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It's difficult to build a successful business, but sometimes it's difficult to tell if things are harder than they need to be.
It's like you're in a long distance bike race and you're pumping along as fast as you can, but you struggle to keep up. You pedal harder, but other riders keep passing you.
Maybe you are not that strong or you haven't trained that hard. Is your racing strategy inadequate? Or is something else slowing you down – sand in the gears and it affects your performance?
While you're in the running it can be hard to know. Sometimes it is the last thing you expect, which affects your performance significantly.
In business, it could be a long-term employee who is retiring and taking decades of experience and processes with him outside. This type of institutional memory is difficult, if not impossible, to replace for most organizations.
Or maybe it's so easy to keep paper records instead of digital ones. This system may have worked flawlessly for decades, but in 2020 it could potentially prevent your business from achieving its full potential if you don't get the full power of your data.
This doesn't seem like a huge problem, but they are blind spots that can affect even the most successful business. They are difficult for managers to recognize in real time because the tunnel vision is oriented towards everyday life.
But the possibility of doing better is there. It requires a holistic approach that goes beyond monitoring basic performance indicators like income and expenses.
Like modern medicine, it begins with vital functions.
A scientific approach
In his 2009 book The Checklist Manifesto, author and surgeon Atul Gawande made a direct link between efficiency and the use of simple checklists, often used by doctors to determine what steps need to be taken to help a particular patient . Is your temperature raised? What is your blood pressure How is your breathing
This checklist approach works because it reduces the complexity of all the different variables that can be tracked, Gawande said. The four primary vital signs can tell the most to hospital staff with the least amount of effort.
It's the same in business.
By removing complexity by only looking at the metrics that are really important to the health of the business, executives can continue to focus on the real impact and gain new insights. Just as a doctor would examine a patient's vital signs – body temperature, pulse, respiratory rate, and blood pressure – there are four business vital signs that I've isolated over the years. They serve as early indicators of potential problems in a company:
1. Incoming volume
The amount of business or work that comes into the organization, in terms of sales or otherwise, is the starting point for all business vital signs. A large influx of inbound volume can mean either resetting customer expectations because delivery times are slowing or moving resources from one area to another to keep up with demand.
2. Outgoing volume
This is a measure of productivity. How much work is being done and whether you are keeping up with the receipt? Outbound volume is a good indicator of the workforce and resource needs in a company as it should be weighed fairly well against inbound volume. If you create too much or too little to meet demand, regardless of your business, you have a problem.
3. Work in progress
If the number of widgets in the factory increases, does that mean the incoming volume will increase and we will scale to meet that need? Or is there something wrong with the outbound volume and those numbers are decreasing? If for some reason too much finished product piles up somewhere, it is a sign that the resources are not aligned as they should be somewhere in the system.
4. Time to completion
Few things are as important to customers as the expected delivery and the status of their orders. For example, if you find yourself in a situation where you have 2,000 open tickets and 10% of them are open for more than six months, it is clear that an interruption is occurring somewhere. What do you have to do to resolve and close these tickets?
Too often in business, decisions are necessarily, not design. But even for the most organized business leaders, responding to challenges in the moment can be like driving blindfolded. By tracking the correct vital signs – universal metrics that apply to any business – organizations can end the read and response cycle and implement real improvements.
You get back control of the business without drowning in data.