5 Key metrics for corporate performances
Every CEO knows that increasing a company’s performance requires the measuring of very specific metrics. Every entrepreneur knows that paying attention to more than 6-7 Key Performance Indicators will keep them from focusing on the right ones. What are the five key metrics every medium-sized company should follow by 2025?
You probably heard of Kodak; this $55 billion technological empire disappeared because of a tiny startup called Instagram, which was composed of 13 people. However, did you know that the name “Instagram” precisely refers to “Instamatic” the legendary model of….Kodak? Moreover, the German company Owned is found to be the real inventor of the numerical picture (its founder, Steven Sasson, was an engineer at Kodak). Meaning, this major business collapse could have been avoided if there was a corporate innovation indicator at that time.
At MYK, we distinguish 5 different stages in the innovation funnel. First, the number of opportunities that have been identified (through ideation sessions) and deserved to be explored. Then, how many of them pass the 10 selected criteria of a successful venture. If your innovation team generates 20 opportunities, there probably only remains 8-10 sustainable and actionable business models. The third stage is the number of prototypes concretely built from these 8-10 potential ventures. And the fourth is the number of real pilots conducted to validate a POC. Then, we analyze the fifth and final number: From the 20 opportunities that entered the pipe, how many became real business units that generate revenue?
For the record, the “numerical prototype” (stage 3) of Kodak existed 30 years before Instagram. But the initial POC was never taken past the “Pilot” phase (stage 4)…Kodak, Nokia, Blockbuster, Chrysler remind us every day that a corporate Innovation metric is not a luxury privilege anymore. It is the condition to survive.
I. Innovation accounting
The list of the leading business companies has radically changed from 2008 to 2018. A few years ago, half of the top ten leading companies were oil & Energy actors such as Exxon Mobile, Gazprom, Royall Dutch Shell, BP and Petro China. Microsoft was the only technological player among them. Today, is the exact opposite. Five technological empires (Apple, Google, Microsoft, Amazon, Facebook) are among the top ten companies (by market capitalization), while only one oil company is included in the list. What happened?
First, the gold of the 21th century (data) is different from the gold of the 20th century (oil). However, there is a deeper reason: tech companies give special attention to their collaborators’ happiness. At MYK, we formalized a happiness indicator based on the level of interest (how passionate are the employees about their job? Do they frequently learn new things?), the level of satisfaction (Do they feel accomplished at the end of each day), and the level of well-being (work-life balance, health, work atmosphere). This metric enables a leader to pay attention to their most precious commodity:their people.
This key indicator; first measured through personal interviews – and then monitored over time by quarterly questionnaires – gives another excellent strategic indication: what are the three corporate issues our company should improve? Adopting both personal incentives and corporate permanent improvement initiatives is the best sauce we know in order to ensure long-term success. Never forget a leaders’ mission is to take care of his employees so that employees take care of the customers.
II. Happiness Management
III. Productivity Indicator
Who here never had a delay while delivering to clients or conducting an internal project? I remember that as CEO of a tech company, there was no way of tolerating any delay given the resources we put into strategic planning. We had, I guess like you do, very detailed quarterly project chart (called “gantt”, See SCRUM chapter, page 167). Every milestone, task and assignee was highlighted in colors. Every deadline was of course mentioned in Excel tables (or project-oriented softwares). And yet, we had delays. If those situations sound familiar, no worry. There is a way to anticipate delays and monitor your projects in a smarter way.
This key metric is meant to ensure the highest effectiveness in your business and measures the real completion of your project (for example 36%) at any given time (on June 19th) according to the number of tasks achieved by a team on a specific project. This indication should be immediately compared with the planned completion rate (let’s say 45% on June 19th according to your initial planning). This highly valuable data is directly extracted from the project canvas (see illustration) we especially designed it to enable any executive to efficiently monitor all the projects running in their company thanks to the indicator on our dashboard.
Moving toward a much higher level of effectiveness requires less effort than an executive would generally imagine. The only engagement middle managers should take is planning their project by milestones and tasks. While updating these charts once a week, they ensure that every department executive takes advantage of a perfect overview to efficiently allocate its respective resources.
IV. Customer satisfaction
You have probably heard of a famous company. It was born 20 years ago, lost a lot of money in the early years, its founder had to overcome more than sixty meetings to raise money, and even the number of different areas (books selling, delivery services, space exploration, cloud hosting, ...) is against every coherent business strategy. That company is today the number one by market capitalization: Amazon. When its founder Jeff Bezos is invited to reveal the secret sauce of Amazon's success, the answer is always the same: customer obsession. While other companies are obsessed by their cash-flow level, their competitors or their market shares, Amazon has proved the world the "customer centric approach" remains the best guarantee to long term profitability.
Your customer satisfaction indicator should of course be calculated on aspects relevant to your delivery process. However, these are some basics. Purchase experience, look and feel of your deliverable, expected quality rate of your product and the client's tendency to recommend your services to others are among the parameters we use to enable
decision makers to reach a reliable "customer satisfaction"rate on our dashboard. Also, our experience implementing dashboard taught us that the best framework to retrieve actionable feedback is a direct phone call from the account manager to your customer, structured by a very specific questionnaire (to receive insight beyond the numerical questions), within 2 weeks after a product delivery. A corporate executives' mission is to take care of the customers, because they guarantee your results. A customer satisfaction metric is the right channel to make it happen.
V. Cash Flow
The fifth parameter regards your financial health. Sheryl Sandberg is the brilliant mind behind the business model of Facebook, Google and Walt Disney. As former analyst at McKinsey, her first obsession in the early 2000’s was finding a job in a highly profitable company. However, she turned down, not only the industrial giants, but also to the Silicon Valley early-money-losing-companies (at that time) hit by the 2000 tech bubble. When interviewed by Google CEO, Eric Schmidt, she explained him that regarding parameters such as level of responsibility, company’s profitability, management role she would be given – Google had less to offer than other companies. Eric responded the one only criteria that matters in a company is – fast growth. [“If you’re offered a seat on a rocket ship, you don’t ask what seat. You get on”.]
Growth indicator is indeed much more important than the magnitude of cash flow in a company. This is the reason we measure financial growth through two indicators. The first calculates the percentage of received income on the expected income. This metric shows the real financial advancement of a company regarding its own expectations. The second is about the sales performance at year-to-date. That second metric shows the improvement rate of the business versus last year performance to keep teams motivated and proud of their achievement. “How did we perform compared to our own expectations” and “are we constantly (from year to year) growing our business” are the only two questions that matter.
Eric Schmidt was right. Growth is worth more than profitability level.