A Stratactical Approach To KPI Definition

Effective KPI definition is a foundational component of any good web analytics strategy. Organizations often struggle to build that foundation because they have put too much focus on either the strategic or tactical elements of KPI definition. On one end of the continuum, organizations struggle to leverage their KPIs to drive change. On the other, organizations may struggle to achieve more than isolated successes. However, Stratigent has found that organizations who take both a strategic and tactical approach are able to achieve sustained competitive advantage.

A "stratactical" approach to KPI definition starts with a strategy to achieve an organization's objectives and it ends with ensuring that all the tactical processes and technologies are in place to support that strategy.

After dozens of KPI definition engagements, we have seen an evolution in how people think about web analytics KPIs. Thinking about these KPIs used to be very simplistic; "If it's an important metric, it must be a KPI." Back then, KPI definition was about distinguishing between interesting and important metrics. For example, of all the interesting web metrics that you could possibly measure and analyze, which handful of them are the most important?

As companies grew frustrated with the lack of progress that they were making, the emphasis shifted to actionable metrics. Organizations began to believe that in order to make progress and evolve their analytics and optimization program, their KPIs must be actionable. But, there's a dark side to actionable metrics. Stratigent has successfully completed more than 500 web analytics engagements, and what we've seen is that an overemphasis on actionable metrics relegates companies to reactive, tactical mode. This is ironic, because many executives say that one of the primary reasons behind pursuing a KPI initiative is that they want to be more proactive and strategic.

Useful KPIs trump actionable KPIs. We're not arguing that there's no value in actionable metrics, because clearly there is. We're arguing against the narrow way in which "actionable" is often defined. Increasingly, a metric is not considered to be actionable, unless it can be acted upon with existing resources before the next report cycle. That definition is too narrow.

Instead, think of key metrics as having at least two dimensions: (1) The extent to which they are actionable and (2) the extent to which they are insightful. It is the combination of these two dimensions that determines the usefulness of a key metric.

An example of a highly actionable KPI that provides little insight might be a landing page conversion rate. One can optimize the landing page by testing whether the submit button should be blue or red, and the results of that test would be immediately actionable. However, in most cases the key insights from such a limited test can't be extrapolated to the rest of the business. So, it's not particularly insightful.

On the other hand, one might not be able to immediately act on competitive data or voice of the customer data, but the insight can inform an executive level strategy.

A balanced, stratactical approach to KPI definition includes looking at both action-ability and insightfulness. It includes looking at useful metrics as KPIs or PKIs. Some metrics are Key Performance Indicators, while other metrics Provide Keen Insight. The organizations that are effectively using analytics to achieve a sustained competitive advantage have both. They're taking a stratactical approach to their KPI definition.

If you're interested in learning more about taking a stratactical approach to KPIs, you may wish to attend one of the new workshops Jennifer Veesenmeyer will be leading entitled Pimp Your Reports: Dashboards & Executive Reports. This hands-on workshop will cover more than just meaningful visualizations and best practices in dashboard design. The workshop will also include guidelines for determining which metrics should be included and / or highlighted in dashboards and executive reports. Register before November 27th to receive a $100 discount on your registration.