Which metrics matter most to your business?

September 16, 2014

80 percent of companies aren't monitoring the full picture. Are you one of them?

The big data confusion is delaying analytical spend

As the big data tsunami made a splash over the past years, many companies have been trying to grasp what to do with all that external data that is becoming available. Some companies have started to collect this external data, but are not yet properly utilizing it.

It seems daunting to get an overview of the many data sources and determine which can lead you to new insights that can change the way you do business. Even so, I was surprised while attending a Gartner Business Intelligence conference earlier this year when they presented me with the fact that only 8 percent of investments made in big data have been deployed, and the largest part of big data investments have been made to consultancies advising companies on the big data strategy. There is so much confusion on the topic as a whole right now it seems to be paralyzing many companies and delaying the potential value they can gain from tapping in to new information.

80 percent of companies only measure financial results

Maybe it's because most companies still struggle to get a handle of their internal data. When Gartner surveyed 2,000 CIOs, they actually found that 80 percent of existing Business Intelligence solutions only focus on measuring financial results. So even though the market has been overwhelmed with the discussion about big data for some time now, most companies are still struggling to move beyond reporting on their results to understand the parameters inside the company or across business units that affects how the business is performing. 

In most organizations, there is an ocean of company data logged through decentralized transactional systems such as the ERP solution or the CRM, marketing, or warehousing solutions. Information is managed by each functional area, but it may be separated by department and not accessible for everyone to understand right away.

So while it's great to be able to differentiate between small and big data sources, at this point it seems critical for most companies to get an overview of their internal information to understand which information is most likely to impact results going forward. It is the discipline of differentiating between leading indicators and lagging indicators and building the business intelligence content accordingly.

Lagging versus leading indicators

Think of lagging indicators as KPIs that are classified as an effect, such as financial ratios. Lagging indicators are typically what make up the financial statement of the company. They are historic and simply tell you what happened.

Leading indicators, on the other hand, are what caused that effect. They are internal or external events. Internal events could include the number of qualified sales leads, website conversions, customer complaints, and employee satisfaction. In the external environment, it could be indicators such as your sentiment of social media, industry growth ratios, or currency fluctuations.

Monitoring your leading indicators is critical because they show signs that your lagging indicators may improve or worsen in the future. Leading indicators give your company the ability to react to changes in real time and make critical decisions before the impact on results becomes devastating.

The goal will be your filter

But for all of the good that data can do for businesses, there's one major issue that it presents: information overload. Many companies try to focus on too many different metrics without focusing on those that truly matter. My advice: start with your end goal. This is where you'll find which lagging and leading indicators are most critical to monitor. Once you've determined your goal, you can work your way back into the parameters that affect that end goal.

In the new TARGIT eBook, "The Metrics that Matter," we give you a suggested plan of action to help you get this process started. It also includes a printable worksheet to help you map out leading and lagging indicators according to your goal. You can download it for free today.

Which leading indicators are critical for your business? Let us know on Twitter @gittesandlykke and @TARGIT and let's keep the conversation going.