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  • 6 Performance Management lessons from the Tour de France

    The Tour de France

    The toughest sporting event of the year is in full swing right now. No, I am not talking about the Olympics. I am talking about the Tour de France. No other sport requires its athletes to perform at the highest level for 21 consecutive days. Think about this: Riders burn an average of 4000 calories per day. To win this unique competition you need to do everything right and you need to have a bit of luck as well.  It is therefore not surprising that top athletes leverage smart technology to help them. As a matter of fact, most top cyclists leverage so-called power-meters to collect and analyze ride data. Think of it as business analytics on a bike. And guess what – the athletes & their coaches do it really well. Here are a few simple lessons that we can learn from the pros:

    1. Pick a balanced set of metrics: Improving your performance requires you to look at various measures. Cyclists, for example, look at things like cadence, power output, heart rate etc.. Each one of these metrics influences performance. It’s the combination of them that allows riders to make sound decisions about their training programs and racing strategies. Do you have the right mix of metrics that allows you and your team to perform well? Managing sales is much more effective by looking at metrics such as # of new customers, avg $ per sales order etc.. Just looking at revenue alone creates a limited view.
    2. Monitor the relevant metrics:It’s nice to have a lot of metrics to work with. But make sure to pick the ones that are actually relevant to your business. Cyclists for example are ultimately looking to increase their speed. However, speed is very hard to control. It’s heavily dependent on outside variables such as wind, terrain, tire friction etc.. Monitoring speed on a continuous basis is therefore no recipe for improvement. As a matter of fact, it would be a counter-productive exercise (think about a day with lot’s of tail-wind). Cyclists therefore focus on the above mentioned metrics. They have direct control over these and improving them will lead to higher average speed. What about your metrics? Are you monitoring the relevant ones? Managing the marketing department with revenue metrics alone is not that effective, for example. You’d rather leverage metrics such as # of leads generated, brand equity etc.. Those metrics are in direct control and they influence the overall goal of increasing revenue.

      Golden Cheetah
      Meaningful metrics create powerful insights
    3. Consider relative measures: Power output (watt) is a key metric in cycling. The higher the power output one can produce, the better. But watts by themselves do not allow you to compare progress over time. Let’s say I am able to produce 300w over one hour today. Last year, I was able to produce only 280w. Have I improved? Will I be able to ride up that hill faster? It depends. We would have to look at my weight. The heavier I am, the more power I need to maintain a certain speed. And that’s why cyclists closely watch relative metrics. Watts/kg is one of the key metrics. It allows them to compare themselves with other riders and they can carefully track their progress. Are you looking at some relative metrics? Think about marketing, for example. We could be tempted to simply look at the number of leads that a certain campaign has generated. Sure, that is an important metric. But we should also look at the cost per lead. That allows us to compare different campaigns.
    4. Leverage data:It’s nice to have a ton of data available. But it’s only useful if we turn that data into information through analysis. Leading coaches and riders spend a lot of time analyzing ride data. They look for insights and they use these insights to refine their program. Businesses have a wealth of data available. Unfortunately, not all of it is used appropriately. I recently met a company that has terabytes of clean customer data sitting in their databases. None of it is being used right now. Such a shame. It happens way too often.

      Tracking and predicting performance
    5. Merge information with intuition: Data is great and data (hardly ever) lies. Yet, it is critical to listen to your inner voice as well. The best cyclists in the world leverage all their analytical insights and merge them with their intimate knowledge of their own body. They intuitively know when they can attack. It’s the same in business. That NPV model might look great on paper, but our gut tells us that the investment is wrong. Let’s not forget that!
    6. Change that plan: Athletes spend a ton of time planning their training schedules. They use scientific methods to predict their peak performance. But no plan is fool-prove. Things are likely to change. Top pros therefore adjust their schedule on a rolling basis. There are days when they simply can’t pull off a hard interval session. Sure, they could try to do it. But that could have a devastating effect on their engine (body). Likewise, there are also days when their body feels surprisingly fresh. In those cases they increase their training load. Too many businesses create plans and stick with them regardless of what is happening around them. That is not only risky but it also often prevents companies from outperforming (think about all those expense budgets that are rigorously spent each year…).

    The Tour de France by numbers

    Take a look at these lessons and see how you could apply these to your business. Granted, cycling is a simple sport. But they face a ton of pressure. The best riders are separated by a mere 1-2% in overall performance. 2011 research by the CFO Executive board has shown that CFOs believe their finance departments perform 30% below their performance potential. What does that tell you?

    P.S.: If you like sports and analytics, make sure to follow the daily coverage of Trainingpeaks.com. They feature detailed ride analysis and such. There is some fascinating stuff.

  • Is it worth going the extra mile?

    That last bit of effort

    Most of us have encountered many situations where we need to make a decision: do we want to put in just a little bit more effort or should we just let it go. There is the project proposal that we have been working on for days. Should we do another spell-check, should we have somebody else take another look at it? And there is one of our customers. Should we invite him for a quick cup of coffee despite our busy schedule? There are many situations. Unfortunately, we are often tempted to take the easy route.

    A small investment

    In many cases, we should make that little bit of extra investment. The potential pay-back is just too big. And it’s usually a relatively tiny investment of our time and effort. I was reminded of that the other day while I was out biking. My house is at 550m altitude (1804 ft). Within a mile there are a bunch of sunflower fields. They are all in full bloom right now. It is gorgeous. There is a town on my cycling route that is just ten miles away. It’s located at 590m (1935ft) altitude. The fields were completely green this past Sunday. Not a single yellow sunflower bloom. A minor difference in temperatures due to the proximity to the Alps and the altitude. (This town actually has more snow in winter than we do).

    Sunflowe

    Not going the extra mile has inherent risks. I flew back from a conference a few weeks ago and wasn’t feeling well. The staff on the flight seemed to be a bit off as well. Dealing with an arrogant and unfriendly staff was the last thing that I needed. Was it really that difficult for them to bring me a second cup of coffee? Was it that hard to greet me with a smile? Was it that difficult to apologize for the water they spilled on me? I doubt it. What could have been a nice experience (I was upgraded) turned out to be a real mood spoiler. I have booked several upcoming trips on other airlines since that experience.

    Make the effort

    Going the extra mile does pay off in many cases. The required effort is usually small. Why don’t we do it more often then?

  • 8 reasons why you should love presenting

    Do YOU love presenting?

    Too many people hate presenting. A few weeks ago, I wrote about some strategies to combat nervousness when presenting to a larger group of people. This post turned out to be extremely popular. However, I just realized that I had omitted an important point: Why would I want to present in the first place? Dealing with nervousness is a nerve-racking business after all. It would be easy to just avoid this all together. In my current role I have had the unique opportunity to present over 100 times per year and have learned that we should jump on the opportunity to present to smaller or larger groups. I honestly have to say that I love presenting. And I think you should love it, too. Here is why.

    8 reasons YOU should present

    • Ability to share your ideas: Think about it – it is damn hard to get people’s attention these days. There is too much information floating around and there is also a lot of distraction. If you have a great idea, you really need to fight to the attention of the right people. Presenting, however, allows you to get the undivided attention of a lot of people at the same time. I consider this to be a serious luxury. It is a rare opportunity.
    • Ability to stand-out:It is quite difficult to stand-out these days. Presenting more than anything else provides you with the opportunity to show your capabilities and to toot your own horn.  An engaging and insightful presentation is the ideal platform to shine and to create a lasting impact. Don’t waste it. It’s no surprise that many experts consider presentation skills a key career skill.
    • Ability to influence: It’s not only about standing out but also about influencing lives and decisions. Delivering a great presentation allows you to influence more than just one person. Once again – you should consider this as a luxury.
    presenting
    Undivided attention is a luxury. Don’t waste it! Shine, instead.
    • Opportunity to learn: One of the best ways to learn is to teach. Creating a great presentation requires you to know your materials insight out. You will have to prepare carefully. And that is an excellent opportunity to acquire new knowledge. I have had a lot of situations where a speaking engagement turned out to be a tremendous learning experience.
    • Ability to test: It’s great to have ideas. But do they actually work? Presenting is an amazing platform to test your ideas and to see if your positioning works. Why is that? Your audience will provide you with immediate and honest feedback. Just look at their faces. Are they engaged or bored? If they are bored, you need to work on your pitch and your idea.
    • Improved networking: Whenever I present at conferences and meetings, I tend to meet a bunch of great new people. As the presenter you enjoy more exposure as I mentioned earlier. If people like your content they will connect with you. And the great thing is that you don’t have to do the work. People come to you.
    • Intellectual challenge: Listen up – presenting is an awesome intellectual challenge. To deliver a great speech you need to be 100% focused. Staying focused for more than 30 minutes is not easy. After delivering a 60 minute presentation, I am often drained. But that’s a great feeling!
    • Fun: Last but not least, presenting can be extremely rewarding and fun. A great job done presenting will give you many reasons to celebrate and smile.

    8 reasons to love presenting

    Those are my 8 reasons why you should love presenting. Of course, non of this is easy and it requires preparation and practice. That’s the way life is. What do you like about presenting?

    “Presenting is an every day activity for everyone. Those that do it well are likely to get to the top of their chosen profession.”, Graham Davies, The Presentation Coach: Bare Knuckle Brilliance For Every Presenter

    “The potential of your speech or presentation to change things – maybe even change the world – goes far beyond just the words spoken.”, Garr Reynold, The Naked Presenter: Delivering Powerful Presentations With or Without Slides (Voices That Matter)

  • Lessons from the discovery-driven planning approach

    Discovery-driven planning

    A few weeks ago I researched ideas for improving current planning and forecasting approaches. I stumbled upon a methodology that I had long forgotten. It is called ‘Discovery-driven planning’ and it was developed by Rita Gunther McGrath and Ian C. MacMillan. The idea was first published in the July 1995 issue of the Harvard Business Review. While I do not want to go into any details of this approach, I do highly recommend reading the original article. It is very inspiring and thought-provoking. Today, I want to look at some lessons that we can apply to our forecasting and planning processes. However,

    The basic idea

    Discovery-driven planning is a multi-step planning approach designed for new ventures. It encourages planners to move away from the traditional process of just creating financial projections. One of the core idea of the discovery-driven planning methodology is to develop a set of detailed assumptions around the projections. They should also be quantified and tested against the plan. What it does is the following: Rather than just saying “These are the results we are expecting” you now have a platform for answering a critical question “What has to prove true for our plan/ forecast to work?”. You should rank the assumptions by importance and/ or the level of uncertainty. The process of developing this should be quite valuable itself and one should be in a position to identify critical problems or opportunities. Once the assumptions have been created and tested, they should be assessed on an on-going basis.

    Enhance your processes

    It’s difficult to disagree with this idea. It’s not rocket-science but it makes perfect sense. Yet, we hardly ever use this approach. Our plans and forecasts are developed as if we could predict the future. Yet, we all know that this is not the case. Various studies, for example, have shown that over 60% of all annual budgets are outdated within the first fiscal quarter. I therefore believe we can significantly improve our processes by incorporating critical assumptions. Not just at the top level but also at the individual contributor level. The resulting process could look like this, for example:

    Discovery-driven planning
    The development, testing and discussion of assumptions is now a critical part of the process.

    An example

    Let’s assume we are a sales manager. We have to develop a sales forecast for the next quarter. Following a best practices approach, we only look at our best customers in detail. We spend time developing the forecast – revenue numbers by customer, by product family, by month. Perfect. The numbers look great when we compare them against budget. And our boss is happy with the look of the forecast.

    Discovery-driven planning
    The traditional approach. This looks great, doesn’t it? But are the numbers realistic?

    Most processes stop right there. A good manager would probably ask a few tough questions here and there. But developing assumptions allows us to go further than that. Incorporating this into the process as a step could help us identify risks and opportunities. Below is a simplified example:

    AssumptionsNow we can easily see that there is significant risk. And we now have to ability to act on this. The sales manager, for example, could sit down with product management to validate product release dates.

    Next steps

    Discovery-driven planning represents a very interesting and pragmatic approach. I highly recommend that you read more about this topic. The idea of incorporating assumptions and their test into our daily planning and forecasting exercises could be quite powerful. It’s not rocket-science. Some companies already do this. However, it is usually done at a high level (GDP growth above 2.5%). Managers at all levels can benefit from this idea.

  • Updates, updates, updates

    Busy times

    Wow. It’s been a busy but exciting week. There is a lot going on in the business analytics space these days. Here are some updates that you might find interesting.

    Analyticszone.com

    • On Tuesday, IBM launched a revolutionary new solution that combines. IBM Decision Management combines business rules, optimization and predictive analytics to embed intelligence into the fabric of organizations’ decision making. Along with that IBM also launched various new versions of other products like SPSS Modeler, Cognos Express etc.. You can watch a replay of the launch event.

    That’s it for today. Short and sweet. Have a great weekend!

  • TM1 – The swiss army knife for the finance department?

    IBM Cognos TM1

    No doubt, IBM Cognos TM1 is a unique solution. I have never met so many loyal and enthusiastic long-term customers than for any other finance-related software solution. TM1 is special indeed. There is a lot to like: it is lightening fast (64-bit in memory), configuration does not require rocket-science, it supports Excel, there is a great-looking web interface etc.. But one of the biggest benefits is that TM1 is very flexible. You can do many things with this solution. Usage is not limited to just planning and forecasting. It is not limited to the finance department but it can be leveraged across the enterprise for a plethora of business problems. And that is why many people say that TM1 is as versatile as a Swiss Army Knife.

    What can you do?

    What can you do with IBM Cognos TM1? A good colleague of mine recently put an interesting slide together. It shows various applications that European customers have built. This is not an exhaustive list but just a snapshot of what is possible.

    TM1 Usage

    Much more…

    Does this inspire you? Find out more about TM1 by reading my interviews with the author of the IBM Cognos TM1 The Official Guide. And if you haven’t bough the book itself, make sure to pick up a copy sooner than later.

  • The robot – a case study about the value of process automation

    The case for process automation

    Many business analytics programs follow a classic approach – they start with process automation. It is the low hanging fruit. Executives and project managers like process automation as it is usually easy to measure and identify the benefits (e.g.: cycle time reduced by 2 days, aggregation is 60% faster). However, that raises a question: What happens with the ‘free time’. Can automation lead to higher effectiveness as well? Let me tell you a personal story….

    Stuck in the process

    AutomationMy wife and I hate mowing the lawn. Our garden is not all that big but it still takes us around 1.5hrs per week to get the task done. Setting up the equipment, getting the stuff cleaned and put away consumes the majority of the time. We do not enjoy any of the involved tasks. It’s just a waste of time without any added personal benefits. It’s really just basic garden maintenance without any kind of physical improvements over time.

    Last year was really busy for us as a family and we often neglected the lawn for obvious reasons. As a result, our garden looked like a football field at the end of a season. It was not pretty. We ended up not enjoying ourselves in the garden.

    The robot

    A few weeks ago, we made the decision to invest in a new tool – a robot for mowing the lawn. It is a tiny and friendly 10lbs car that whizzes around your garden while mowing the lawn. It works extremely well and it is fun to watch. Setting it up every other day takes about 2 minutes. It doesn’t need any major cleaning and there are no wires. Pretty cool stuff. This saves us a few hours every week.

    Process automation in action

    And what are we doing with the time savings? Well, here is the honest answer: we spend more time working in the garden than ever before. However, it is time well spent and we have more fun doing it. Why? Very simple: the garden always looks nice and fresh. That in turn has inspired us to do more. We now frequently dedicate time on improvements and enhancements that benefit our family. The efficiency gains have effectively been translated into effectiveness gains. And this is a self-perpetuating process. It is contagious.

    Robomow

    Business analytics and process automation

    Process automation with business analytics often allows us to dispense with mundane and boring tasks. Think about spreadsheet maintenance. Think about copying and pasting data from one system into another spreadsheet. Think about fixing formulas that don’t work. That type of work typically zaps energy. Process automation allows us to get rid of the boring work that does not add value to us personally and to our company. Getting rid of the mundane work allows you to focus on the important things. And that’s where the true benefits are.

    Once we gain time, we often identify improvements. Our energy and motivation increases as well. Trying to improve things without process automation is tough.

    Take a look at your business analytics projects. Are there opportunities where you can leverage the power of process automation?

  • Business Analytics Updates for June 14th

    Greetings. It’s been an incredibly busy few weeks for me with lot’s of travel through Asia. The IBM Finance Forum events for that region were kicked off last Wednesday. I was pleasantly surprised by the huge number of finance professionals that joined the events in Taipei, Hong Kong and Shanghai. As I am still recovering from a serious jet lag, here are some short and pointed news for this week.

    • IBM Innovations in Smarter Analytics Launch event: Make sure to register for the June 19th launch event. IBM Business Analytics will launch and present a bunch of really exciting and cool new capabilities. The big focus will be on Analytical Decision Management. This is an area that combines predictive analytics, business rules and business intelligence. Using analytical decision management, you can optimize and automate transactional decisions by combining predictive models, rules, scoring and optimization techniques. Very cool stuff! There are also a bunch of updates to other products such as Cognos Express and SPSS Modeler. This is a virtual event and you can attend from your desk. Make sure to register today.
    David Parmenter
    • European Soccer Cup 2012: If you love soccer, make sure to watch all the exciting games that are happening this month. It’s been an interesting tournament so far. As a business analytics guy, I love to check out the statistics for the match. You can find some interesting information on the official site.

    All the best,

    Christoph

  • David Parmenter’s reading list – Listen to the King of KPIs

    David Parmenter

    Greetings from Shanghai. For the past seven days, I have had the pleasure of working with the thought-leader, book author and consultant David Parmenter. He is also known as the King of KPIs based on his best-selling book Key Performance Indicators (KPI): Developing, Implementing, and Using Winning KPIs. David and I have been traveling through Asia to speak at various IBM Finance Forums and to meet with great customers. Most Asian IBM Finance Forums feature David Parmenter as the external keynote speaker this year. As part of his presentation called ‘The CFO as Chief Performance Officer’, David urges the audience to spend more time reading and studying the great business thinkers and writers. He goes further in his presentations and presents the audience with a few specific recommendations. I thought it might be worth sharing these.

    David’s Recommended Reading List

    (Click on the images to see more details)

    Why these books?

    The Definitive Drucker: Challenges For Tomorrow’s Executives — Final Advice From the Father of Modern Management: “Peter Drucker is the Leonardo da Vinci of management. His thinking is way ahead of its time. I predict that his ideas will become a standard within the next 20 years. This book is a great summary.”

    Winning: “Jack Welch is often regarded as one of the greatest managers. This book provides some profound wisdom that every manager should be aware of.”

    Good to Great: Why Some Companies Make the Leap… and Others Don’t: “The classic book to find out what it takes to be a great organization. The insights are also relevant for personal success.”

    In Search of Excellence: Lessons from America’s Best-Run Companies (Collins Business Essentials): “This book remains a timeless classic.”

    The Future of Management: “Seeing into the future. He stirs ups the general thinking about management.”

    In the next few days I will publish an interview with David Parmenter. You can also find further book recommendations on this blog.

  • How to confuse and distract your audience with poor visualizations

    Excuse me?

    We often talk about how to best visualize data so that the audience can quickly discover the most important information in often complex data sets. But we cannot forget that it is also possible to achieve exactly the opposite effect: You can also leverage visualizations to distract and confuse people. As a matter of fact, it is possible to create visuals that completely hide important messages. Why would you do that? I guess if you want to hide bad news….right?

    A bad example

    The other day I received the 2011 spending report of the town that I live in. The text was quite dense and it included a ton of public sector terms that I did not understand. The core of the report, however, was centered around a graphic that outlines the detailed spending. Without further due, here it is.

    Poor visualization

    What’s wrong with this chart? Boy….pretty much everything: Extreme 3D, poor font choice (I can’t read it…), technical language and the colors… The sum of the parts is also not correct (as compared to the narrative). Percentages are not correct either (poor rounding practices). To be honest with you – when I saw this report I immediately got the impression that our town hall is trying to hide something. After some analysis I am still confused and not quite sure what to think about this.

    To be fair, I believe that our mayor and his team are highly qualified. His approval ratings are extremely high for good reason. But this sort of communication does leave a bad taste in my mouth. It just makes you wonder….

    A better approach

    3D pie charts are never a good choice. The data above is quite simple and one could either leverage a standard sorted bar graph, a stacked bar chart or a waterfall graph. Really depends on your own personal preference. Here is an example:

    Stacked Bar Chart