Creating and Defining Metrics 1- For Businesses

In our modern world, we can find metrics almost everywhere. We have metrics for both our personal life and business life. They show us our progress and current state, which implies that we can make decisions with this information. A couple days ago I heard someone say that every single human activity can be measured, and I think he was right.

The main objective of this new and small series of articles that I’m starting today, is to talk about metrics, how to create them and implement them. For this first article, I will focus my attention in the basics of metrics for businesses (or organizations in general).

About 20 years ago a book that changed the understanding of metrics and management was published. This book is the Balanced Scorecard, by Kaplan and Norton, which introduced some additional views of how metrics should be treated in organizations. At the time it was quite revolutionary and visionary. Back then businesses used many metrics, however their reach was redefined and augmented.

One of the topics I deal as a consultant in my daily life, if a phrase that comes out of the ideas of the Balanced Scorecard: “if you don’t measure, you can’t analyze it; if you can’t analyze it, it can’t be improved”. A business that doesn’t have metrics or that doesn’t analyze them is destined to make the same mistakes over and over again. However, I think the key aspect is that without real actionable metrics, we will have a hard time creating new successful products, increasing our market share and selling more, among other elements.

With the current state of technologies, capturing metrics can be quite simple. Technology can even help us analyzing data and creating reports for us to interpret. For instance, in the Internet, which is the topic for the next article, we can obtain all types of data. In this case, and in a very simple way, we can analyze all type of things. To start, we can know how many visitors are browsing our website, for how long, on which pages and from what country to they come from.

Every day more businesses have access to technology, so there is usually a large amount of data for our metrics. However a large amount of this metrics are never read, nor analyzed in a timely manner and as a regular exercise. Also, we have to understand the context of the metrics, cross data and evaluate their implications.

Lets see a couple of examples how we can put into action all this metrics. Lets suppose we run a big company that as part of the support and selling function has a call center. In this case, I’m sure you could analyze the correlation between the amount of time a user has to wait in line to receive attention and the increase or drop in sales. I’m sure this correlation exists and it will be an eye opener.

Another example is from the giant Amazon.com. A couple years ago, a report was published saying that Amazon found that for each additional 100 ms in the increase of the time to load their website, sales drop 1%. That doesn’t seem to be much, but with the high number of sales from Amazon, this isn’t a small number. In this case the solution was simple: make the site faster. Plus, this is a ongoing obsession for Amazon.

I want to invite you to check and redefine the metrics of your company, starting in the way you capture data, to how you cross figures and analyze it as a permanent exercise. You’ll find valuable data and take actions to make your company stronger, with greater sales, larger market and overall more income.

Image taken from Flickr.com