The Value of Business Analytics: Identifying the Path to Profitability

MEASURING WHAT IS IMPORTANT

Building an effective measurement framework need not be complex. Although a multitude of different measures may be useful, often only a small number of these are really important. An effective measurement framework aims to do three things:

1. Measure the value being created.

2. Focus attention on underperforming assets.

3. Identify areas that may benefit from optimization.

The most effective measurement frameworks are often the simplest. By tracking only what is important, the team can spend less time developing a needlessly complex reporting platform. By keeping the number of measures monitored low, the team makes its analysis simpler. And, by focusing attention on the measures that most impact success, managers drive optimizing behaviors away from activity and toward outcomes.

When the right measures are not tracked, teams often struggle to understand what is adding value, how much value they have created, and where they should be investing resources. Conversely, if too many measures are tracked, teams often fail to deliver any measurement framework at all. Because building a measurement platform takes time away from growth initiatives, it is often difficult for managers to justify a significant time investment from their team. After all, every hour spent building the platform could be an hour spent creating tangible or intangible value for the organization.

Specific measures will vary by application, but the most effective teams consider three ...