The Rise of the Micro-Indicator: Getting the lead on leading indicators

Posted on April 11, 2016 by Chris Warburton

wave-545130_1920Office conversations often turn to finding the best measure for a particular process.

Opinions abound, there is heated discussion, however agreement is usually reached (only to be informed by IT there is no captured data available and no historical values!).

It is common in our search to try to look for a couple of ideal metrics.  We are looking for something that will explain our processes in simple terms, providing guidance on how and where we can improve performance.

Our hope is we can add it to the executive dashboard, freeing us from analysing and interpreting vast amounts of data and provide us time in the day to to focus on something else.

And there are some great measures out there; DSO, OEE, Write off rates, Cures per customer per hour per agent and cost per £$ collected are all good examples.

They are incredibly useful in understanding process performance, reporting and comparing against known standards.

However some caution is required and this is needed in part as each of these are lagged indicators.

Something occurs, it get measured, reported and we analyse the performance to understand why this happened.

Lagged Indicators

Lagged indicators are easy to understand, popular and great at explaining what just happened.  The past can also be a predictor of the future, especially in stable systems.  This is not always the case however.

Where there is significant process change, new patterns will not be necessarily be picked up straight away.  It can take time to see effects in results and if the impacts are negative, this can be vital time lost.

Leading Indicators

In order to solve this, we need to move further up stream and get an earlier warning.  It is often useful to find new measures, leading indicators.

Usually with a causal link or significant input to the lagged indicator, they are not a guarantee that something will happen, but are a useful indicator that something significant may occur.

And there are some famous examples

These measurements lead to the more traditional lagged economic measures, however better reflect what is going on now, rather than having to wait for data to accumulate.

Whilst they help in predicting future trends in lagged indicators, they still measure what is happening today.  It does buy some time for strategy adjustment, but often the outcome is already set and yet more time is needed.  Introducing the micro-indicator.

Micro-Indicators

Micro-indicators fall in a third category.  Small indicators that together point to a much bigger change underway, often before the larger event has even occurred.

An example is an earthquake.

  • The lagged indicator is the shaking from the earthquake.  The event has happened, the impacts are being measured.
  • The leading indicator is the ground starting to move, an earthquake starting.  If you live far away from the epicentre there is some time to react.  You do need to be quick however.
  • Micro-indicators are the subtle changes to bulges in the earth, the micro quakes that take place on surrounding faults, all before the earthquake.  In isolation they may not mean much, but taken together and interpreted correctly they can point to a much larger event happening.  They give everyone much more time to take action.

The same is true in business processes.  Micro-indicators are the small indicators that taken together can inform us early of events underway, allowing us time to react and adjust.  They can be invaluable.

The challenge

The challenge with this approach is the earlier you try to predict something the more uncertain the linkage to the final event can become.  Ie the probability that the movement in this measure will result in the larger event is reduced.

To manage this and get higher degrees of certainty, it is therefore important to measure multiple micro-indicators.  Measuring multiple micro-indicators increases your confidence that something that will occur.  It increases the probablity and allows you to buy that crucial time.

So is the search for the perfect indicator a waste of time?

Traditional measures remain incredibility useful.  They have formed the backbone of performance measurement for many years and form a big part of any BI suite.  It is still important to have a good blend of lagged and leading key indicators.

However identifying a few key micro-indicators can really help supplement these measures and buy yourself crucial time to adjust processes.  It can really help in generating the performance you need.

More data!

Yes this is more data and maybe is not the simple world we dream of.  But, in the quest to better understanding and control our processes maybe more, not less is better…..  (just a little more maybe…!)

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Leading indicators: there is more information than you think

Posted on March 22, 2016 by Chris Warburton

You can lead a horse to water, but cannot make it drink...A few weeks ago I was lucky enough to attended a talk by the Bank of England providing an overview of the UK, its economy and outlook.

Now whilst the discussion itself was very interesting (the latest report here), what I also found illuminating was the process the BoE uses to gather its information for forecasts, and the lessons we can learn in the rest of the business world.

The Bank of England process

As you would imagine they have teams of statisticians gathering data from multiple sources, with this data being fed to bank economists to ‎explain performance and forecast trends.

However they also have a team of regional agents, who roam the country observing economic conditions directly.  These agents speak with businesses, systematically recording what they hear and gathering ’the word on the street’.

It turns out that these indicators are actually excellent ‘leading’ indicators of economic changes, often providing information and insight before there is sufficient data to be seen in official statistics.

True in the rest of the business world

We also have teams of data analysts gathering data from multiple sources, presenting this information to management teams to explain performance and trends.  It is often the role of the Business Intelligence team these days.

However, how many of us also have ‘agents’ in each department, ‘systematically’ recording information that doesn’t come from these traditional data sources?

Expanding on traditonal measures

Unfortunately for many of us we continue to largely remain reliant on traditional metrics and forms of measurement.  We are left analysing this historical information to make data based decisions, trying to divine future performance.  Yes, we may hear customer feedback, but this is often anecdotal rather than robust systematic data input.

Just like the Bank of England, conversations with customers, suppliers and employees, recorded correctly, can provide additional valuable insight… and aid in this decision making process on a more timely basis.

An easy place to start

Whilst many companies do already have customer listening programs, these are typically targeted at improving customer satisfaction levels.

However structured correctly these can also provide an insight to economic conditions, changes to the market, competitor product development, outlook on future sales.  They should form part of your leading indicator metric suite.

Setting up your process

The BoE uses a points based system, however the key is ensuring that the program is defined, structured and supported.

Once you have support and the data has started to be gathered it needs to be reviewed not just in terms of what has happened or customer satisfaction, but also the wider view of what could this mean for the future, as indicators for other areas of the business.

Organisational Resistance?

Gathering anecdotal data and building leading indicators is never easy.  It feels there is a suspicion; an air of disbelief in the approach and it is always easy to return and retreat to the world of traditional metrics.

The value add

Whilst these traditional metrics are undoubtably invaluable, developing these additional data sources can yield valuable actionable data to help stay ahead.

After all if the Bank of England can do it, is there value to ‘double down‘ on a similar approach for us all?

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Why does no one read my blog – when is comment too much comment?

Posted on February 26, 2016 by Chris Warburton

cat-1056662_1920Last year I decided to publish articles on LinkedIn.  I had seen some great articles and wanted to share my insights too.

Not being a natural writer (I always preferred maths/science at school) this felt a bit daunting.  I already had my own blog, but admittedly it lives in what I would describe as the ‘cul-de-sac’ of the ‘information superhighway’.

Publishing on LinkedIn felt like going mainstream, easily found and visible to the world.  However, I hoped it would help me explore some interests, share some of my ideas and hopefully find my writing style.  Putting myself out there a bit more seemed like a good idea.

So I wrote my first piece.  Taking inspiration from the women’s world cup on at the time, it highlighted leadership qualities which are also relevant in the modern office.  Everything was written, re-written, edited, re-edited.  I attached a photo and with a nervous finger pressed PUBLISH.

As the little red icons started to appear in the top right hand corner of people’s screens, I quickly turned to see the stats: 10, 20, 50 people, it was being read… what a buzz!  I even had some nice comments (thank you).

And so I have been hooked, trying to publish something new, thought provoking and relevant each month.

However as I gained experience and the articles have started building I have also noticed something interesting.

  • After an initial burst of interest, the number of views of each subsequent article have flatlined or decreased.
  • I was not alone.  As I published more I noticed other people were starting to publish too.  It was as if we had all discovered it together – at the same time.
  • It felt like there was more comment out there, all looking for visibility….  it was getting a tougher market, harder to get new readers.

This got me thinking.

Is this really a trend?  When is comment too much comment?  Is too much content being posted, are readers losing interest?  If so, just how do you maintain or increase your readership?

Whilst readership is important, (how do people know what you are saying if they don’t read your blog), this should not be the sole goal for publishing.  I believe you need to decide your own reasons and objectives.  For example, is it to explain new ideas, engage in discussion or just reach a new set of contacts?

Without this, it is a quick race to the bottom, with funny pictures, pop quizzes and one liners.  They are extremely popular, but add little value and people see through them, not remembering who or what was posted.

Once your reason for writing are clear, it is also worth setting out your own set of publishing guidelines.  There is plenty out there on writing great articles, however here are a few of my own thoughts on guidelines.

  1. Think carefully about the headline.  Just like any newspaper: great headline, summarise the points early, explain the points and summarise again.
  2. Keep it positive.  Explain even negative points in positive terms, not critical.
  3. Have an engaging point or non conventional view.  Readers are better engaged, even if they don’t agree with your point of view.
  4. Be personal and authentic.  The audience wants to hear from you, not from an imaginary persona, especially in a blog article.
  5. Don’t make it verbose or too long.  Short, snappy to the point is more popular… (I struggle with this one!).
  6. Link and reference well.
  7. View, like and engage with other bloggers.  Likes, comments, shares, all spread blog posts to your network.

Lastly: caution with kittens…  I accept the line is blurring and pictures of cute kittens are fun, but try to stay focused on your objective and message, use with caution, only to re-enforce your point.

Why does no one read your blog, is there too much comment? 

There has been an explosion of ideas and the interaction is undoubtably a positive thing.  As a reader it can be harder to filter out the noise and as a writer harder to reach the reader.  However I am not sure that number of views really matters in the long term.  Engage the audience and they will return.

After all, an engaged reader is always many times more valuable than one which is not.

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