Are you measuring the right things?

Wed, 12/12/2012 - 18:45 -- John Locke

Business Intelligence. Customer Relationship Management. Big Data. High Speed analytics. A/B Testing. These are common buzzwords that promise to make your business succeed, through the analysis of things you can measure -- the number of visitors on your web site, the number of Twitter followers/Facebook Likes, the average rating a handful of survey respondents give to an event.

There's all kinds of things you can measure, and you can easily get lost in the possibilities. But does all this measurement help you succeed?

Perhaps. But it might not be the best use of your time.

I'm in the midst of implementing some internal business dashboards for this kind of data, for Freelock. And I've seen similar efforts underway in other organizations. And a key mistake I see repeatedly is spending too much time trying to move the dial on numbers that ultimately have little to do with the bottom line: generating revenue, getting attendees in seats, getting happy customers that will reward you with repeat business.

"Big Data" is considered a hot topic these days. For the scientific realm, big data supports analysis on scales previously unheard of, leading to some really great results. Some areas that really illustrate this are individual human genomics, weather modeling that can predict the left turn Sandy took with several days of advance warning, discoveries of the Higgs Boson, and more. When applied to business purposes, the benefits start to become a bit murkier.

The biggest problem with business use of Big Data is what the data represents: you.

Like it or not, if you're on the web, you are data for a whole bunch of businesses and organizations out there who are tracking you, categorizing you, analyzing your activities, and selling data about you to other businesses who want to sell to you.

This isn't always bad. It leads to very useful services like Amazon and Netflix recommendations, services that compare your buying behavior with others, and where they can match you up to a cluster of other individual with similar tastes, they can recommend other titles your peers have purchased.

But it also can be a bit creepy, and it is certainly reducing you as a customer to a speck of data lumped together with others. It's dehumanizing. It's basically assuming that we are all interchangeable "consumer" units, and if you tweak something in a certain way, we will jump in a particular way.

I'd like to draw a very big distinction between Business Intelligence (BI) and Customer Relationship Management (CRM). Both are hot business buzzwords, and both are supported by similar tools. But the underlying assumptions driving the use of the tool seem to me to be diametrically opposed.

Business Intelligence -- you are a number, and I'm going to push buttons until you jump

In BI, analytics is the key focus. You are constantly measuring everything, and doing tests to identify things that make your key measurements improve. The assumption is what one group of people responds to, everyone (or at least everyone in that group) will respond to.

To me, this seems like a pseudo-scientific approach to marketing and business development. Pseudo, because it's not scientific, it only appears that way. The assumption is that if you show some users one thing, and other users something else ("A/B Testing") then if people respond to one more than another, it must be correct. That's fine if you're testing a single, carefully chosen element change, across a broad enough base of visitors, over a long enough period of time to test its validity.

The problem is, making a decision rarely boils down to a single element. There are far too many factors going into a decision than you're likely to uncover using a testing approach like this -- the number of variables you would need to test would mean you'd need a sample size of the whole world! And if a news story highlights some disaster and changes the way people think, you'd have an entirely new factor outside your control mucking with your test.

BI may be effective for Amazon, NetFlix, and the US Government. Chances are, your sample size is far too small for it to be effective for you.

Customer Relationship Management -- when you have a need, I'll help you solve it

With CRM, you're not looking at the big picture. You are looking at one customer at a time, and seeing their individual case history with your organization. CRM is all about improving the communications and level of service you are providing to your customers, one person at a time. If you systemize how you interact with your customers, you can make sure you are delivering on a minimum level of service, and are talking with them on a timely basis so when they have a need they come to you ready to buy.

One sales acronym I learned recently is BANT:

B - has an appropriate Budget
A - has the Authority to make a decision
N - has a Need for the solution
T - now is the Time the organization wants to make a purchase

A CRM system can help you keep track of prospects who may lack the budget or the timing, and remind you to call them periodically so that when these all line up, you're ready and available to take their business.

Taken a step further, a CRM system can help you add value for your customers. We're working on ways of getting our contact list organized so we can better provide strategic introductions between customers, or otherwise refer business.

Measure the right things

Don't get me wrong. Having a robust measurement system can be an incredible boon to your business. If you can find key indicators that eventually lead to sales, you can get a snapshot view of how your business is performing, where you're losing potential (or existing) customers, and where as a leader you should focus your attention to increase your bottom line.

But the number of Twitter followers you've added in the last month or your current Klout score is totally irrelevant if you haven't figured out how to link those figures to sales.

The crucial thing is to analyze how your customers find you, where people who would be good customers are that you are not, how to turn people who have heard of you into customers, and what might be holding you back. Measuring the quantity at each stage of your sales pipeline can give you some indication of how good a job you did. But it's really easy to inflate one or two of those while having no impact at the end of the sales pipeline where people actually pay.

The story that you're selling, the quality of your service, the satisfaction of your existing customers -- these are far more meaningful than the raw numbers. Having a quality relationship with your customers, making happy customers, these are going to be much better for you than simply having more.

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  1. I wanted to touch base and thank you for your team’s quality work on the FHCRC eagle-i connection project.  The system is live and in production – pushing our Drupal content automatically to Harvard’s system.

    We’re very grateful for all the efforts your crew put into this project! Freelock is on my speed dial for future projects!

    Ann Marie Clark
    Fred Hutchinson Cancer Research Center

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