When Performance Metrics Attack: Complete, Agile BI Requires Going Beyond Just the Numbers
I’m currently reading Howard Schultz’s Onward: How Starbucks Fought for its Life Without Losing its Soul (2010). Schultz compellingly conveys his dedication and passion for the company and, of course, great coffee.
I’m currently reading Howard Schultz’s Onward: How Starbucks Fought for its Life Without Losing its Soul (2010). Schultz compellingly conveys his dedication and passion for the company and, of course, great coffee. Returning in January 2008 as Starbucks’ ceo (Starbucks uses lower case for all company titles), Schultz would save the company from its doldrums and rekindle long-lasting success, soundly refuting critics who had proclaimed Starbucks’ best days were behind it.
Just as important as what Howard Schultz did as ceo was what he stopped doing: Soon after returning to the ceo office, Schultz told investment analysts that Starbucks would no longer publicly report its same-store sales, or “comps.” Schultz’s wise decision would prove to be as critical to Starbucks’ revitalization as its new Pike Place coffee blend and Clover brewing machines.
Analysts were predictably annoyed by the move, but Schultz patiently explained that comps did not consider Starbucks’ grocery sales and other revenue beyond its cafes. But Howard Schultz had a far more urgent reason to stop reporting comps: comps had long become “a dangerous enemy in the battle to transform the company.” As Starbucks’ chairman, Schultz had realized the company had, slowly over time, “defaulted” to viewing the health of the company through the singular performance lens of comps; as long as comps were fine, the company was fine – except that it wasn’t.
Comps would eventually prove to be a harmful lagging indicator: as Starbucks persisted with excessive store expansion and a series of missteps that diminished customer experiences, comps remained highly favorable. Only long after “slow, quiet, incremental” damage did comps finally, and very suddenly, trend poorly. Schultz wrote:
Maintaining positive comp growth history drove poor business decisions that veered us away from our core…Once I walked into a store and was appalled by a proliferation of stuffed animals for sale. “What is this?” I asked the store manager in frustration, pointing to a pile of wide-eyed cuddly toys that had nothing to do with coffee. The manager didn’t blink: “They’re great for incremental sales and have a big gross margin.” This was the type of mentality that had become pervasive. And dangerous…It is difficult to overstate the seductive power that comps had come to have over the organization…overshadowing everything else.
In hindsight, it was very fortunate that Howard Schultz had remained active as Starbucks’ chairman and was willing and able to step back into day-to-day operations as ceo. Having pioneered the company’s signature cafe stores, Schultz had the situational awareness to realize that “something wasn’t right” with the company’s customer experience years before comps finally tanked.
What about other leaders who also want true, long term success, but don’t have the same hands-on, ground-floor business awareness of a company founder? How do they acquire similar awareness to avoid overlooking slow, subtle damage to the company and instead make business decisions that promote genuine, long-lasting success? Here are a few essential requirements, based on some insights I drew from Schultz’s book.
Keep score based on how well you achieve your core mission. Howard Schultz had a true passion for revitalizing Starbucks around its core mission – its very reason for existing: delighting customers with its superior coffee and unique cafe experience. Pleasing shareholders was always part of Starbucks’ mission, but doing so slowly eclipsed its core mission, and eventually impaired shareholder value as well. Eliminating the rogue performance metric of comps gave the company “a new way to see” the business based on its core mission and “freed everyone to enthusiastically [re]focus on our coffee and our customers.”
“Get your hands dirty” in the “roots” of the business. Schultz rallied the company around its core mission – freshly updated with his global executive team – and aligned all operations, customer service, and decision making with achieving that mission. He called on everyone in the company to join him in that hard work, urging his executive teams to “get dirty, get in the mud, get back to the roots of the business” – a metaphor that resonated throughout the company. Long term leaders and managers must “get their hands dirty” – fully commit themselves to deeply understanding the key details of the company’s operations and its customers and take action accordingly.
Get a complete informational picture of the business. On his first day as returning ceo, Howard Schultz told employees that “to just go ‘back to the future'” of Starbucks would not be good enough to turn the company around. While the company would “need a piece of its past,” Schultz also believed “many of us at Starbucks had lost our attention to the details” – leading to Schultz’s drive to “get back into the roots of the business.”
By necessity, acquiring a deep, detailed understanding of the business at its “root” level requires a complete picture of the business far beyond numbers alone. Leaders and managers dedicated to long term success will therefore not be content with analytics limited to such superficial questions as, “So how are comps doing?” They will demand answers to far deeper, probing, “get your hands dirty” business questions, such as:
- How do our sales performance, new product launches, employee retention, etc. correlate with customer sentiment expressed on social media sites, our online surveys, email and chat logs?
- What complaints, compliments, and/or suggestions keep coming up? Is this customer feedback correlated to specific regions or locations?
- What other factors we may not yet be fully aware of affect our sales, costs, and customer service: Changes in weather? Changes in local/regional tastes and preferences? And on and on…
Leaders cannot, and will not, wait weeks or months for answers from unresponsive, un-agile traditional BI processes and legacy IT systems. Answering such vital questions that “dig into the roots of the business” requires a powerful new enterprise information “rototiller” – a new “Analyze Everything” agile BI platform.
As the name implies, an “Analyze Everything” integrates structured data (e.g., databases) with business signals buried within text-based information sources (web content, social media sentiment, wikis, documents, news and much more). The result is a much wider and deeper level of insight into not only what is happening, but also why they are happening.
Take action in person. Make house calls. Howard Schultz used a medical analogy to emphasize the vital need for “root-level” business understanding: “Like a doctor who measures a patient’s height and weight every year without checking blood pressure or heart rate,” Schultz wrote, “Starbucks was not monitoring itself at a level of detail that would help ensure its long term health.”
Once leaders and managers achieve that essential deeper level of business understanding, made possible by “Analyze Everything” agile BI, they must take action based on those insights in a timely – and public – manner. Leaders must be visible to the managers and workers whose daily dedication and effort are critical to achieving the company’s core mission.
During Starbucks’ turnaround, Howard Schultz “sensed that people inside the company needed to see me…Showing up, listening to and talking with Starbucks’ partners was one way I got my own hands dirty…Whether I was in front of one person or thousands…I strove to be authentic and frank while threading optimism into every communication.”
Extending Schultz’s leader-as-doctor analogy, the “doctor” must not only prescribe well-informed action for revitalized business health, but also administer it with a lot of house calls.
Onward provides substantial insight into authentic leadership. The book is also a primer on reigniting internal excitement for the company and its mission, refocusing on the customer experience and growing through innovation with the customer and mission in mind. Leaders driven to achieve these goals and realize long-term success will reject superficial metrics in favor of gaining deep “root-level” business understanding. Doing so requires the complete, agile BI that an “Analyze Everything” platform so readily provides.
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