3 Questions to Create Valuable Analytics
At some point in your business, you feel like you are ready to start measuring yourself. Whether we call the output: charts or analytics or metrics or KPIs, it doesn’t matter. At first it feels easy, we pull a report into a spreadsheet and create a few charts with a few clicks of the mouse. You do this for the many reports that you regularly create, and after a few hours, you have charts and data everywhere. This is what I call the shotgun approach, create charts and ask the value of the chart later.
There is a better way. A way that will save you time, money, and ultimately will create analytics that point you towards the best way to run your business. Below are the three questions to ask at the beginning of any project to create analytics for your organization.
1 What are the specific business questions, if answered, would create the greatest business value?
Defining these questions before even looking at one piece of data is key. If not clearly defined, we may realize the question we were answering shouldn't have been our question at all. Defining and then fine tuning a question is key, and due to shadowy corners of a businesses, executives may not even know what the questions actually are. If you don’t know the questions, start by asking yourself if you had to receive only three numbers on a weekly basis to run your business, what would those numbers be?
2 What information and/or data do we need to explore to find those answers?
Handing over a stack of reports that weigh more than a brick doesn't help anyone. Only using data that is relevant to our business problem or question is perhaps one of the toughest parts of creating relevant analytics. It's easy to pull reports that don't mean anything, hand it over to the business leader, and tell them to use that information how they want. But the true work requires thought into what parts of the business we need to explore to solve the problem and then teaching leaders what levers we pull in the business to control those areas.
Take Revenue for example. I highly recommend that we measure the revenue coming into your business, but revenue is not going to be enough information to take action within your business. We could have a chart of weekly revenue, it could be a great metric to follow, but at the end of the day, we can’t take action on this metric alone. Assume revenue is declining, is it a sales problem, a quality problem, a customer service problem, etc. Revenue as a high level metric may point out that there is a problem, but to take action we will need to dig deeper to find root cause issues.
3 What are the risks to our business if we don't answer these questions?
What are the risks to business owners, their employees, and their customers if they don't answer the question at hand. After all, why answer the question if there is nothing at risk or nothing to gain?
The key to success in understanding your business and using analytics is to find root causes. We are swimming in data, so many time it is no problem to find a report that tells us what we want to hear. The question is, did you solve the right question? Simplify down to the real problems that need to be solved. Simplify down to only the information that will help you solve the problem. Simplify down to understand what will fix the problems you find.