We hear so often that KPIs don't work because they are confused with metrics Metrics, measures, KPIs, raw data... another confused client that wanted to figure out the difference. Here is an article that explains: -- how the numbers appears into our life; -- how they are reinvented in a form of measures and metrics; -- and how some of them are lucky enough to become a KPI. The next time someone will tell me that "KPIs don't work for our business", I'll have a prepared detailed answer that explains what KPIs actually are and why not all metrics are KPIs.

1. The difference between
quantification, measure,
metric, and KPI
Based on
www.bscdesigner.com/quantification-measure-metric-kpi.htm
By Aleksey Savkin, bscdesigner.com
BSC DESIGNER

2. KPIS DON’T WORK FOR
OUR BUSINESS!

3. KPIs don’t work for our business!
• Does this statement sound familiar to you?

4. KPIs don’t work for our business!
• Does this statement sound familiar to you?
• In a business world there is no good
understanding of what a KPI, a metric and a
measure is…

5. KPIs don’t work for our business!
• Does this statement sound familiar to you?
• In a business world there is no good
understanding of what a KPI, a metric and a
measure is…
• And what the difference is between them.

6. KPIs don’t work for our business!
• As a result, many executives have a long list of
metrics

7. KPIs don’t work for our business!
• As a result, many executives have a long list of
metrics
• They call them KPIs

8. KPIs don’t work for our business!
• As a result, many executives have a long list of
metrics
• They call them KPIs
• They put them of a visually appealing
dashboards

9. KPIs don’t work for our business!
• As a result, many executives have a long list of
metrics
• They call them KPIs
• They put them of a visually appealing
dashboards
• But these efforts don’t provide any tangible
effect on business performance.

10. NOT ALL METRICS ARE KPIS!
Let’s see if we can clarify the
situation.

11. Observation.
A marketing and sales process.
Mapping observations into numbers.
Metric.
A derivative of measure.
Measures. An amount or degree of
something.
$ 88
A total cost to gain a new customer
$ 200
$ 1300 4
11
2
17
$ 1500
The number of customers acquired
Funds invested in the marketingFunds invested in the marketing
The number of customers acquired
=
Observation Quantification
Source: www.bscdesigner.com
FROM A QUANTIFICATION TO A METRIC

12. Observation.
A marketing and sales process.
Mapping observations into numbers.
Metric.
A derivative of measure.
Measures. An amount or degree of
something.
$ 88
A total cost to gain a new customer
$ 200
$ 1300 4
11
2
17
$ 1500
The number of customers acquired
Funds invested in the marketingFunds invested in the marketing
The number of customers acquired
=
Observation Quantification
Source: www.bscdesigner.com
FROM A QUANTIFICATION TO A METRIC

13. Observation.
A marketing and sales process.
Mapping observations into numbers.
Metric.
A derivative of measure.
Measures. An amount or degree of
something.
$ 88
A total cost to gain a new customer
$ 200
$ 1300 4
11
2
17
$ 1500
The number of customers acquired
Funds invested in the marketingFunds invested in the marketing
The number of customers acquired
=
Observation Quantification
Source: www.bscdesigner.com
FROM A QUANTIFICATION TO A METRIC

14. Observation.
A marketing and sales process.
Mapping observations into numbers.
Metric.
A derivative of measure.
Measures. An amount or degree of
something.
$ 88
A total cost to gain a new customer
$ 200
$ 1300 4
11
2
17
$ 1500
The number of customers acquired
Funds invested in the marketingFunds invested in the marketing
The number of customers acquired
=
Observation Quantification
Source: www.bscdesigner.com
FROM A QUANTIFICATION TO A METRIC

15. BENCHMARKING WITH METRICS
• A metric is a standard of measurement.

16. BENCHMARKING WITH METRICS
• A metric is a standard of measurement.
• It means that we can use it to compare our
measurements with past results.

17. BENCHMARKING WITH METRICS
• A metric is a standard of measurement.
• It means that we can use it to compare our
measurements with past results.
• Or, we can compare something that we
measured in our company with measurements
of another company.

18. BENCHMARKING WITH METRICS
• An example: we can compare “a total cost to
gain a new customer” with historic data to
update company’s marketing strategy and
choose a more cost-effective marketing
approach.

19. WHAT IS A KPI?
WHY ISN’T ANY METRIC A KPI?
• KPI is a metric (it doesn’t imply that any
metric is a KPI).

20. WHAT IS A KPI?
WHY ISN’T ANY METRIC A KPI?
• KPI is a metric (it doesn’t imply that any
metric is a KPI).
• KPI stands for Key Performance Indicator.

21. WHAT IS A KPI?
WHY ISN’T ANY METRIC A KPI?
• KPI is a metric (it doesn’t imply that any
metric is a KPI).
• KPI stands for Key Performance Indicator.
• These three words define the function of a
KPI…

22. WHAT IS A KPI?
WHY ISN’T ANY METRIC A KPI?
• Indicator. It should show the number.

23. WHAT IS A KPI?
WHY ISN’T ANY METRIC A KPI?
• Indicator. It should show the number.
• For example: “How good our customers are
engaged” is not really an indicator; in
opposite, “Average customer engagement
score according to the monthly survey” is an
indicator.

24. WHAT IS A KPI?
WHY ISN’T ANY METRIC A KPI?
• Performance. It should be connected to a
performance.

25. WHAT IS A KPI?
WHY ISN’T ANY METRIC A KPI?
• Performance. It should be connected to a
performance.
• “The number of computers in an office per an
employee” is a metric, but it is not really
connected to the ultimate business
performance. If you will double the number of
computers you don’t expect your profits to be
increased.

26. WHAT IS A KPI?
WHY ISN’T ANY METRIC A KPI?
Key. It should be important for your business,
department, team or whatever you current
scale is.

27. A QUICK TEST: METRIC VS. KPI
• Ask yourself a question: would you pay a
significant sum to get the value of this metrics
two times higher (or lower)?

28. A QUICK TEST: METRIC VS. KPI
• Ask yourself a question: would you pay a
significant sum to get the value of this metrics
two times higher (or lower)?
• If the answer is “no,” then we are talking
about a metric, not a KPI.

29. A QUICK TEST: METRIC VS. KPI
• An example: “a total cost to gain a new
customer” might be or might not be a KPI.

30. A QUICK TEST: METRIC VS. KPI
• An example: “a total cost to gain a new
customer” might be or might not be a KPI.
• It depends on your business strategy.

31. A QUICK TEST: METRIC VS. KPI
• An example: “a total cost to gain a new
customer” might be or might not be a KPI.
• It depends on your business strategy.
• If your currents costs to gain a new customer
are high and your team found a way to reach
the same customers, but at a 10 times lower
price, then it is an excellent KPI that will affect
your ultimate performance significantly.

32. “MONTHLY WEBSITE VISITORS” IS NOT A KPI
• The number of monthly visitors is a metric,
but if it is a KPI?

33. “MONTHLY WEBSITE VISITORS” IS NOT A KPI
• The number of monthly visitors is a metric,
but if it is a KPI?
• Let’s do a “metrics vs. KPI” test: How much
would you pay in US $ to double the number
of your monthly visitors?

34. “MONTHLY WEBSITE VISITORS” IS NOT A KPI
• The number of monthly visitors is a metric, but if
it is a KPI?
• Let’s do a “metrics vs. KPI” test: How much would
you pay in US $ to double the number of your
monthly visitors?
• Don’t rush to come up with a figure, it’s not as
simple. Any experienced website owner will start
asking the questions: what SEO methods will be
used, who will be these new visitors, where will
they come from?

35. FOR MOST ONLINE BUSINESSES THE
NUMBER OF MONTHLY VISITORS IS
AN EXCELLENT METRIC, BUT IT IS
NOT A KPI.

36. HOW CAN WE POSSIBLY CONVERT THIS METRIC
INTO A KPI?
• Let’s have a look at the questions that I
suggested an experienced website owner
would ask.

37. HOW CAN WE POSSIBLY CONVERT THIS METRIC
INTO A KPI?
• Let’s have a look at the questions that I
suggested an experienced website owner
would ask.
• What if we are taking about visitors that come
from search engines?

38. HOW CAN WE POSSIBLY CONVERT THIS METRIC
INTO A KPI?
• Let’s have a look at the questions that I
suggested an experienced website owner
would ask.
• What if we are taking about visitors that come
from search engines?
• They were searching using keywords that were
highly relevant to our marketing funnel.

39. HOW CAN WE POSSIBLY CONVERT THIS METRIC
INTO A KPI?
• Let’s have a look at the questions that I suggested
an experienced website owner would ask.
• What if we are taking about visitors that come
from search engines?
• They were searching using keywords that were
highly relevant to our marketing funnel.
• We know that these visitors will generate us
qualified leads that will be successfully converted
into sales.

40. THE NUMBER OF ORGANIC VISITORS
FOR A RELEVANT KEYWORD MIGHT
BE A GOOD KPI.

41. WHY DO WE NEED A KPI?
• KPI is abused in a business jargon.

42. WHY DO WE NEED A KPI?
• KPI is abused in a business jargon.
• People tend to call any numeric value a KPI.

43. WHY DO WE NEED A KPI?
• KPI is abused in a business jargon.
• People tend to call any numeric value a KPI.
• In most cases this doesn’t make sense and as
a result we hear something like “KPIs don’t
work for our business.”

44. WHY DO WE NEED A KPI?
• KPI is abused in a business jargon.
• People tend to call any numeric value a KPI.
• In most cases this doesn’t make sense and as
a result we hear something like “KPIs don’t
work for our business.”
• That’s because those were not KPIs, but were
simple measures or metrics.

45. THE BENEFIT OF A REAL KPI IS THAT
IT PROVIDES EXECUTIVES
WITH MEANINGFUL INFORMATION
TO MAKE A BETTER DECISIONS.

46. LET’S TAKE “A TOTAL COST TO GAIN A
NEW CUSTOMER” AS AN EXAMPLE
• It helps to come up with a better lead
generation strategy.

47. LET’S TAKE “A TOTAL COST TO GAIN A
NEW CUSTOMER” AS AN EXAMPLE
• It helps to come up with a better lead
generation strategy.
• A company might start promoting a low-cost
or free product as a front end, making money
on the back end product.

48. LET’S TAKE “A TOTAL COST TO GAIN A
NEW CUSTOMER” AS AN EXAMPLE
• It helps to choose of an appropriate marketing
method and eliminate ones that are not cost
effective.

49. LET’S TAKE “A TOTAL COST TO GAIN A
NEW CUSTOMER” AS AN EXAMPLE
• It helps to choose of an appropriate marketing
method and eliminate ones that are not cost
effective.
• Once compared an efficiency of various marketing
and PR methods, a company might decide to replace
expensive advertisement in a magazine with targeted
CPC campaign in AdWords.

50. LET’S TAKE “A TOTAL COST TO GAIN A
NEW CUSTOMER” AS AN EXAMPLE
• It helps to define a right pricing for a product.

51. LET’S TAKE “A TOTAL COST TO GAIN A
NEW CUSTOMER” AS AN EXAMPLE
• It helps to define a right pricing for a product.
• Knowing the cost to gain a new customer a
manager can decide on the pricing of a new
product or on the maximum discount that he
can afford.

52. KPI BEST USAGE SCENARIO

53. KPI BEST USAGE SCENARIO
• In the best case KPI will not only tell us a story
about what’s going on in the business right
now…

54. KPI BEST USAGE SCENARIO
• In the best case KPI will not only tell us a story
about what’s going on in the business right
now…
• But it will give a business time to react
appropriately.

55. KPI BEST USAGE SCENARIO
Following an example above:
• If a company tracks its positions in search
engines for the keywords that are the most
relevant and best converting, then KPI will
work as an early warning signal, telling a
management that something is going wrong.

56. KPI BEST USAGE SCENARIO
Following an example above:
• If a company tracks its positions in search engines
for the keywords that are the most relevant and
best converting, then KPI will work as an early
warning signal, telling a management that
something is going wrong.
• Executives won’t be surprised by a sudden sales
drop, they will have a time to react respectively.

57. EXAMPLES OF A GOOD CANDIDATES
FOR KPIS
• EBIT (Earnings before interest and taxes) $
• Average shopping cart value
• Lead to sales conversion rate
• % of returning customers
• A total cost to gain a new customer
• Market Share, %

58. EXAMPLES OF A GOOD CANDIDATES
FOR KPIS
• Bernard Marr in his article on LinkedIn
suggests “The 4 KPIs Every Manager Has To
Use.”

59. EXAMPLES OF A GOOD CANDIDATES
FOR KPIS
• Bernard Marr in his article on LinkedIn
suggests “The 4 KPIs Every Manager Has To
Use.”
• You won’t actually find there ready-to-use
KPIs.

60. EXAMPLES OF A GOOD CANDIDATES
FOR KPIS
• Bernard Marr in his article on LinkedIn
suggests “The 4 KPIs Every Manager Has To
Use.”
• You won’t actually find there ready-to-use
KPIs.
• For example, it’s impossible to come up with a
universal KPI for “Internal Process Quality,”

61. EXAMPLES OF A GOOD CANDIDATES
FOR KPIS
A company need to search its own KPIs in the
four areas mentioned in the article:
• Customer Satisfaction,
• Internal Process Quality,
• Employee Satisfaction,
• Financial Performance.

62. METRICS AND KPIS IN BSC DESIGNER
In BSC Designer with have a “KPIs” tab:

63. METRICS AND KPIS IN BSC DESIGNER
Some users load the
software with raw
data, other use
metrics, good projects
consist of KPIs.

64. METRICS AND KPIS IN BSC DESIGNER
Some users load the
software with raw data,
other use metrics, good
projects consist of KPIs.
Hopefully, after this
presentation you’ll be
prepared to differentiate
raw data, metrics and
KPIs.

65. MORE ABOUT THE BALANCED SCORECARD
Find more insightful
articles about the
Balanced Scorecard
in ”Articles” section at
www.bscdesigner.com
BSC DESIGNER

66. THANK YOU!
Feel free to send us your questions using the contact form at
www.bscdesigner.com