How your kids can help you
with better business performance

Children are never satisfied with you answer to their what-question. It is usually followed by a “why”. Knowing the fact is never enough. Kids need to know the reason. Us, adults, shall sometimes let this inner kid out, especially when it comes to a business that we play in.

In business, we have dashboards and reports which give us facts but don’t show reasons why something happens. There are no parents nearby to tell us why it is so, and we, ourselves, are too busy to spend time for playing in Sherlocks. But sometimes it is knowing the reason that distinguishes a winner from a… less successful individual.

One scrupulous Japanese guy, Sakichi Toyoda, got it and developed a concept of 5 Whys. He claims it requires at least 5 why-questions to find a root cause of any change. Each question comes out of the previous one, and the answer to the last question opens up the root cause for us. If to apply this concept to a business situation, it means we need to look through a report, analyse a change of KPIs there, suggest what caused a change and find a proof in an additional report…or reports. Sounds logic. The bitter truth is it can take great efforts to look through numerous reports in an attempt to solve a puzzle. It can take days or even weeks… which might mean days and weeks of loosing money for our business.

What if we had a tooltip to show cause-effect relations between KPIs in reports? So that when we have a negative change in a KPI, we could see what other KPIs influence it and analyse only them, skipping all the others. Wouldn’t it make life easier? How would it work in a real business situation?

In retail (and not only) it’s quite a common situation when sales drop, and there can be thousands of reasons for that.

pic_2So one day, comparing sales results, we see the revenue going down dramatically since June.  Our 1st Why will be: “Why did it happen?”

It makes sense to filter sales by regions to see where the drop rate was the highest. Detecting the champion, there comes our 2nd Why: “Why only in this region?” And this can be a tricky question since almost anything can be the reason.

But with a tooltip, we are lucky and have predefined relations between KPIs and links to reports in which KPIs are measured. With this, we know exactly what KPIs influence revenue: sales volume, number of transactions, average transaction value. Having this information, we drill down further to the KPIs that influence these ones.

Skipping unnecessary information, we can quickly find an answer – a negative trend in the number of transactions with loyalty cards and a decrease in a total number of active customers. Time for the 3rd Why: “Why loyal customers are buying less from us?”Loyal customers

This way we untighten the knot further and go down the tree of KPI relations.
Among the KPIs that influence the number of active customers, we see that the number of repeat customers is falling down. The 4th Why: “Why would our key customers stop shopping at our stores?”

Now we look at performance indicators that influence repeat customers. At first sight store performance indicators haven’t changed too much: product availability is on the same level, cash registers work without delays… Average wait time in line shows good results and decreased. Then we look at customer satisfaction level that decreased dramatically. Time to fire away with the 5th Why: “Why are our customers unhappy?”

Inventory and merchandising indicators that influence customer satisfaction are alright. It means the root cause lies in the store itself. One look at the store upgrades makes the situation clear. This indicator shows if there were any changes or renovations in the store, and we see in the previous month there was a total interior change in the stores of the region. After a short increase in sales, they were decreasing from day to day… alongside with NPS – Net Promoter Score – which shows the willingness of customers to recommend our retail chain. It’s new interior that makes customers leave our shops.

This is a scenario that I’ve invented to illustrate how 5 steps potentially could help to find a root cause. The question is what are the chances we would give up, having no time to go through all steps to find a reason, and take actions, rather assuming a reason than knowing it? Eventually, they are quite high, especially when we have to spend a lot of time, “manually” looking through reports to find an answer.

And this imaginary tooltip?
It exists in reality. We’ve developed it, called Perfex Framework and wrapped into Perfex Portal.

 

 
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