Your business has more in common with Motorsports than you think.
I received some great follow-up questions from my last article, revolving mostly around finding and measuring Key Performance Indicators (KPIs) that make sense for various businesses. As I am an avid motorsports fan, I was immediately drawn to creating racing analogies to explain the concepts behind identifying, measuring, tracking, and improving KPIs. It’s my hope that I can add value to the conversation for those who may or may not relate with racing, and draw some conclusions that will open your eyes to new ideas in measuring and impacting the performance of your business.
In motorsports the very simplified objective is to finish the race ahead of your opponents, with the ultimate goal of achieving a victory by crossing the finish line in first place. OK, so that is very simplified much like “winning in business” can be simplified in a matter of a few short words. Let’s all agree, however, that winning in business and winning in motorsports is a complicated matter. So much so that volumes of books have been written on BOTH topics.
The aim of my article today is to give you insights into what you can learn from race teams about incremental improvement so you can apply that in your business. I’ll break it out by how teams identify, measure, track, and improve their results and how those same concepts can apply in business.
Identifying KPIs: What to measure
This is possibly the trickiest part of the process, and why so many businesses are stuck making decisions in a vacuum or worse off by making decisions based on hearsay, feelings, etc. If you were running a race team instead of your business, would you strap your driver into the race car and expect him to win a race without any experience, data, practice, or benchmarks? Why not? You’ve HEARD the track is great, easy to drive, you FEEL like he can do the job, you EXPECT him to know how to drive a car fast around a racetrack.
Data makes the difference. In fact, the most successful race teams simply could not imagine operating without data. The amount of data they have today is mind-blowing. But how did they choose WHAT data is important? The same way I recommend you choose the data in your business.
The data that is important to track is the data that predicts success and drives results. This is not easy stuff so you’ll need to take some time to think about it in your business. What are the results you are after and what are the predictors of those results? One of the simplest examples might be the number of quotes or bids per week/month and the relationship to revenue at the end of your sales cycle. Another could be predicting failure points in machinery for a manufacturing business based on the number of parts output or hours on the machine. Look at the deliverable or result you want to measure and backtrack until you start to get a feeling for what predicts that result. What you will find there are Leading Indicators that make for a good starting point for KPIs that are meaningful in your business.
Measuring KPIs: How to measure
How many sensors, gauges, and reporting mechanisms exist in your business. Are their thousands of data-points being calculated in milliseconds and fed wirelessly to screens throughout your office to make split-second decisions. Maybe…but you would not have made it this far in this article if that was the case. In motorsports they use sensors and timing to measure the data they need to make decisions. Simple really. Without that data it would be a process of testing and measuring, which is perfectly acceptable if you have time on your side and safety is not a concern.
Once you have identified what you want to track, you have to figure out how to measure it. For many entrepreneurs, this is another sticking point because it feels like more work than is necessary. And you certainly do need to be aware of admin overhead when concerning yourself with measuring KPIs. You will want to seek the most automated way to measure the results of your KPIs, and attempt to eliminate human error and biasing that can occur in the process. Be certain the measurements are documented immediately, concisely, and in a repeatable fashion otherwise the data is not reliable. This could be with an app, website, cloud-based spreadsheet, etc. You want to eliminate all friction related to measuring and documenting, or your humans will find any shortcut to eliminate the friction themselves…potentially resulting in unreliable data.
In our examples above, you might try to use a CRM system to report the quote data versus relying on someone to tally the quotes in a spreadsheet. For machinery, you might see if sensors or cloud-connected hour meters can be added to eliminate the need for manual reporting. The most reliable and least biased measuring systems are likely to require some investment, make sure you vet the product and the process before signing on for any long-term solution.
Tracking KPIs: Where are the trends?
You've identified what is important and how you are going to measure it, and at some point the same happened when the speedometer was invented. In the early 1900s it was determined that measuring the speed of locomotives was important and the speedometer was the measuring tool. Do you think at that point they knew immediately what they were going to do with that information, what speeds were safe and unsafe? Fast-forward to modern racing cars which are capable of insane cornering speeds in a relatively predictable and safe manner. What role did the speedometer and the other later measurement devices play in growing the safety and performance of motor vehicles? Somehow data needed to be gathered, analyzed, and communicated to create more innovation and drive behaviors.
Tracking data and analyzing trends in that data is how you back up decisions that need to be made. Check out my prior article for more on the topic of data-driven decisions. There are many ways to track the data and it could be as simple as a spreadsheet or report that is output from whatever software you choose. The most important part again is that you must eliminate the friction in using the tracking method, make it simple to it gets done.
The most effective way that I have experienced to report the data that is being tracked is using a dashboard methodology. This is where the underlying data sits behind the scenes of clear and concise dashboards that represent the most critical data in an easy to consume way. One great example of a dashboard system in the Custom Integration industry is the Bi4Ci system, which can be seen here. You can create dashboards of your own with many different solutions, including Excel. Try to start simple and work your way into something more comprehensive as time goes on. Creating and managing the dashboards may not be an area of strength, so consider hiring out the technical work to keep it simple. The power is in reviewing the dashboards and reports regularly to identify trends and extract insights.
Improving the results of your KPIs, and ultimately your business, can be challenging at first, since we often feel that big moves are required to make big impacts. Be open to the idea that large changes in performance can often be traced back to small modifications made along the way. Consider how racing drivers and teams focus on improving their lap times through testing and tweaking.
A road racing course is made up of a combination of straight aways of varying lengths and corners of fluctuating complexity and radius. If you were to look at the race course as a whole and try to "go faster" or "get a faster time", you'd be hard pressed to make much improvement. What teams will do is to break down the coarse, often starting with the areas of the course which have the greatest impact on lap times. This may be the fastest corner that leads on to the longest straight away, considering that a small change in corner speed could net a much greater impact through acceleration down the long straight section. What accelerators exist in your business as you start to break things down? Those things which have the greatest impact with the smallest change are where you should start. A little tweak here and there in a number of areas can result in huge impacts over time, and you'll only realize those impacts with a reliable method of measuring, tracking, and reporting.
I'll close by saying that a process of measuring and analyzing data is one that takes patience and persistence, because often the results of changes will take some time to appear. Be sure you are viewing your data at the proper resolution to see results at the level you expect them to be noticeable. This means that you may have to focus your analysis at first, and zoom out over time. Just stick with it...the power is in the consistency.