| KPI: the first step to do for a successful Business | | | | A KPI like Increase Sales that is defined as Change in |
| Intelligence process. | | | | Sales volume from month to month and it is measured |
| Introduction | | | | by Total of Sales By Region for all region with the |
| There are a lot of business intelligence softwares that | | | | target to Increase each month seems a good KPI. |
| gives you the possibility to control your business, from | | | | Looking deeper into that there are other questions |
| Oracle to Microsoft to SAP. In any case, before the | | | | arising that show how the KPI is not SMART. Does |
| software and the implementation, there is a question a | | | | this measure increases in sales volume by Euro or |
| company has to answer: What do we need to | | | | units? If by Euro, does it measure list price or sales |
| measure? | | | | price? Are returns considered and if so do the appear |
| In this article will be discussed the definition and the | | | | as an adjustment to the KPI for the month of the sale |
| importance of the KPIs, who and which areas are | | | | or are they counted in the month the return happens? |
| involved, how to define good and bad KPIs, a | | | | How do we make sure each sales office's volume |
| categorization, the most used KPIs and the feedback | | | | numbers are counted in one region, i.e. that none are |
| about KPIs from the companies point of view. | | | | skipped or double counted? How much, by percentage |
| Definition of KPIs In the question above, what do we | | | | or Euro or units, do we want to increase sales |
| need to measure, a part of the definition of KPI is | | | | volumes each month? |
| hidden. A performance indicator or key performance | | | | Categorization of KPIs As we can see from the |
| indicator (KPI) is a measure of performance. Such | | | | above KPIs, it is possible another categorization. |
| measures are used by companies to define and then | | | | - Quantitative indicators which can be presented as a |
| evaluate the success of their business. Before to | | | | number |
| evaluate a business and create a software, the first | | | | - Practical indicators that interface with existing |
| goal to achieve is to define the parameters that | | | | company processes |
| characterize the specific business. After that it is | | | | - Directional indicators specifying whether an |
| possible to monitor these parameters to fully | | | | organization is getting better or not |
| understand the present state of the business and to | | | | - Actionable indicators are sufficiently in an |
| define future actions. | | | | organization's control to effect change |
| Who and which areas are involved in the definition of | | | | - Financial indicators used in performance |
| KPIs Before giving concrete examples, there are other | | | | measurement and when looking at an operating index |
| elements to consider defining KPIs: who and which | | | | The most used KPIs The most used metrics concerns |
| areas are involved in this bi process. | | | | the above 3 ares. |
| The first question is who is involved in bi process, that | | | | Investigating on costs means understand cycle time, |
| means who can gain from that. Generally those are: | | | | ability to conform to market standards, quantity and |
| - High level management | | | | quality. |
| - Communications | | | | Information on product are about pipeline work, |
| - Marketing | | | | research and development, time to market, and |
| - Sales | | | | product customization. |
| - Any stakeholders interested in the company | | | | A modern approach on marketing is more focused on |
| Considering them, it is natural to see the business | | | | customer behaviour. Therefore some metrics are: |
| intelligence process as a common involvement of all | | | | environmental appearance, complaint management, |
| the lines of an organization. | | | | employee empathy, product expertise, and |
| Since the answer to the first question, it is possible to | | | | responsiveness, customer acquisition, demographic |
| guess the areas involved. The 3 main areas are: | | | | analysis applying to become customer, turnover by |
| - Cost | | | | segment, bad debts, profitability by segment. |
| - Product | | | | Specially if a company is customer focused, then it is |
| - Customer | | | | possible to integrate a business intelligence tool with a |
| How to define good and bad KPIs KPIs are different | | | | CRM, customer relationship management software. |
| according to specific business. Since this bi approach is | | | | Conclusion In this article we talked about the first step |
| very analytical and measurable, a mandatory element | | | | to do when companies want to go for a business |
| is the KPIs have to be SMART. That means: | | | | intelligence software. Before the tools, they need to |
| - Specific for the business | | | | understand what they need, what to measure and |
| - Measurable to get a concrete value for the KPI | | | | how to do that. There is the SMART approach to |
| - Achievable, attainable to get real values | | | | define the KPIs and then several examples of |
| - Relevant to measure | | | | common used KPIs. If you are in the business, check |
| - Timely, time-bound to define them in time frames | | | | also the KPIs other companies use and if they |
| According the SMART definition, it is possible to | | | | consider them relevant for their strategic goals. |
| identify good and bad KPIs. If the KPI is not SMART, | | | | References: |
| then it is a bad KPI. An example can show this | | | | More details and examples are in FeroPluris Blog. |
| concept. | | | | |