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TOP 5 MOST IRRELEVANT BUSINESS METRICS

Metrics, metrics, metrics there are so many business metrics in the world today that most of them have little or no relevance. Sometimes I think business gurus stay awake at night concocting a new metric, so they have something new to talk about or sell to clients.

Making decisions based on numbers a.k.a. metrics the numbers need to be relevant, meaningful and actionable. Here are a my Top 5 most irrelevant numbers that businesses collect:

Number 5- Customer Satisfaction (CSAT)Scores: You would think that CSAT scores are the most valuable number any business can collect. They are highly subjective and bias laden. The results of these scores seldom reflect actual customer behavior but more a snapshot perception of a specific interaction with a product or service. Using CSAT or Net Promoter Scores (NPS) alone provides minimal insights into customer behavior or advocacy. Understanding customer needs, perceptions, and behaviors require a combination of hard metrics like customer retention and share of wallet, average order value (AOV), Customer Lifetime Value (CLV) along with softer metrics like CSAT, NPS, Customer Effort Score (CES) and the most valuable piece of data, unstructured feedback like product reviews, complaints and praises. A holistic approach to understanding customer behavior offers far more value than a single CSAT, CES or NPS number.

Number 4-Gross Revenue: Gross revenue is a totally meaningless number. Focusing on gross revenue without considering costs is highly misleading. Top line revenue without taking into account the costs required to achieve that revenue can lead to complete misunderstanding the health of the business. Insights into the business that are actionable financial metrics should include all costs associated with the gross revenue. Getting to the core of understanding business health requires metrics that reflect net values. Examples include net income and net profit margin that reflect both the incoming revenue stream and outgoing costs.

Number 3-Vanity Metrics: Vanity metrics are interesting but often totally irrelevant to business decisions. Vanity metrics include social media followers, page view or app downloads. While they might look impressive or depressing, depending on the numbers, they don’t necessarily connect with business success or profitability. Some would argue these vanity metrics have value for understanding the success of marketing efforts. I would argue that a more valuable and actionable metric is Return on Marketing Investment (ROMI). ROMI requires a bit of work to calculate because it focuses on the profits of incremental sales attributed to marketing activity like social media, page views, promotions and campaigns. It can be calculated uniquely for each marketing or advertising channel providing insights into the value creation of marketing activities in each channel.

Number 2-Customer Count: Focusing on the gross number of customers doesn’t tell you much about your business. It doesn’t reflect the value of those customers, their behaviors, retention or loyalty. There is no insight with this metric, it’s just a number. Insights leading to action comes form hard metrics that reflect the value of your customer base through understanding segmentation of that customer base, retention of customers, customer lifetime value (CLV) or in B2B scenarios average revenue per account (ARPA). In today’s business world customers move and shake like an 8.0 earthquake. Rely on the data beneath the customer count to make decisions that create value for the business and the customer.

Number 1 – Employee Hours Worked: Not many businesses use this metric but for those that still see value in knowing how many hours employees put on a timecard it’s time to wake up. Simply tracking hours worked doesn’t account for productivity, competency or efficiency. Unless your business relies on timesheets for billing customers to generate revenue hours worked is the top irrelevant metric in history. Focus on output and results to truly measure employee performance. Revenue per employee provides a read on the entire workforce. The more revenue per employee, the more productive is and the more likely its efficiently using resources.

Metrics drive insights that drive action. Use that valuable real estate on an executive dashboard for meaningful metrics that provide a snapshot of business health.

July 24, 2024 Posted by | Uncategorized | , , , , | Leave a comment

Self Service Off the Rails

Yesterday I spent 2 hours climbing in my attic, crawling under sinks and behind toilets in service to my insurance company. Seriously? Apparently to save money my outrageously expensive insurance company decided that I should conduct my own self-inspection using a really shitty app providing them access to the perils of my toilet connections.

This is a version of self-service that is off the rails, out of bounds and an affront to the value I get from any insurance company. By the way, in over 4 decades of paying tens of thousands of dollars for homeowners’ insurance I have never filed a single claim, not one. The reward, go ahead and spend your time doing our job.

If this sounds like a rant, it’s because I’m angry and disappointed in how far businesses have taken self-service. Apparently, today’s business just provides a “thing” whether it’s a product or service they take no responsibility for actually serving their customers. Your app not working, try finding a human to help. Car breaks down and need a tow, you better have signal coverage and the app installed. I think you get the drift here. This all started when we began pumping our own fuel at service stations and has gotten wildly out of control.

I take some responsibility for these practices as a customer experience expert advising clients on how to both be efficient and customer focused simultaneously. Self-service is a tool in the bag but shouldn’t be the only tool.

I’m quite sick of having to download an app for everything in my life. From coffee shops to banking to utilities the world has gone application crazy. Data is the true commodity that every business is selling today, the insatiable appetite for more data has destroyed customer service. The thirst for personalizing every offer through the endless number of apps. On average we have about 35-40 apps installed on our smartphones. That means we carry between 35 and 40 cards in our wallet to conduct daily life. Imagine the size of your wallet. But since these cards are virtual and have no physical footprint, we don’t care, it’s just another icon on a screen.

I hope my point is clear, if a business wants to differentiate itself in a wildly competitive market take a stand and care for your customers with real-time support for your product and service.  Self-service or Level Zero support is important for the mundane like password resets but don’t put customers into an endless loop of time wasting to access Level 1,2, and 3 support. Your customer’s time is just as valuable as your time, even more valuable as they pay your bills. Understand that one simple concept and you can differentiate.

July 17, 2024 Posted by | Uncategorized | , , , , | Leave a comment

Paranoia: The Foundation of Business Agility

North American Aircraft (NAA)produced around 42,000 aircraft during World War II that included the iconic P-51 Mustang and B-25 Mitchell bomber. employing over 90,000. At the conclusion of the war effort then company president James “Dutch” Kindelberger had a business problem.  What do we do now? The P-51 and B-25 lines were shut down. He put his executives to work to build a new, innovative business.  The results were astonishing with NAA developing the F-86 Sabre, the first military jet as well as other jet aircraft based off the Sabre technology.

I tell this story only to illustrate how quickly a business model can experience dramatic change overnight. I had the honor to work at NAA for several years following the end of the Cold War when a similar dramatic transition occurred. We would often raise Dutch as the model for embarking on a new, innovative era following the B-1 Lancer and Space Shuttle contracts expiration.

Are you prepared to adapt at a moment’s notice?  Do you have agility built into your business model and organization?  Can you adapt or will you die?

Business agility is crucial for organizations to respond to market changes and emerging opportunities quickly and effectively. Dutch Kindelberger was a leader that made change happen at NAA through his hands-on style and a strong focus on innovation and efficiency.

Here are the key components that make up business agility:

  1. Leadership: Agile leadership focuses on communication, collaboration, and commitment. Leaders develop others as leaders and work towards a shared purpose1.
  2. Governance: Effective governance ensures that decision-making processes are flexible and responsive to change. It involves setting clear guidelines and frameworks that allow for quick adaptation1.
  3. People: The workforce must be skilled, adaptable, and empowered to make decisions. Continuous learning and development are essential to maintain agility1.
  4. Culture: An agile culture promotes innovation, risk-taking, and a willingness to adapt. It encourages a mindset that embraces change and values continuous improvement1.
  5. Strategy: Agile strategies are dynamic and flexible, allowing organizations to pivot quickly in response to new opportunities or threats. This involves regular reassessment and adjustment of strategic goals1.

It’s easy to lay out the pieces required for business agility and the challenges to pull it off are numerous. Everything from our old friend resistance to change to the mechanics of having flexible processes.

In my experience, agile organizations are always in a state of change. Every planning cycle promotes investment in innovation. Andy Grove, the former president, and CEO of Intel, was famously known for the mantra, “only the paranoid survive.” Being paranoid isn’t a bad thing, it keeps us looking forward, not accepting the status quo as lasting forever.

A couple of tips to think about:

1. Always have an eye beyond the next 24 months. Look beyond the end of your desk calendar for possible disruptions and innovations.

2. Take succession planning seriously. Succession planning is not just for the most senior leaders in the business, it’s a process that should evaluate talent at all levels of the organization for either new opportunities or skill building.

3. Be honest and accountable. Be honest with yourself about the state of your business model and accountable for goal achievement. Don’t allow yourself to get comfortable or complacent.

4. Make changes in the business part of the business. Change is the only constant in life, make it part of doing business every day. Changes may be small but making it a norm in the culture will pay dividends.

Be paranoid…in a good way!  

July 10, 2024 Posted by | Uncategorized | , , , , | Leave a comment