Sunday, December 11, 2005

Forward-Leaning Metrics

Most of us have a pretty keen ability to look backward and know where we’ve been. Many of us have even advanced that skill to be able to look around and know where we are at the moment. But knowing whether you’re on track for where you expect to be six, 12, 18 months from now … that’s something only a very few managers have mastered.

Today, marketing reporting, and to some degree financial reporting, is primarily a function of gathering sales data at the end of a reporting period, massaging it into charts and graphs, and then circulating it for discussion or comment. And for most, even this is no small accomplishment.

This diagnostic approach is rooted in the instinctive human learning method of interpreting past experiences to frame future expectations. At best, that process is effective at helping the organization see where it’s recently been. Only through very intuitive methods do companies attempt to project the trajectory of performance into the future so they can manage to the desired outcome. And only a very few possess the innate (or artistic) ability to properly view diagnostic information and project it with reasonable accuracy, overcoming their own perceptual biases and assimilating the collective wisdom of their entire team. This is the fundamental human frailty marketing dashboards can help overcome.

Without a doubt, there is benefit to having diagnostic measurements on your dashboard. But without components that help you predict the future, the dashboard is only expanding the limitations of memory, not improving decision making. Think again about the dashboard on your car and how it works with your vision and stored experiences. You keep your eyes fixed on the road ahead with only quick glances at the dashboard to see how speed, fuel level, and engine stress will affect the desired outcome of arriving at your destination. Your brain makes millions of calculations per second to adjust the turn of the wheel, the pressure on the gas pedal, and the search for rest areas along the way. You might even have reviewed a map before starting out to form a mental picture in your mind of where you were going.

Today’s vehicles are increasingly equipped with some “forward-looking” dashboard capabilities. Compasses are being replaced by GPS systems that provide real-time mapping to guide you to your destination, alerting you in advance to upcoming turns. Fuel gauges are evolving to become distance-to-empty meters that display not just the current level of the tank, but how far you can go before stopping based on constantly updated fuel economy readings. By focusing your thinking on the journey ahead, these advances make driving easier and more efficient.

However, most marketing dashboard metrics are still being presented in the form of current vs. prior period. That’s helpful in terms of seeing the trend to the current point in time. But, to use the vehicular metaphor, it would be like driving forward while looking in the rear-view mirror — more than a little dangerous.

The metrics on a marketing dashboard highlighting current performance should be compared to a forecast for where they’re supposed to be at that point in time relative to the longer-term goals. That way, the dashboard answers the question, “Where is my projected outcome vs. my target outcome?” Proper marketing dashboard readings give you an indication of whether you’re on the right course, at the right speed, and have enough gas in your tank to get to your desired destination, not just any destination. If the dashboard says you’re off course, you can look at past-performance data for diagnostic insights and ideas on how to course-correct, but no longer will looking back be your central focus (or the focus of countless hours of discussions and justification exercises).

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