Over the course of this book, we learned how to analyze business data through various perspectives. We started with the sales perspective and then went on to develop visualizations for financial, marketing, working capital, operations, and human resources perspectives. Then we brought several perspectives together in a fact sheet that analyzed a customer through a sales representative's point of view.
Our next step is to unite the most pertinent perspectives and analyze the business as a whole from a business owner's point of view. This result is often referred to as the company's information dashboard. Stephen Few was the first person to investigate the real purpose of the information dashboard in his book, Information Dashboard Design, and he defines dashboards as follows:
A dashboard is a visual display of the most important information needed to achieve one or more objectives, consolidated and arranged on a single screen so the information can be monitored at a glance.
We often design an information dashboard using the same freestyle process that we applied to create our customer fact sheet. However, we can also use a more disciplined approach such as a Balanced Scorecard (BSC) to unite the business's various perspectives into one consolidated viewpoint. This popular method was first developed by Robert S. Kaplan and David P. Norton to both drive and manage company strategy.
In this chapter, we will create an information dashboard that is based on the Balanced Scorecard method. We will cover the following topics in this chapter:
- The Balanced Scorecard method
- The Balanced Scorecard data model
- The Balanced Scorecard information dashboard design
- Additional QlikView UX customization
- Measuring process change with an XmR chart
The BSC method focuses on the following four perspectives:
- Financial
- Customer
- Internal business process
- Learning and growth
In each perspective, an organization should define a series of objectives, measurements, targets, and initiatives that help align its activities with its vision and strategy.
Source: Robert S. Kaplan and David P. Norton, "Using the Balanced Scorecard as a Strategic Management System," Harvard Business Review (January-February 1996):76
The financial perspective is the traditional way to measure an organization, but these measurements tend to tell us more about past events rather than future ones. In other words, the financial perspective uses lagging rather than leading performance indicators. For example, in the financial perspective, sales revenue is a lagging performance indicator that measures the results of a business's past efforts to market, sell, and deliver its products and services. The BSC method helps us to drive and foresee future sales revenue by using leading performance indicators, or we need to use performance drivers, that measure new customer acquisition, customer satisfaction, new product development, and employee retention.
An organization's performance indicators depend on its strategy to accomplish what it envisions as a successful business. The BSC method teaches us how to create a Strategy Map through the financial, customer, internal business process, and learning and growth perspectives. This Strategy Map communicates a series of objectives and the cause-and-effect relationships between them.
In our example, our vision of success is to increase the size of our business; therefore, our principal financial objective is to increase revenue. Our strategy to accomplish this is to increase customer retention and customer product mix. We've created the following Strategy Map that breaks down the strategy into objectives that are based on the four BSC perspectives:
In the following sections, we will review what performance indicators we will use to measure the success of our objectives in each perspective.
Our financial objective is to increase revenue, so our first financial performance indicator will be revenue growth. We define growth based on Year-over-Year (YOY) monthly and Year-to-Date (YTD) growth. We look at growth in terms of monetary amounts and percentages, as both ways can be insightful. Also, given that our strategy involves customer product mix and customer retention, we decide to detail revenue growth by product line and to measure the percentage of revenue that comes from existing customers.
|
Strategic objective |
Strategic measurement |
|---|---|
|
Increase Revenue |
|
The next step is to review how to measure the customer objectives that are part of our strategy to increase revenue.
Our customer objectives are to increase customer retention and customer product mix. We measure our customer retention using the customer churn rate or the percentage of customers lost. We are not a business that sells products through a subscription, so we consider a customer as lost if they haven't purchased anything in the last twelve months.
We measure customer product mix by evaluating the average number of product lines that a customer purchases during a given period of time. The exact time period that we use often depends on the type of industry our customers belong to and their buying rhythm. In order to simplify this example, we will use the same time period as we do for the customer churn rate; that is, twelve months. In more complex scenarios, we can use analysis techniques, such as a t-test, to evaluate each customer's purchasing rhythm like we did in Chapter 12, Sales Perspective.
We use YOY comparisons on a monthly and YTD basis for both indicators, which is consistent with the financial indicators:
|
Strategic objective |
Strategic measurement |
|---|---|
|
Increase customer retention |
YOY change in customer churn rate. |
|
Increase customer product mix |
YOY change in average product lines purchased by the customer. |
The next step is to review how to measure the internal business process objectives that we will use to drive an increase in customer retention and customer product mix.
In a similar way to how supermarkets grew by providing one place to purchase many products, our plan is to promote cross-selling in order to increase customer product mix and customer retention. Cross-selling is simply the act of selling an additional product or service to a customer. However, it can be a powerful way to increase customer satisfaction and retention.
In the customer perspective, we measure the result of our efforts to increase cross-selling using the indicator average product lines per customer. However, in this perspective, we aim to use an indicator that focuses on the sales representatives' efforts to promote cross-selling independent of customer actions.
When we first explained lagging indicators, we referred to financial indicators as lagging and every other indicator as leading. In reality, the terms leading and lagging are relative. Therefore, a measurement such as average product lines per customer can be a leading indicator for future revenue growth, but it can also be a lagging indicator of increased cross-selling. We use another measurement such as the number of cross-selling quotations as the leading indicator of average product lines per customer and a confirmation of sales representatives' efforts to promote cross-selling.
|
Strategic objective |
Strategic measurement |
|---|---|
|
Increase cross-selling |
YOY changes in the number of sales quotations with products lines not purchased by customers. |
The next step is to review the learning and growth objectives that will enable sales representatives' to be able to promote cross-selling.
Human talent is often what determines the overall success of our strategies. The investment in employees' knowledge and growth is what drives all the objectives in every other perspective. In our example, we are going to give sales representatives product knowledge training and tools that suggest cross-selling opportunities that they may, otherwise, not recognize.
We measure an increase in product knowledge by evaluating the number of employees that attend each training session this year as compared to the last year. We also evaluate the effectiveness of the training and their behavior outside the classroom by analyzing their usage of the cross-selling analysis tool:
|
Strategic objective |
Strategic measurement |
|---|---|
|
Increase product knowledge |
YOY change in number of employees who attended product knowledge training sessions. |
|
Average number of days that the sales representatives use the cross-selling analysis tool. |
Now that we've defined the strategic measurements that we are going to use to evaluate the strategic objectives in our BSC, we will review the necessary data model and its supporting information dashboard.