Are Your KPI’s False Idols? #CX #CRO #Measure
This is a post about false accountability and the worship of quantitative idols. Companies looking to be innovative face a dilemma. Policies and procedures that make them efficient at execution also stifle innovation.
On day one a startup is flexible until it discovers its business model and establishes a goal. On day two a mature company organizes around that goal and measures the efforts to reach the goal. Then they strive to find the most efficient ways to reach that goal. They create processes to make execution repeatable and scalable by employees.
These KPIs and processes, which make companies efficient, also impede agility.
In Jeff Bezos’ 2016 Letter To Shareholders he explains why he worries about day two.
“Jeff, what does Day 2 look like?”
That’s a question I just got at our most recent all-hands meeting. I’ve been reminding people that it’s Day 1 for a couple of decades. I work in an Amazon building named Day 1, and when I moved buildings, I took the name with me. I spend time thinking about this topic.
“Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
To be sure, this kind of decline would happen in extreme slow motion. An established company might harvest Day 2 for decades, but the final result would still come.
I’m interested in the question, how do you fend off Day 2? What are the techniques and tactics? How do you keep the vitality of Day 1, even inside a large organization?
Such a question can’t have a simple answer. There will be many elements, multiple paths, and many traps. I don’t know the whole answer, but I may know bits of it. Here’s a starter pack of essentials for Day 1 defense: customer obsession, a skeptical view of proxies, the eager adoption of external trends, and high-velocity decision making.
Jeff Bezos is once again describing the Four Pillars of Amazon’s Success:
- Customer Centricity.
- Continuous Optimization.
- Culture of Innovation.
- Corporate Agility.
Every business (B2C, B2B and others) can make Amazon’s Four Pillars work for them. Leaders can use Amazon’s Four Pillars to refocus on what never changes. Amazon’s Four Pillars help you look beyond data about your company’s performance. They help you see the data that reveals your customer’s reality.
Examine whether what you measure is what you most value
In chapter one of Be Like Amazon: Even a Lemonade Stand Can Do It, we discuss the four unifying principles of Kodak’s George Eastman.
George Eastman organized the Eastman Dry Plate Company in 1881 under four unifying principles:
- Keep the price of the product low so the customer will and more uses for it.
- Always sell by demonstration.
- Be the first to embrace new technologies.
- Listen to what the customer tells you.
In 1976, Eastman Kodak sold 90% of all the camera film and 85% of all the cameras in America. By 1988 they had more than 145,000 employees worldwide, and in 1996 they had 16 billion dollars in annual revenue and a valuation of $31 billion. In 1975 Kodak’s Steve Sasson invented the digital camera, they patented it. In 2012 Kodak went broke because they decided they were in the camera film business. That was the result of abandoning their unifying principles in favor of the false accountability of their KPI’s.
What if Kodak had pioneered digital photography? What about they listened to their customers? What if they decided that instead of how many units of film they sold their measure of success would be how many magical moments customers captured?
I certainly hope you are measuring and optimizing the right things.
