger, we identify new processes and different ways of doing things. The Interweb moves at the pace light, or if something's faster, faster than that. So all this evolutionary, and ecosystem processes will put pressure on your business to evolve and you will evolve. And along with that your metrics and KPI should evolve. So remember, define, measure. Analyze action if no action, eliminate kill, find a new metric. If action, yes, figure out if there are ways in which you could further improve it, and go through the cycle again once every quarter. I hope you found part two of our video to be actionable and useful. I wish you all the very best in your KPI journey. Please share back with me, your, your victories and your war stories and your wounds, and, and we can ee how we can celebrate or see how we can improve. Good luck.

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  • PMP, PMI, PMBOK, CAPM, PgMP, PfMP, ACP, PBA, RMP, SP, and OPM3 are registered marks of the Project Management Institute, Inc.

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