So, you have decided what becoming data-driven means to your organisation (see blog #1) in this series) and have adopted a question-everything approach (see blog #2). It is now time to start taking practical steps on your journey.
This starts with examining your existing business processes, applying the “why?” principle (see blog #2), and determining whether they are still appropriate for the business that you want to be.
A business consists of three main components: resources, processes and information and the objective of a data-driven organisation is to optimise the use of information to ensure that these are deployed and managed correctly to meet the goals of the organisation.
Mapping and analysing your business processes is crucial if you want to transform the way your organisation operates, yet most companies do not do this effectively. Ideally you should associate resources, information sources/destinations and costs, along with instructions and compliance requirements, to the various activities in your processes. You should also be able to show that regular audits have been made to ensure that the processes have been adopted effectively and are still fit for purpose. If, like the majority of companies, you are still trying to do this using Microsoft Office tools then drop me an email as we have a much better way of approaching the problem.
However you do it, you need to arrive at a documented set of processes that efficiently achieve the business objectives and an understanding of the information required to support and monitor those processes. The most important measures for monitoring purposes will become Key Performance Indicators (KPIs).
It is important to understand that KPIs are contextual according to the where in the organisation they are deployed but they should be related vertically. Applying the “why?” principle (see blog #2) can help here. For example:
CEO: Revenue is down 10% this month – why?
CFO: My department was only able to invoice 90% of what we expected to – why?
COO: My department was only able to ship 90% of the finished product that we would normally expect to – why?
Operation Manager: We unexpectedly lost 10% of our production capacity this month due to a faulty machine – why?
Quality Control: We had a machine which had missed a routine maintenance deadline fail.
It is highly likely that the cost of maintaining that machine was far less than 10% of the month’s revenues.
In this case the cascading KPIs would be:
Revenue – Customer Invoicing – Order Fulfilment/Shipping – Production Throughput – Maintenance Against Schedule.
The key takeaways here are that it is necessary to identify the top-level metrics which are important to your corporate objectives, ensure that your end to end processes impact them positively and ensure that what is being measured and presented as KPIs at each stage drive specific activity relating to the processes at that stage. Applying a revenue KPI to the Quality Control department is unlikely to be effective as that does not directly relate to its day to day business processes. It is, however, also important that everyone in the business understands how their activities impact the corporate objectives.
A key test here is for anybody in the business to be able to answer the question “if my KPI measure indicates a problem, what is likely to be the impact to the business and what should I do next?”. When this is the case then you are starting to become a data-driven business. This is even more the case if an automated action has already been instigated as the result of an issue being indicated by the underlying data for that measure.
KPIs have been used and abused in many organisations to the point that many end up as nothing more than a box-ticking exercise, at best, with little positive impact upon the business. This is not an acceptable situation for a data-driven organisation, which should instead focus on a (generally) smaller number of KPIs that relate directly to local business processes and which can truly be used to drive the business forward.
Having identified what information that you need at each stage of your processes, the next step is to ensure that the data from which this is derived is available at that point and fit for purpose. This is the topic of next week’s blog.
When was the last time that your company revisited its processes to ensure that they are still fit for purpose? Do the KPIs for every department of the organisation relate directly to its own processes? Does everybody in your organisation understand the impact that a missed KPI in their area has on the overall corporate objectives? As ever please Like, Share and Comment as appropriate.
Steve Crosson Smith
Client Director, SDG Group email@example.com
Helping companies to become data-driven organisations by enabling them to organise, analyse and visualise data