Pay attention to the difference between Company Performance Data and Customer Reality Data. Because you can only monitor the outputs, but you CAN control the inputs

I hear many business owners asking for dashboards to improve their business. We are all familiar with dashboards. That’s because they are so useful in our cars. Car dashboards give us the most important data about our car in the present moment. How fast we are moving, what we’re signaling about a turn, how many miles the car has traveled, how much fuel we have, etc. Occasionally, if something goes wrong an indicator light might turn on.

Businesses often have dashboards, fancy and not so fancy ones. Businesses aren’t cars. Dashboards are often more distracting and misleading than executives will admit.

What are you monitoring and why?

The common expression suggests, you only manage what you measure. That’s true! So you have to be careful to measure what’s important and to monitor those measurements at the right times, for the right reasons.

The theory goes that keeping employees focused on goals with these real-time metrics will improve your results. Let’s imagine, you land at the Austin airport and proceed to Highway-130 with the highest posted speed limits in the country at 85 mph. You know you’re bound to find those whose dashboard speedometer never cracks 75, others set their cruise control at 85. A Masserattis does 125. The point is, that one simple metric on a dashboard does not modify all people’s behavior the same way.  

Similar things happen when you display leaderboards in your organization. Some are driven to excel, others are demotivated. Some are merely cautious because they know they don’t have the engine to be at the top. While others put in only enough effort to get by. So is a leaderboard truly effective at influencing the results you’re looking for? Would their behavior be different if you didn’t display a leaderboard?

The Difference between Leading Metrics and Lagging Metrics

How we share the right data or metrics will influence our growth. Many business owners want to share top sales leaders, conversion rate, call volume, etc. But these metrics show results, not what goes into those results, from your team.

 “…results are lag metrics. Lag metrics are easy to set and simple to track, hence their popularity. The problem is, they show what happened. But in terms of predicting, much less influencing, the future? Possibly more distracting than helpful.” Jeff Bezos

In an intriguing article, Jeff Bezos (the Founder of Amazon), shared the transformative impact of prioritizing leading metrics over lagging metrics within organizations. Bezos highlights that while lagging metrics, such as quarterly earnings, reflect past actions and results, leading metrics are predictive and instrumental in achieving long-term goals. By concentrating on leading metrics, companies can ensure employees focus on processes and actions that directly influence future success. Otherwise they can get distracted by past outcomes. This approach encourages a more focused, productive, and successful organizational culture.

“Lead metrics predict where you will go. Lead metrics track processes that directly produce results. In simple terms, stepping on a scale is a lag metric; it tells you where you are. Counting calories, clicking off workout sessions, etc. tells you —if you stay the course— where you will go.

Display lag metrics and people may not only get distracted, they may focus on the wrong things.” Jeff Bezos

Customer Reality Data is better than Company Performance Data

You may think I am against data and dashboards. Nothing could be further from the truth. In our book, Be Like Amazon: Even a Lemonade Stand Can Do It, we discuss the difference between company performance data and customer reality data. Customer reality data reflects how your business processes impact what your customers are experiencing with your brand.

Amazon’s category managers focus on four key customer reality data inputs to drive their business: 1) greater product selection; 2) competitive price; 3) availability to ship; and 4) customer experience leadership.  They know that when they dominate in these four metrics, they deliver on the brand promise and their sales results always follow.

You can only monitor the outputs, but you CAN control the inputs

When you think about your dashboard, remember that the performance indicators you choose will influence how your team treats customers, what things they will prioritize and whether those performance indicators are leading or lagging metrics. It takes time and effort to identify and monitor what matters.

Customer reality data is not usually found in a dashboard. It does reflect how your business processes impact what your customers are experiencing with your brand. The only way to know that is by questioning which leading metrics (inputs) deliver the long-term results (outputs) you want for your business. If you need help identifying your inputs, ask for it.

Paradise won’t be found by the dashboard lights. Figure out what your leading customer reality metrics are —then, and only then— consider what you’ll monitor.

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