Metric Myth Five: There Are Good Industry-Standard Measures. Use Them.

(A quick note to start: our February KCS Foundations Workshop is filling up.  If you or a colleague are interested, now would be a good time to register.)

It’s a cliché that you get what you measure.  So before we start picking from the standard list of reports provided by your KM, CRM, or BI system, let me ask you: what do you want to get?

If what you want is the same thing as everyone else, then the standard measures should do just fine.  But if you have ambitions to stand out…if you have a new insight about how to do support…if you’re seeking competitive advantage, I’d say, not so fast.

When Southwest Airlines emerged into prominence, there were many standard airline metrics to choose from: occupancy, revenue per available seat mile, and the like.  But Southwest’s then-CEO, Herb Kelleher, recognized that their chief limit to growth was the number of extremely expensive airplanes they could afford to own.  Or, to be more precise, their revenue is bounded by the number of airplanes in the air.  This led to a simple insight: an airplane on the ground isn’t making money, so let’s minimize the time spent on the ground.

To put this insight into action, Southwest started measuring and improving their turnaround time, or the length of time their planes spend idle at the gate.  Much of what’s unique about Southwest, from flight attendants who clean the planes as passengers are leaving, to boarding by groups and unassigned seating, are the result of Southwest’s obsession with turnaround time.  The result is sustained profitability in a generally unprofitable industry, and the equivalent passenger capacity of 35 additional multi-million dollar 737s.  “Strategic” trumped “standard” for Southwest.

Other industry leaders have taken the same path.  Dell focused on its Cash Conversion Cycle (CCC), the length of time between paying vendors for components and receiving money from customers.  Dell’s remarkable build-on-demand infrastructure, leverage with suppliers, and streamlined operations resulted in a negative CCC—that is, Dell gets paid by customers several weeks before it has to pay its suppliers.  This cash float is a real engine for growth, and it’s there because Dell focused on its own, slightly non-standard, metric.

We’ve seen this in the support industry, too.  When innovative support and customer experience leader Brad Smith was at the helm at Openwave Systems, he had his team focus on margin dollars per case.  He reasoned that he wanted more margin (through efficiency and customer retention), and fewer cases (through product improvements, self-service, and proactive support).  The more margin, and the fewer cases, the better their margin per case.  I don’t know if any other organization has measured margin per case—and it certainly isn’t in any standard Support dashboard.  But Brad and his team were completely focused on higher renewals, more efficient case handling, and helping customers avoid cases…all great things for Openwave and its customers.

“Transformational measures can help organizations focus on what is most important today and for the future,” says Dr. Dean Spitzer in his outstanding book Transforming Performance Measurement.  “When we change our ways of measurement, the fundamental ‘lens’ used to view things changes.  Organizational transformation is what happens when people begin to see their organization through the new lens.”

If you’re not sure what your strategy should be, or how you’re going to transform your organization for the better, then by all means, use the same measures as everyone else.  But if you have a vision for where you want to go—and I hope that you do—then pick what Spitzer calls transformational measures to track and motivate your progress on that journey.