A couple of interesting threads have been running on Eric Peterson’s Web analytics forum over the past few days. One is on setting key performance indictors (KPIs); the other deals with how to report Web analytics data in a meaningful way for business users. These topics are related, because if you know what’s important to measure, it’s easier to focus and report on that data in a meaningful way.
My fellow columnist Jason Burby has written extensively about setting KPIs for different types of Web properties. Today, I’ll add my perspective on developing KPIs and disseminating e-business insight around the organization.
In an ideal world, organizations would all have clear goals and objectives. Flowing from those goals and objectives would be the organization’s KPIs, the measures by which the organization knows whether it’s successful or not. Similarly, the e-business channel would have its own goals and objectives that would be aligned to the overall corporate goals. The e-business would have its own KPIs, which would have some resonance with the corporate KPIs.
A multichannel retail banking operation, for example, has branches, a call center, and an online banking presence. One corporate objective is to improve its customer service operations’ efficiency and cost-effectiveness. The corporate KPI for this objective is cost per customer transaction.
In the online channel, the corporate objective manifests itself into a desire to increase use of online self-service facilities. A suitable KPI for this is the number of online bank transactions. By comparing the volume of online transactions with its online targets, the bank will know whether it’s successfully increasing use of the self-service facilities and reducing its cost per transaction.
Don’t fall into the trap of having too many KPIs. Measurement and attention focus are lost if you track too many metrics. It’s easier to remember a handful of KPIs at any one time. Too many become unwieldy and lack focus on the main objectives. If you have 30 different measures with the same perceived priority, there’s the danger of “paralysis by analysis.” You’ll wade through a sea of metrics, trying to understand what’s happening to the business.
Selecting KPIs is a strategic process, but the metrics aren’t set in stone. They’re dynamic, changing from year to year as the business’s goals and objectives change.
E-businesses have a tendency to focus on metrics that come from Web analytics packages and call them KPIs. A guy who used to run Amazon.com in Europe made an interesting comment at a conference earlier this year: “Be careful of what you count. What you count is what you get.”
This is a powerful piece of insight, as it links the way business is measured to the way the organization (and the people within it) will then behave. Are you more interested in increasing page views or in improving customer satisfaction?
Another tendency is to focus on KPIs that are outcomes rather than the causes of those outcomes. Shouldn’t the focus be as much on the drivers as on the results? Commerce sites often use sales as a KPI. The sales figures will also typically be part of the standard financial reporting pack. However, sales are an outcome, a result. What drives sales, and should some of those drivers be KPIs?
What makes a good KPI? Craig Schiff, a business performance management consultant, offers a succinct answer. They “are strategic, they are actionable and they will make a difference in improving the business.” How do your KPIs stack up against these criteria?
Once you agree on your KPIs, understand them, and can measure them, data dissemination becomes a lot easier. The organization is focused around the key issues and knows what data to look for.
Next: a look at some obvious challenges in finding ways and means of bringing Web data to life.
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