(2022-06-22) Schmidt Why Business Intelligence Falls Flat

Daniel Schmidt: Why business intelligence falls flat. It wasn't that people didn't care about the story the data was telling. They did care, and they were worried that the numbers were flat. The problem was they had no idea what they could do about it. The metrics in the dashboard were divorced from the actual work happening on the ground.

the medium of today's business intelligence tools does not lead us to use data effectively in decision-making.

Imagine that we work at a music subscription service, like Spotify. We might have an executive dashboard that looks like this.

The problem is not that we don’t have the right data. The problem is that it’s not clear how we can influence the business outcomes.

For example, revenue is flat, but what can we do about it? It's like looking at the scoreboard when the game is already over.

On the other hand, there are metrics, like average hours per session, that we can directly influence with product improvements. But will optimizing this metric lead to the business impact that we’re looking for? It's unclear.

let’s try adding another layer of organization.

Now we’re separating the leading indicators from the lagging business KPIs.

companies like Amazon identify "input metrics," lead measures (1) that can be influenced by work and (2) are predictive of lagging business KPIs.

But there’s still more we can do to make this metrics dashboard useful…

When we organize the dashboard in the form of a graph, the relationship between metrics becomes explicit. The metrics are laid out on a spectrum from leading to lagging so it’s clear what we can influence in the short-term versus long-term. Diagram of effects

And we can still do better…

This dashboard goes beyond business performance to show the initiatives that we’re doing to improve performance.

Powerfully, organizing our metrics as a graph allows us to evaluate the assumptions behind our strategy…

Our assumptions, of course, are just theories. (thinking in bets)

Having our dashboard laid out like a graph allows us to examine the relationship between metrics and the efficacy of how our initiatives are moving metrics, or not.

To help with this form of analysis, at DoubleLoop.com we're developing correlation scores between metrics so you can find flawed assumptions in your strategy

For example, one of our customers found that dozens of their people were focused on an input metric that was inversely correlated with their North Star. The $2M per year that the company was spending on the initiative, they discovered, was actually hurting the business

Sometimes the problem is not the metric. Instead, the problem can be how we're trying to move that metric.

The only thing harder than achieving strategic alignment at your company is sustaining alignment. Most strategies are fragile. Alignment breaks as soon as new information undercuts an assumption in the strategy.

A strategy operationalized in DoubleLoop, in contrast, is antifragile. With new information, the strategy and team alignment get stronger.