Don't Just Count, Measure

The United States faces a shortage of 140,000 to 190,000 people with deep analytical skills and 1.5 million managers and analysts to analyze data and make decisions based on their findings. — Big Data: The next frontier for innovation, competition, and productivity

Measurement can be defined as a quantitatively expressed reduction of uncertainty based on one or more observations, while counting is to determine the exact number or amount of something.  Executives have become obsessed with counting; they track everything from inventory, hours worked vs. hours billed, number of Facebook fans, website visitors and much more.  It is easy to like counting, because it is familiar and exact. However, it is time to move beyond counting, and start measuring.
Making great business decisions is not only about knowing exactly how much of something you have, but instead about reducing uncertainty about the future and your decisions.  This is the definition of measurement, to reduce uncertainty based on one or more observations.
To be meaningful, measurement requires that you define the business question to be answered and select the right variables to measure.  Unfortunately, most off the shelf metrics or so named “analytic packages” distract executives with counting, instead of helping them define the most important business questions and find the variables will help provide the right answers.  The following is a quick introduction to moving beyond counting and applying measurement in your business.
Step 1: Define Your Most Important Business Question
Valuable measurement requires a lot of work, so you want to make sure that you are answering the right business question.  Before you start working on selecting variables, writing a survey, or defining methodology, it’s essential to define what business question, if answered, would have the most significant impact on your business.  For example, what business question would be the valuable to answer: what are customer perceptions of your company, why do people choose to purchase your product, or why are people purchasing product A and not B.  The most important business question is specific to each organization, or even individual departments.  Without being able to clearly define your most valuable business question, it’s a waste of time and resources to move forward with your measurement endeavors.
Step 2: Prioritize Variables
The variables you select should be chosen based on the business question you need to answer, and variables you choose should be prioritized based on their ability to reduce the uncertainty of the answer to the most important business question you seek to solve.  Many organizations tend to focus on internal data sources, but make sure to consider data from external, as well as internal sources.  A deep knowledge of your internal business processes is required, but big opportunities, threats and results tend to come from outside an organization.  Make sure that you only collect the most important data by clearly defining your business question and prioritizing the variables required to answer the question you seek to answer.  Related Post: How to Structure a Survey
Step 3: Answer the Question
Ideally, your answer should go beyond just answering the business question, and explain how the answer impacts the business then provide recommended next steps.  For a CAN specific example, if you answer the question of “why people purchase Tracker more frequently than Capture”, your answer should also provide steps to improve the sales of Tracker and Capture, and recommend whether CAN should focus on selling more Tracker or on increasing Capture sales relative to Tracker.  This requires more work, as well as the integration of internal strategy, external forces, and a deeper involvement with stakeholders that shape the outcome, but going the extra step allows for your answer to actually impact the organization.  Rather than simply counting the number of sales for Tracker and Capture, by measuring vital aspects of the sales, you are able to better plan for the future by helping to explain away the uncertainty of the future.


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