Effort and Effect. Knowledge Through Measurement

Strategy = Execution

Effort and Effect. Knowledge Through Measurement.

With the Minimum Viable Product (MVP) in the first execution wave, we can harvest the benefits of a new initiative for the first time. Measurement is crucial in this phase: after all, we do want to know what’s working.

Why You Need a Practical Measurement System for Revenue Management.

What do we mean by “benefits” in this context? Benefits are the measurable and planned changes resulting from a strategic initiative that are perceived as an advantage by a stakeholder. These are net benefits—that is, after deducting the costs—and after deducting the negative benefits, which are distinct from costs. Costs are the investments made in a program to realize the benefits. Negative benefits include, for example, a loss of revenue resulting from exiting a particular market.

Benefit management is a very serious matter. Benefit management in Strategy Execution involves setting up, operationalizing, and using a benefit measurement system. You can also call it something else: business case management, “target monitoring,” or performance management. What’s in a name? These are all synonyms used to measure the results of strategic initiatives. Ultimately, they reflect the results of our daily efforts in the areas of management (“running”) and Improvement, Renewal, and Innovation (“change”). We can determine how these efforts impact our KPIs related to customer and employee satisfaction, revenue, profitability, and so on. But as soon as we want to measure our improvements (type 1), renewals (type 2), and innovations (type 3) independently, it becomes more difficult. Yet that is precisely what we want to do. After all, we are investing more and more resources (time, money, and energy) into improving, renewing, and innovating. The goal is to be able to compete more effectively and ensure our survival. To do that, we need to know what’s working. Figure 1 illustrates how you can measure the business case realization of initiatives independently of the contribution made by day-to-day management.

Be very careful about which KPIs you measure. Not every key performance indicator (KPI) is suitable for measuring the desired end result.

Pay close attention to which KPIs you measure. Not every KPI is suitable for measuring the desired end result. Sometimes you need temporary sub-KPIs before you can measure a final KPI. For example: more website visitors lead to more requests for quotes and, subsequently, to more sales. Ultimately, you want to be able to create a KPI tree that shows the strategic end goals, the benefits, the KPIs, and the relationships between them. In my book, I’ve included a list (Appendix 10) of 25 typical KPIs and another 32 startup metrics to help you formulate your objectives.

A few tips for effective revenue management.

If there’s one thing you need to get right, it’s determining who owns the specific benefits to be realized.
Continue to align the objectives and benefits of an initiative with the organization’s overarching goals.
Try to isolate the benefits of a new initiative as much as possible so that the measurement is not skewed.
Organize benefits management separately from project or program management so as not to hinder the project or program.

Perhaps most importantly: you need a practical and simple measurement system. Effective leaders monitor the progress of the entire Portfolio every quarter and the initiatives currently in progress every month. It’s better to have a clear-eyed view than to muddle through blindly.

Accurate measurement supports validated learning. After all, you want to be able to demonstrate the progress you’re making, especially in uncertain circumstances. Eric Ries’ Lean Startup Method uses A/B testing and cohort analysis, which allow you to measure each cohort—each group of customers—separately, rather than just looking at a cumulative total.

To measure progress, you need metrics. Metrics must meet three criteria. First, they must be actionable. There must be a causal relationship—for example, the number of visitors per day. Second, the metrics must be accessible. If the metrics aren’t available, they can’t be analyzed. And third, they must be verifiable. It must be certain that they are accurate and timely. If a metric does not meet the three criteria listed above, it is a “vanity metric”—a number that is useless.

The Basics of Benefits or Performance Management

Maintain a realistic gap between ambitious and achievable objectives. Rule of thumb: make sure that four to five of the twenty to twenty-five KPIs are truly challenging, and the rest are realistic.
The selected KPIs must be put into practice. You don’t want them to be just a paper tiger.
Both the content and the timeline of the targets must be SMART. “A number” is not a number, and “soon” is not a specific time.
You need the flexibility to transcend disciplinary and departmental boundaries.
Make sure your objectives are well-balanced, so choose at least two. Even a cost-reduction program should include an objective related to continuity and, for example, Renewal, so that cost-cutting measures are implemented while maintaining the necessary quality standards.
Define the targets from the perspective of the stakeholders and from the outside in.
Keep it simple. For the sake of implementability, but also for the sake of measurability.
Think about it. And then think about it some more. Discussions about targets are often too superficial as well.
Align the targets with the current KPIs and targets of the existing performance management system.
Set it up as a dynamic system. The goal is to measure and be able to make adjustments.

“TO MEASURE PROGRESS, YOU NEED METRICS”

Strategy = Execution. Improve, Renew and Innovate Faster

How can organizations make strategy execution their number one priority? And improve, renew and innovate faster? This I describe in my book Strategy = Execution. Strategy = execution is based on the research that Turner started years ago into the success factors of strategy execution and innovation. We interviewed 60 directors and professionals and analyzed more than 75 cases, 300 relevant books and articles.

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More about Jacques Pijl (author) and Turner Consultancy.
The most popular interventions based on Strategy = Execution
24 endorsements from organizational leaders
American management book of the year 2021, no. 1 in the category of strategic management, in the top 100 bestseller, seventh edition, translated into: English, German, Spanish, Russian and Bahasa.
Selection of the most important management books according to CEOs of innovative organizations (FD New Champions). Included in library of classics (mb.nl).
Nominated for Management Book of the Year.
Countless articles and interviews in FD, Emerce, Frankwatching and CFO.
Numerous Ted Talks and in-company workshops at the top 25-50 organizations, average rating 8.7.

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