Rethink “Business Intelligence” and Key Performance Indicators
By Bruce Merrifield - Merrifield Consulting
The on-going, global, credit-bubble meltdown requires new thinking beyond cutting costs. But, new thinking requires new vocabulary to explain new concepts that can be both analyzed and managed by new, truly “actionable information”.
Deeper profit power metrics – that presumably will come from a “business intelligence” (BI) system – must be added to our past “key performance indicators” (KPIs).
Why is BI a bit of an oxymoron? Is it because we are using KPI’s that are refined by-products of financial data, which are the lagging effects of still deeper, vaguely known, but unmeasured profit power causes that proceed better financial results? If our KPIs are only telling us that – “we aren’t improving, try harder!” – how do we do more than just fine-tune the past?
First, can we agree that “BI solutions” are really only “tools”? For big change to happen, we will also need new: strategic architecture of insights (blueprint), support systems to engender new beliefs that will then motivate the re-skilling of the users to then realize the upside potential of better tools?
We need a total, holistic change plan and support to go along with better measurement of true profit power root causes!
NOTE: Although BI data-warehouses and KPIs for “dashboards” and “balanced scorecards” have been around for over 10 years, they haven’t been widely used. One now exists specifically for distributors! A fast, inexpensive, flexible, dynamic, distributor-tuned, BI solution that is delivering 2 to 10 times ROI in 3 to 12 months... to check out Waypoint Analytics’, call Bill Wade or me. We’ll bring the demo to you.
ROOT CAUSES OF PROFIT POWER
Let’s follow this dig-deeper chain of inquiry to the elusive root causes of profit power.
Most distributors exist to deliver the irreplaceable, fundamental economic benefits of “hub economics” for breaking big orders into assorted small orders of stuff needed quickly to maximize uptime value or minimize downtime cost.
By buying from an array of manufacturers in large quantities, a distributor can create a one-stop-shop, in-stock-fill-rate, service value for one or more target segment/niches of customers. This dramatically reduces channel transaction costs in comparison with customers bypassing distributors to get a lower price per unit, but at a higher total procurement cost while direct-selling suppliers often incur higher total sales and service support costs than gains in incremental margin dollars.
Assuming most customers want (or can be taught to want) best total economic/service value – assuming we have such service value:
- What is our most profitable segment-niche of customers?
- If we ranked the customer niches by estimated profit contribution, what would that report look like?
- Who are our most profitable customers in our top niche(s)?
- Amongst the most profitable customers in our #1 niche, can we find a few “advisor” customers with which to re-define a new, improved definition for our service value equation expressed in 8 to 12 specific service metrics?
- What next level of metrics do we have to measure, manage and improve to in-turn improve the 8 to 12 service metrics? For example, what measurable daily activities will help to improve effective fill-rates, which is itself a foundational basic service metric?
- What measurable analytic reports will help us to reduce errors to “zero unconditionally guaranteed”?
- If service personnel are ultimately responsible for changing their attitudes, skills and team-work to achieve distinctively different and valued service metrics, how do we measure their morale, skill levels, skill-improvement certifications and team-work spirit?
- If 4% of all customers are perpetual innovators that will grow far faster and more profitably than the rest of their niche competitors, how do we identify them; measure their year-over-year growth with us; crack them and partner them through total team-service focus?
- We won’t crack these targets (gazelle) accounts unless the entire team is empowered to do “heroic service acts” for them. How do we measure the daily “heroic acts” done by employees and report that back to them real time?
- Why is the feedback of “published praising statements” the oxygen for continuous improvement of both personal-growth and service value?
So, FedEx’s motto of the early ‘80’s – “People, Service, Profits” – points us down the right metrics path for improving profit power. Within distribution, we can sell many different niches of customers. Each can have different service value (metrics) equations, as well as profit-potential economics for our core business model.
We have to zero in on our most profitable niches and customers within those niches to (re)define our service value equation metrics and endeavor to capture 50% or more of “the customer profit pool” in that niche for our market area.
- Are you looking for the best strategic distributor BI capability that delivers the fastest, highest ROI possible?
- Would you like to benchmark your current BI capability (no strings attached) against this target?
Please contact Bill Wade or me to request an invitation for a Waypoint Analytics workshop in a city near you!
The Wade / Merrifield / WayPoint Partnership Solution
Our new service is delivered on a monthly subscription basis over the Internet –leveraging software as a service technology – that didn’t exist two years ago. We will:
- Install the service within two weeks;
- Guarantee an excellent, immediate payback (or stop monthly subscription payments!)
- Provide upgrades for a most progressive group of subscribers from our distribution channels instantly with case stories to go with the upgrades.
- Provide on-demand minutes of coaching as needed sitting in our offices, looking at the same screens as the subscriber.
- And, we don’t have to disturb the existing IT system, just supplement it.
For all of these reasons, we have - for the first time in over 40 years of consulting (between us) - partnered with a software solution provider: WayPoint Analytics.
Typical financial outcomes for RUDR in actual distributor case studies showed astounding results…. double profits in 3 months; increase them 4 to 6 fold in 6-12 months; grow faster than the industry.
Call Bill Wade today (847-760-0067) for details on an all- or partial- day seminar that Merrifield, Wade and WayPoint will conduct on site for both interested companies and distributor groups.
Wade & Partners, located in Elgin, Illinois, specializes in business planning and marketing services for the heavy-duty aftermarket worldwide. Go to www.wade-partners.com.
Bruce Merrifield started his consulting practice for the world of independent distribution channels in 1980. Bruce has given countless speeches to well over 100 trade associations, as well as many of the world’s largest corporations. He authored “Electronic Commerce for Distribution Channels” and is currently working on two start ups that leverage software-as-a-service technology to create new business models for distributors.
WayPoint Analytics is an online service that the best distribution and manufacturing companies use to analyze their business and maximize profits. With WayPoint, distributors quickly identify profit-draining products, customers and activities and can rapidly develop new profit strategies, then validate and implement them to immediately improve results.