When I face a business challenge I'm trying to see the root of the problem. Having a quick-fix solution is fine, but what if a quick-fix solution is not possible unless fundamental issues are resolved. I see this often with KPIs. People ask to help with KPIs for this or for that, but the problem that they actually experience is a fundamental one - they have a vague strategy that is hard to follow. Recently I had a conversation with Pablo, one of our Spain-based customers. His company is a leading national manufacturer and his question was about a KPI to help with the poor performance of their business. Our dialog was really insightful for both of us. Pablo sorted out things about strategy and KPIs; I was able to trace verbally the problem of a bad KPI back to its root - a poorly formulated strategy. The result is not an article, but a dialog between me and Pablo. Together we completed a journey from a pointless KPI request to ideas about formulating a better strategy: http://www.bscdesigner.com/a-journey-from-a-bad-kpi-to-an-excellent-strategy.htm

1. A JOURNEY FROM A BAD KPI
TO AN EXCELLENT STRATEGY
Based on
http://www.bscdesigner.com/a-journey-from-a-bad-kpi-to-an-excellent-
strategy.htm
By Aleksey Savkin, bscdesigner.com
BSC DESIGNER

2. PREPARING FOR THE JOURNEY
• I was reached by a potential client from a
Spain-based manufacturing company.

3. PREPARING FOR THE JOURNEY
• I was reached by a potential client from a
Spain-based manufacturing company.
• He asked me for advice about a better kind of
KPI.

4. PREPARING FOR THE JOURNEY
• I was reached by a potential client from a
Spain-based manufacturing company.
• He asked me for advice about a better kind of
KPI.
• I asked the client a few questions about his
needs.

5. PREPARING FOR THE JOURNEY
• I was reached by a potential client from a
Spain-based manufacturing company.
• He asked me for advice about a better kind of
KPI.
• I asked the client a few questions about his
needs.

6. PREPARING FOR THE JOURNEY
• I was reached by a potential client from a Spain-
based manufacturing company.
• He asked me for advice about a better kind of
KPI.
• I asked the client a few questions about his
needs.
• It became obvious for me that the actual problem
was not with a KPI, but with a strategy.
• I will use a dialog style to tell a story about what
was discussed.

7. A NEED FOR KPI REVEALS A
PROBLEM WITH A STRATEGY

8. A need for KPI reveals a problem with
a strategy
Alex, we need some help to come up with
better KPIs…
We need some KPIs that will track our
progress in improving business
performance…

9. A need for KPI reveals a problem with
a strategy
Alex, we need some help to come up with
better KPIs…
We need some KPIs that will track our
progress in improving business
performance…
What strategy are you going to
execute to improve the performance
of your business?

10. A need for KPI reveals a problem with
a strategy
Well, our strategy is the
elimination of any poor business
performance… Do you have a KPI for
this?

11. A need for KPI reveals a problem with
a strategy
Well, our strategy is the
elimination of any poor business
performance… Do you have a KPI for
this?
I could have found an indicator that would
show you the level of the underperformance
that you have, but it won’t help you to
perform any better.

12. A need for KPI reveals a problem with
a strategy
In my opinion, what you actually need to do
first is to come up with a good strategy.

13. AN APPROACH TO FINDING A BETTER
STRATEGY
Isn’t “elimination of the poor
performance” a good strategy?

14. AN APPROACH TO FINDING A BETTER
STRATEGY
Isn’t “elimination of the poor
performance” a good strategy?
Well, it is not a strategy.
“Poor performance” is a very vague
definition of the problem that your business
has experienced. “Elimination of the poor
performance” can be a goal, but a strategy
is more about objectives than about goals.

15. AN APPROACH TO FINDING A BETTER
STRATEGY
If you want my advice I would suggest the
following:

16. 1 Start with an
analysis of the
reasons of the
problem.
3Formulate
these factors
as actionable
objectives.
1. Invest time in researching the reasons for
the poor performance;

17. 1 Start with an
analysis of the
reasons of the
problem.
3Formulate
these factors
as actionable
objectives.
2Map results
to show a
connection
between factors.
2. Map results to show a connection
between factors

18. 1 Start with an
analysis of the
reasons of the
problem.
3Formulate
these factors
as actionable
objectives.
3. Come up with some good actionable
objectives that will address the
underperformance problem;
2Map results
to show a
connection
between factors.

19. 1 Start with an
analysis of the
reasons of the
problem.
3Formulate
these factors
as actionable
objectives.
2Map results
to show a
connection
between factors.
4. Find key points that will tell if a
hypothesis actually works.
4 Find key points
that will tell if a
hypothesis
actually works.

20. 1 Start with an
analysis of the
reasons of the
problem.
3Formulate
these factors
as actionable
objectives.
2Map results
to show a
connection
between factors.
5. Add some indicators that will help to keep
track of your progress towards achieving
these objectives.
4 Find key points
that will tell if a
hypothesis
actually works.
5 Track
metrics, numeri
cal values for
these key
points.

21. STRATEGY IS NOT A GUARANTEE OF
SUCCESS
Do you guarantee that this will
work?

22. STRATEGY IS NOT A GUARANTEE OF
SUCCESS
Do you guarantee that this will
work?
Here we are talking about making
an informed assumption about what might
be the reasons for the poor performance
and what might be good solutions to this
problem.

23. Do you guarantee that this will
work?
STRATEGY IS NOT A GUARANTEE OF
SUCCESS
This is a kind of business hypothesis. As any
hypothesis it might work or might not

24. HOW-TO GUIDE FOR GETTING
BUSINESS INSIGHTS
Do you suggest using a certain
business framework to analyze the
current situation and come up with
solutions?
Something like SWOT?

25. HOW-TO GUIDE FOR GETTING
BUSINESS INSIGHTS
Do you suggest using a certain
business framework to analyze the
current situation and come up with
solutions?
Something like SWOT?
Business tools like SWOT, 7-S, Balanced
Scorecard, Competitive Analysis, etc. will
guide you and your team.

26. HOW-TO GUIDE FOR GETTING
BUSINESS INSIGHTS
Although the best business insights will be
rather spontaneous breakthroughs based
on the experience of your team.

27. SOME TOPICS TO STIMULATE
CREATIVE THINKING OF YOUR
TEAM

28. 1
STIMULATING CREATIVE THINKING
Put yourself in the customer’s shoes.
What can be done better?

29. 2
STIMULATING CREATIVE THINKING
Have a look at your competitors, their
products and services. What can you
learn from them?

30. 3
STIMULATING CREATIVE THINKING
What limiting factors (constraints and
bottlenecks) do you have in your
business environment?

31. 4
STIMULATING CREATIVE THINKING
Instead of adding something to your
business consider removing something
that might be holding you back.

32. 5
STIMULATING CREATIVE THINKING
Model your processes on the paper or
in software, visualization helps

33. WHY IT DID NOT WORK IN THE
PAST

34. HOW-TO GUIDE FOR GETTING
BUSINESS INSIGHTS
We did something similar in the past
and it did not work out well…

35. HOW-TO GUIDE FOR GETTING
BUSINESS INSIGHTS
We did something similar in the past
and it did not work out well…
What exactly happened?

36. HOW-TO GUIDE FOR GETTING
BUSINESS INSIGHTS
What exactly happened?
Well, we did a kind of brainstorming
and we had a list of excellent ideas.
In few months I understood that we
had progressed in just few of them
that were really close to what we
have been doing before

37. HOW-TO GUIDE FOR GETTING
BUSINESS INSIGHTS
I guess we just lost focus. I thought
that some new KPIs could help us…

38. HOW-TO GUIDE FOR GETTING
BUSINESS INSIGHTS
But after trying some I’ve found that
they worked as another formal
routine that our employees hated.
KPIs were reported, but no one had
an idea about what to do with this
information

39. HOW-TO GUIDE FOR GETTING
BUSINESS INSIGHTS
But after trying some I’ve found that
they worked as another formal
routine that our employees hated.
KPIs were reported, but no one had
an idea about what to do with this
information
I think the first step when you brainstormed
ideas was the right one. The problem
appeared because those ideas were
neither aligned with each other nor with a
problem.

40. HOW-TO GUIDE FOR GETTING
BUSINESS INSIGHTS
Actually, the problem itself was not
properly diagnosed.

41. HOW-TO GUIDE FOR GETTING
BUSINESS INSIGHTS
Actually, the problem itself was not
properly diagnosed.
It went sort of like this…

42. HOW-TO GUIDE FOR GETTING
BUSINESS INSIGHTS
Sales department suggested
developing a discount program;
marketing told us that we needed to
add two more products to satisfy our
clients’ needs;

43. HOW-TO GUIDE FOR GETTING
BUSINESS INSIGHTS
Engineering argued that we needed
to try a new technology.

44. HOW-TO GUIDE FOR GETTING
BUSINESS INSIGHTS
We did just a superficial analysis of
the problem and started shooting
out solutions.

45. MAP THE FACTORS OF FAILURE

46. MAP THE FACTORS OF FAILURE
I suggest you to start with the proper
diagnosis of the problem.

47. MAP THE FACTORS OF FAILURE
It won’t be as simple as “this prevents us
from performing well.”

48. MAP THE FACTORS OF FAILURE
Most likely you will find a number of
interconnected factors.

49. MAP THE FACTORS OF FAILURE
Moreover, some connections and
correlations won’t be really clear to your
team

50. MAP THE FACTORS OF FAILURE
Moreover, some connections and
correlations won’t be really clear to your
team
What can we do to stay focused?

51. MAP THE FACTORS OF FAILURE
What can we do to stay focused?
Creating a map where factors are linked to
each other to represent a cause-and-effect
connection between them (BSC Designer
software can help with automation of this).

52. MAP THE FACTORS OF FAILURE
These factors can be easily transformed into
objectives. And your goal is to focus the
company’s efforts on a few
objectives that will be more likely to lead
you to success.

53. MAP THE FACTORS OF FAILURE
These factors can be easily transformed into
objectives. And your goal is to focus the
company’s efforts on a few
objectives that will be more likely to lead
you to success.
It appears that the ideas of
marketing to add two more products
had nothing to do with our poor
performance. Our clients would only
be confused with new products.

54. MAP THE FACTORS OF FAILURE
Can an opposite idea (removing
some products) work for us?

55. MAP THE FACTORS OF FAILURE
Can an opposite idea (removing
some products) work for us?
Normally reinventing a product line helps to
focus a company’s efforts on what matters.
Take Apple’s strategy as an
example, when Steve Jobs focused on
cutting their product line.

56. THE ROLE OF KEY PERFORMANCE
INDICATORS (KPIS)

57. THE ROLE OF KEY PERFORMANCE
INDICATORS (KPIS)
It appears that the major part of the
job is about making a careful
diagnosis of why things happened as
they did…

58. THE ROLE OF KEY PERFORMANCE
INDICATORS (KPIS)
What about KPIs? Which ones do I
need?

59. THE ROLE OF KEY PERFORMANCE
INDICATORS (KPIS)
What about KPIs? Which ones do I
need?
When you put all parts of the diagnosis
together you can come up with a strategy to
address these problems. KPIs will help you
to see if you are on the right track.

60. THE ROLE OF KEY PERFORMANCE
INDICATORS (KPIS)
Yesterday this answer would sound
logical to me. But after our
conversation I’d like to ask you to be
more precise…

61. THE ROLE OF KEY PERFORMANCE
INDICATORS (KPIS)
What exactly do you mean by
“seeing if we are on the right track?”
Can you give me some examples?

62. THE ROLE OF KEY PERFORMANCE
INDICATORS (KPIS)
What exactly do you mean by
“seeing if we are on the right track?”
Can you give me some examples?
For example, what problem do you want to
solve by eliminating some of the products
from your product line?

63. THE ROLE OF KEY PERFORMANCE
INDICATORS (KPIS)
Would you like to cut some engineering and
marketing expenses, or do you plan to make
your customers pay more for advanced
versions of your product?

64. THE ROLE OF KEY PERFORMANCE
INDICATORS (KPIS)
Indicators are supposed help you to track
your progress towards these goals. You can
use indicators that will measure certain
types of engineering expenses and/or …

65. THE ROLE OF KEY PERFORMANCE
INDICATORS (KPIS)
… you can come up with an indicator that
will confirm that customers are buying an
advanced version after the old one was
removed from your product line.

66. Now I see how pointless my initial
request was for a KPI! Thank you for
focusing my efforts in the right
direction.
THE ROLE OF KEY PERFORMANCE
INDICATORS (KPIS)

67. By the way, why do you say
“indicator,” and not a “KPI?”
THE ROLE OF KEY PERFORMANCE
INDICATORS (KPIS)

68. By the way, why do you say
“indicator,” and not a “KPI?”
THE ROLE OF KEY PERFORMANCE
INDICATORS (KPIS)
I’m trying to be careful about using terms
like metrics, indicator and KPI. People tend
to call a KPI any metric, but not all metrics
are KPIs.

69. THE ROLE OF KEY PERFORMANCE
INDICATORS (KPIS)
Metrics might become a KPI only when
placed in a certain business context. By the
way, that’s why a long list of KPIs from the
Internet don’t work.

70. Let me summarize what I have
learned:
THE ROLE OF KEY PERFORMANCE
INDICATORS (KPIS)

71. SUMMARY
1 • Start with an analysis of the
reasons of the poor
performance problem that we
have.
• Use various business methods
to stimulate the creative
thinking of my team.

72. SUMMARY
2 • The results of this analysis
need to be mapped to show a
connection between various
factors.
• The strategy map automation
functions of BSC Designer can
be used.

73. SUMMARY
3 • Formulate these factors
as actionable objectives where
it is possible;
• Together with my team we will
come up with an action plan.

74. SUMMARY
4 • Find some key points that will tell
us if our hypothesis about what
needs to be done to solve the
initial problem actually works.
• Track metrics, which are the
numerical values for these key
points.

75. SUMMARY
That’s an excellent summary! With BSC
Designer you can actually automate not only
a strategy map, but also the KPIs. Your
action plans can be aligned with KPIs and
business objectives.

76. SUMMARY
Most people download and try the software
just to manage KPIs, but now you see that
one will spend more time on the “Strategy
map” tab on KPIs.

77. SUMMARY
Most people download and try the software
just to manage KPIs, but now you see that
one will spend more time on the “Strategy
map” tab on KPIs.
My first thoughts about the software
was exactly as you described. I’m
happy that my understanding of how
business challenges need to be
addressed was changed.

78. SUMMARY
Thank you for your help and for your
excellent software!

79. SUMMARY
Thank you for your help and for your
excellent software!
You are welcome! Nice to see you among
the users of BSC Designer!

80. MY QUESTIONS
Have you faced the same problems in your
business? What are your favorite methods
to get business insights?

81. MORE ABOUT THE BALANCED SCORECARD
Find more insightful
articles about the
Balanced Scorecard
in ”Articles” section at
www.bscdesigner.com
BSC DESIGNER

82. THANK YOU!
Feel free to send us your questions using the contact form at
www.bscdesigner.com