The Future of KPI’s
Metrics and Key Performance Indicators come from a shared past and will continue to be interlinked. The future of KPI’s is more likely to appear as distant cousins from our current standard dashboards.
We already have come a long way from the early days of production tally’s and financials only reporting.
The Balanced Score Card influence on KPI’s
One of the most significant shifts in business performance reporting has been the introduction of the BSC (Balanced Score Card). I have already made a case for what I call the Biased Score Card for business performance.
The Balanced Score Card is an outstanding contribution to business and was introduced by Kaplan and Norton. BSC operates with an emphasis on selected combinations of financial and none financial measures. The system is supportive to the business vision, mission and strategy with an agreed key selection of appropriate measurement points.
Despite the potential of the BSC , it has never fully realized its full potential across every business.
The implementation of BSC runs at an impressive approximate 50% of Western public listed business operations.
The adoption of the model has various rates of success and implementation standards vary considerably from business to business.
The origins of the BSC originated from the principles of performance management from the 1950’s and matured into the model in the 1990’s.
The future of the BSC or a model similar to it remains most likely in future but many new factors will shape its destiny than ever before.
OKR designed failure for improvement
John Doerr from Intel is often used as the largest influencer and evangelist for the performance management system OKR (Objectives Key Results).
This system exploded in popularity and implementation after the millennium. The implementation and impact of OKR to KPI’s is significant.
Often cited as a software business performance tool, due to its initial implementation with leaders such as Google, Twitter, GoPro, LinkedIn, and Spotify the system has growth potential to reach across manufacturing, health care and financial business institutions. The growth of Fintech and their software base makes OKR a natural candidate for many startups and potential unicorns to implement.
OKR as a system is great for stretching and creating an innovative culture. The creativity and bias of the system to include some failures has impacted the significance of KPI’s across business cultures and employees expectations. As technology continues to develop and improve expect to see some changes within the tolerance band of OKR failure rates from the current “sweet spot” of 0.6/0.7.
Business Intelligence to On-demand insights
Since the late 1970’s business intelligence is a term that has been applied in business for using various data sets including databases, data mining and data warehouse use of information gathered and used to generate information for management decisions.
The use of BI (Business intelligence) also varies from business to business in its quality, depth and breadth of application. Even today the most common hurdles BI needs to overcome is data quality, data source integration and it’s application to simply report historic performance instead of being utilized to provide insights.
The more metrics and data is gathered, the wider the possibilities for leadership to question elements of its operational market and own business operations and tools. This has raised the surge of on-demand insights.
These data sets are often to-date performed by a business analyst or manager at the request of a leader to provide insights. The outcome from these spontaneous requests can be a danger due to varied data quality. Causation and correlation decisions are not always tested for validity of proposed insights to business scenarios. The potential for this to impact future KPI’s continues and must be addressed and managed with deep caution.
Regulation changes require constant review of regulatory trends and potential statute law requirements. Their impacts on business metrics and KPI’s in future need to be part of the management review process to ensure the correct and optimal coverage is gained.
IT knows what you need
IT (Information technology) is no longer the power of a mainframe computer and some generic software.
Those days are long gone, instead modern IT systems are developing at a pace that many companies find hard to remain up to date.
The future of this race is to develop systems within a business that can reduce costs and improve value. Through the surge of advances within big data, machine learning and analytics it becomes possible for a business to verify the quality of its own measures.
This advance is complimented through the power of advanced data visualization systems such as Tableau, Processing, Raw, dipity, Tangle, D3.js, R, Google charts and even Excel.
The power these modern tools offer is to provide suitable improvements to determine the difference between noise and signal from data sets. They form the basis of preventative management systems and predictive behavior planning.
Simply imagine in future opening your operating device to new KPI’s you never knew you needed.
Through advanced machine learning and artificial intelligence the power of future computing will help leaders create more agile companies to effect change rapidly matching its values and objectives.
Fit for purpose means fit for business
Imagine for a moment that you work for a steering wheel manufacturer. In the short and medium term your business model has a continued strong growth potential. All your metrics, KPI’s will be supportive to match the rosy 5-10 year future of supporting the automotive industry with steering wheels.
A longer term future however has more question marks on its business model. The advance of autonomous vehicles shows a distinctive trend and high risk to the future of the business.
So, which metrics and KPI’s do you need to include to “future proof” your business or accept a business model with a life cycle suited to the expectations of the market?
A key portfolio of metrics/KPI's for future inclusion will be;-
· Speed of Research & Development
· Rate of innovation
· Speed to market for new products and services
· Availability of skilled technical staff globally to scale your ideas to a global market
· Depth of your business collaboration.
These will become strong influencing trends over the next few years.
A special note for small business and startup companies needs to be added here as a special note. The recent patience of venture capital funding has seen expectation change over the recent 9 months. This trend may change in future, however for 2017 expect these funding impacts to change your priority KPI’s for financial return expectations.
What metrics do already feel you miss for your business?
When was the last time you reviewed your business metrics and KPI design?
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Measuring Long Term Performance - via McKinsey
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