Merging key performance indicators and big data analytics

When implementing a strategy, the purpose of using metrics is to trigger performance improvement. Once organisations have collected meaningful data, they must analyse it before they can work out what it means, ie. the initiatives or actions that might be needed to improve against key strategic goals (performance management analytics).

Performance management analytics enables organisations to convert their performance data into relevant information and knowledge. Without it, the whole performance management exercise is of little or no value to the organisation. Yet, many organisations spend the majority of their time and effort on collecting and reporting data and not enough time on extracting valuable and actionable insights from it. The difference between good and bad information is determined by how well it supports critical decision-making.

Data analytics is rapidly growing in importance as a result of the extraordinary recent developments in big data analytics.

Big data is today’s biggest buzz word, and it is changing the world. Big data can originate from anywhere, such as sensors designed to collect climate data, social networking sites, digital videos and images, cell phone GPS signals, and sale transaction records, among others. Big Data analytics refers to the strategy of analysing large volumes of data to explore concealed patterns and unidentified connections and reliably predict future behaviour, as well as providing other valuable insights into data.

Organisations are already reaping the rewards. For example, it is already commonplace for telecom companies to use big data to better predict customer churn, for retailers to predict what products will sell, and for insurance companies to understand how well their customers actually drive their cars. As another example, a hospital unit that looks after premature and sick babies is generating a live steam of every heartbeat. It then analyses the data to identify patterns. Based on the analysis the system can now detect infections 24 hours before the baby would show any visible symptoms, which allows early intervention and treatment. Impressive stuff.

In the past such analysis was not possible; we had only traditional database and analytics tools that could not deal with extremely large, messy, unstructured, and fast-moving data. Thanks to big data analytics we now have sophisticated software that enables us to do this and bring together these different and previously inaccessible data sources, alongside structured data, to generate mission-critical insights.

However, organisations are barely starting to get to grips with the new world of big data, how it can be harnessed and analysed to drive performance improvement, and how it can work alongside strategic and operational measures.

Indeed the merging of measurement and big data analytics is the new frontier of performance management. Most measures (and all of the KPIs that we use to monitor progress to a strategy) are by nature backward-looking (that is they provide information into what has happened). Big data analytics provides near “real-time” insights into what is happening (pattern analytics) and what that means in the future (predictive analytics). Quite simply, the ability to analyse and make sense of big data is an extension of the KPIs we use to monitor strategic performance and identify required initiatives or process improvements.

Amongst the many benefits of integrating data analytics and KPIs will be the ability to properly test the logic of the causal relationships that are central to the promise of the Strategy Map component of a Balanced Scorecard. Analytics will enable the pinpointing of the specific components of a KPI that really make a difference to improving performance to a strategic objective (and causally between objectives) and ensure that actions and initiatives are driving performance improvement against that component: this will likely also save much money by stopping, or refocusing, initiatives that aren’t driving expected change.

Gone are the days when strategy management essentially revolved around an annual retreat and a quarterly report stuffed with historically based KPIs. Today, the best organisations collect strategically critical data on an ongoing basis (historical, present and future-based) and turn this information into those golden nuggets of knowledge that drive competitive advantage and, more importantly, convert that knowledge into practical solutions.

If you would like to learn more about creating a performance-based culture to drive results, please join James Creelman in Johannesburg this October where he will be running the following courses:
Kaplan-Norton Balanced Scorecard Modular Training, 12-15 October. FIND OUT MORE
Defining Meaningful KPIs to Enhance Organisational Performance, 19-20 October. FIND OUT MORE

Skills Portal Readers can claim 10% off Palladium courses this October! Contact Jen Wilcox on [email protected] for further information and your tailored quote.

James Creelman
Director, Research and Intellectual Property
For more information visit thepalladiumgroup.com

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