Chapter 5: Step One: Understand the Importance of Measuring Performance

Chapter 5

Step One: Understand the Importance of Measuring Performance

The material in this chapter expands upon pages 129-148 in The 2,000 Percent Solution.

Many people are surprised when they rapidly find many innovative ideas for creating breakthrough progress by using the questions in Part One. Two factors contribute to this enhanced creativity. First, you have used the questions in the workbook to explore areas of potential that you probably have not fully considered before. Second, by thinking about the opportunity in more detail and assuming that you could have unlimited resources and skills, you opened your mind to new areas of implementing improvements that you had not thought about before.

Let’s now turn that successful experience into lessons about the value of measurements. Move back in time and consider what measurements you could have put into place that would have revealed the opportunities you are now considering sooner … even without this workbook.

If you are like most people, you will discover that you haven’t been measuring the nth degree potential of opportunities to expand profitable demand from customers and end users. Instead, you have probably focused your measurements on how effective you are in serving customers and end users by doing what you already do. You need both sets of measurements to succeed. The nth degree measurements tell you “what” you should be emphasizing and the measurements of how you are performing now tell you “how” you are doing in pursuing the best “what” area.

The nth degree measurement gap can easily be filled by using a combination of survey techniques, detailed examinations of your most developed markets and market tests involving vastly changed benefits for customers and end users. We strongly encourage you to begin working with skilled practitioners to put the necessary nth degree measurements in place.

Most people discover from their new nth degree measurements is that they are totally unaware of some of the best ways to create more profitable near-term demand for your offerings. You are highly likely to find an even better opportunity than any of the ones you identified in chapter 3. As a result, it’s very important that you develop nth degree measurements before you repeat the eight step process in considering the opportunity you selected based on chapter 3.

These nth degree measurements can bring you an unexpected benefit: New insights into how to move faster and less expensively to nth degree effectiveness. For instance, the publishing company in the example developed in chapters 3 and 4 could use such measurements to identify which celebrities, which new information, which charities, which sponsors, which media events, what kind of a contest and what daily disclosures would work best to work with. A company that already had such information could then be much more precise and effective in finding the fastest, easiest ways to implement those insights.

Naturally, you should also examine why your organization doesn’t already have nth degree elasticity measurements in place. The source of that lack will uncover stalls that are holding your organization back in other ways as well as denying you these measurements. For many organizations, the root cause will be an over focus on “meeting budget.” In such organizations, anything that doesn’t contribute to meeting this year’s or next year’s budget is looked at as being entirely optional. But that short-term focus can paradoxically cause an organization to miss its best opportunities to prosper this year and next. It’s like a runner only developing conditioning to run for a short period of time. That runner will be failing to reach his or her full potential. With different conditioning, much faster times over longer courses would soon follow.

Another helpful focus for your new nth degree measurements is to search for the potential achievements of the people and organizations with whom you seek to partner. For example, how can they derive the most benefit out of the new directions that are very powerful for you? As you expand the number of stakeholders who will benefit and the size of their benefits, you will create a powerful momentum that will further speed your progress. If you would like to understand more about why this occurs, please see Part Three of our book, The Ultimate Competitive Advantage (Berrett-Koehler 2003).

Questions to help your organization identify the opportunities for identifying nth-degree opportunities through new measurements.

If you do not yet have nth-degree opportunity measurements in place, these questions will help you create those measurements. If you do have such measurements, you can use these questions to improve upon what you are doing today.

1. Which stakeholders (including end users, customers, opinion leaders, regulators, suppliers, distributors, partners, employees, shareholders, lenders, and the communities you serve) are or could be most critical to expanding your success to much higher levels?

Make this list as long as possible. Each group or person you identify should then be included in your new nth degree measurements.

2. How could each person or group expand profitable demand for your products and services in ways that would not be as helpful for your current and potential competitors?

Re-ask yourself this question as often as possible. Chances are that you are not considering enough ways to cooperate with your stakeholders. Also, as conditions and preferences change, new opportunities will open up to you. The answers to this question are essential building blocks to the type of measurements you need.

3. What’s the best way to find out more about the capability of each stakeholder to help you expand profitable demand for your products and services?

For large organizations, the answer is often to measure their successes in the past that relate to your particular needs. The answer might mean learning how rapidly a given distributor has usually gained ideal distribution for products and services like yours.

For large groups of individuals like end users, the answer is often to measure their responsiveness to various marketing and performance choices you offer or could offer through market research. In doing so, be sure to segment groups of individuals into those who offer various degrees of potential profitability and speed of adoption. Then when you focus on the results for those who will provide the most profit and adopt the soonest, you will know better where to start your focus.

As you consider a stakeholder or stakeholder group, be sure to also look into the indirect effects of gaining their support. For instance, some early adopters of new products and services are also sources of great word-of-mouth influence. Some early adopters will tell hundreds of people about their positive experiences and influence early trial among those who admire the early adopter. In this way, focusing on early adopters who are also influential with others can greatly speed your progress.

4. What new forms of information can help you gain insights into nth degree potential?

For a mining company, creating a more helpful form of information might mean translating geological information into a three dimensional computer model that geologists could use to help identify where the most valuable ore veins are likely to be located. For a biotechnology company, this approach could possibly mean defining likely characteristics of genes that could be adjusted to provide patentable health benefits. For a chemical company, this opportunity identification measurement could mean identifying potential product characteristics that will enhance customer performance in powerful ways.

5. How can you compile what you have learned so that it can be more effectively shared with other stakeholders and experts who can help you devise new methods of capturing nth degree benefits?

Many stakeholders can only help in one dimension of nth degree elasticity. In such cases, they will be overwhelmed and confused if you provide everything you have learned. Instead, you will need to package the results of your measurements in ways that provide simple clarity in one or a few dimensions. We suggest that you consider creating strategy maps for this purpose. To learn more about this process, we suggest that you read Strategy Maps (Harvard Business School Press, 2003) by Robert Kaplan and David Norton.

Copyright 2005 Donald W. Mitchell