A guide to getting the right information in the most efficient way
Think back to your last major decision. What information did you use to make it? When you decided to buy a new car, for example, did you make a list of all car options, collect data on each option for each vehicle, rank all cars on each option, assign a weight to each option, and finally calculate a cost-weighted ranking for each car? And did you then have the discipline to buy the one with the best ranking?
Or did you talk to friends, read magazine articles, visit a few dealerships, and then make a purchase based on your gut feelings? Maybe you even went back (feeling a little guilty) and changed the weightings of your formula so the hot red number you really ached for was the one that ended up on top.
If you're like most people, you collected a few facts and then, in the face of incomplete information and the need to choose, made the best decision you could. The point is that given constraints on time and resources, we need to have an "information focus" to make the best business decisions possible. We can't afford to feel guilty for not studying a problem exhaustively or to be paralyzed by a tidal wave of data.
An information focus gives decision makers the specific information they need to make better decisions. And in today's economy, scarce company funds must not be wasted on generating information that no one reads or needs. How do you get the right information in the most cost-effective way? Consider the following questions:
What are you trying to achieve?
Most business decisions are twofold: an initial decision and ongoing reviews to determine whether the decision should be reversed or fine-tuned. Each aspect requires different information. The more specifically each of them can be defined, the better the information you can get.
For example, your objective might be to expand sales by adding a new product line. To meet that objective you have to decide, among other things, which products to add and how to structure your sales force to market those products most effectively. Initially you need to know who will be buying a new product, what features that buyer is looking for and how much they cost, how the product will be distributed, the size of the potential market and what your share of that market might be, and the sales volume you can expect. Answers to those questions have to be written down as a formal plan so you can track your progress systematically. To evaluate the decision on an operating basis, however, all you need to do is compare unit sales volume and profitability figures with your plan on a fairly frequent basis (say, weekly and monthly) and reassess your decision about target market and distribution on a less frequent basis (say, semiannually or annually).
Writing down your overall objective, the initial decision to be made, and the ongoing operational decisions will help clarify, refine, and focus the objectives of your company. You then need to get reasonable consensus among decision makers. The process takes time. Allow it to unfold, but don't let it paralyze your company. A one- or two-hour discussion three or four times over two to three weeks should be sufficient. Allow time to pass between each session so that people can digest what's been said.
During the discussions, ask yourself whether the initial objective and the subsequent decisions are specific enough -- often they are not. In the car-buying example, for instance, the objective seems to be to buy a car, but that isn't nearly specific enough to define the information you need. Do you want the car for getting to work in the morning, for taking clients to dinner, for transporting your child's scout troop, or for impressing a date? When you ask the questions that need to be answered, you'll find it easy to test the relevance of the corresponding report: it will answer the questions.* * *
What are the information trigger points that lead you to make one decision instead of another?
For each of the key information items you are tracking (number of units sold, gross-margin dollars, and so on), ask yourself ahead of time what numbers will lead you to take one course of action over another. If, for example, a new product line in its first year achieves just 20% of the sales volume you'd planned for, will you eliminate it? Will you do some fine tuning? Or will you give the product another year or two to get its sea legs?
Information trigger points normally aren't single numbers but a range of values. Businesses don't usually kill a product if it achieves only 50% of projected sales volume and keep it if it achieves 51%. Instead they use "traffic-light ranges." Values in the green mean that things are working the way we expect them to; values in the red mean that change is required; and values in the yellow mean that close monitoring is needed. Try to set a green, red, and yellow range of values for each report.
You may find that no matter what value you see in a report, you're going to keep on a particular course. This is very common. It means that the action is strategic (something like diversifying into a new line of business or adding a new store location), not tactical (buying a car to get to work). Monitoring strategic objectives is not the same as monitoring tactical objectives. Strategic objectives, along with other measures of the health of the business, need to be evaluated over the long term. Too many companies restart their tracking with a new year; they don't look at the long-term impact of a decision. But it is long-term analysis that allows you to see where a decision is headed and provides the information with which to make subsequent choices. From the start, be sure your strategic objectives are not too subjective ("I want to improve the quality of service to my customers"). If they are, you'll lose valuable time -- and money -- puzzling over what to measure and report.
Who are the decision makers, and what are their styles?
You'll need to figure out which people should participate in making a particular decision and then find out about their decision-making styles. Whoever is gathering the information will have to learn those styles to provide appropriate support. Looking at the key decisions executives have made in the past -- and how they went about making them (including the information they wished they'd had) -- can provide important clues. So can learning about their media diets: what books and magazines they read, what radio stations they listen to, what television shows they watch, what Web sites they frequent, and, most important, why they're drawn to those information sources.* * *
Before you strike out to create a new report, review those that already exist to see if one can be modified. Don't reinvent the wheel. If you do decide to create a new report, it should have the following characteristics:
Convenience. It should be available at any time from any location.
Security. It should be available only to the appropriate people.
Flexibility regarding detail. Users should be able to select the level of detail they need.
Context. Facts on their own are not terribly helpful. Facts placed in context -- indicating significant trends, comparisons against norms, and other relative variables -- are what you need to run your business.
Once reports are available that answer relevant questions in a format that jibes with the decision-making styles of your executives, make sure the reports are advertised. The job isn't done when the report is created. It must get to the right people, promptly, in order to have a positive effect on the business. I like to have a wide range of reports on-line and every month track the frequency with which each is used. That way I know which reports "sell" and which do not.
Those that aren't selling should be examined to determine why not. If the problem is that people don't know about a report, it should be advertised more aggressively. If the problem is that the report contains a fatal flaw -- say, the thing it's measuring is ultimately irrelevant to the business objective you're trying to achieve -- it should be modified or even killed. Don't be afraid to scrap a report that isn't being used and to start over.
An on-line menu for reports is a good idea because it allows users to get the information they need when they need it. Remember: Just as companies' goals and objectives change, so do their information needs. Flexibility is key. Structure your information systems, your decision-making process, and your reports to accommodate the ebb and flow of your changing business.* * *
William R. Pape (email@example.com) is a cofounder of VeriFone Inc., with headquarters in Redwood City, Calif. He was the company's first chief information officer.