We have a greater capacity to measure than ever before. Increasingly sophisticated data collection methods and tremendous analytical power enable us to delve deep into critical business issues, such as operational performance and customer behavior. It has opened up a world of opportunities.
And a world of challenges.
While now we can collect mountains of data, I see a major breakdown in what we do with the data. In short, too many companies treat measurement as an event, not a process.
If you want your measurement to be meaningful, then follow this 5-step process:
#1 Design
Don’t just measure for measurement’s sake! Before you decide to measure anything, ask: What do we want to measure and why? How will we utilize the data to help us make good business decisions and take the right actions?
#2 Collect
Every data collection method has limitations. Before collecting any data, ask: What are the inherent limitations in how we intend to collect the data? Can they be overcome? Are there better methods? Should we use more than one method.
#3 Analyze
Thanks to technology, we can quickly crunch numbers and summarize the data. Cool, right? Maybe not. If your average customer satisfaction rating is a 3 on a 5-point scale, what does that tell you? Well, it tells you two very different things if, on the one hand, every customer rated you a 3, versus on the other, half rated you a 1 and half rated you a 5. The mean or average, doesn’t tell you about the variability or distribution of the data. Before analyzing the data, ask: Which statistics would best summarize and represent the overall data?
#4 Interpret
Sales are up 30% year-over-year. Great. Or is it? How do you interpret the summarized data? Ask: Is our year-over-year growth greater or less than that of the market? Is our growth rate what we would expect of a company at our life stage? How much of the growth can we reasonably attribute to our actions versus external factors such as the economy?
#5 Utilize
You’ve purposefully worked through the first four steps, Now come the big questions. Ask: What decisions should we make based on the data we’ve interpreted? What actions should we take?
It’s not hard to collect data. And it’s easy to get enamored with the idea of collecting lots of data. But you could be wasting time, money and effort if you don’t treat measurement as a process – a process that is intentionally managed.
How will you measure up?
Make it happen.
Michael
