Innovation

How to measure what matters for continuous improvement

How to set key peformance indicators that guide the continuous improvement any business function.
What is the purpose of this thought piece

Many organisations invest in innovation with a clear objective in mind such as improving the customer experience. But more often than not, organisations won't know what actually drives their customer experience. Or furthermore, what drives the success of most of their goals!

This thought piece aims to introduce three simple steps that will help you set unchanging key performance indicators that can guide internal work to better achieve a goal such as improving the customer experience.

The challenge with continuous improvement today

Imagine you are tasked with managing improvements to the customer experience of the Amazon retail platform. Or improvements to sales outcomes for a peanut butter brand. If I gave you a list of problems to solve that I believe are going to help improve the customer experience or sales outcomes, how would you choose which problems are worth solving? 

Investing in continuous improvement is an extremely valuable. But, more often than not, we don't know how to answer key questions - which problems are meaningful, which experiments are meaningful, how do we measure success?

Below, we will introduce three steps that will help you answer these questions.

Step one: write your goal

Begin by writing down what your goal is - is it to improve the customer experience of a business offering? Is it to improve sales outcomes? Operational efficiency?

We will use the Amazon retail platform as our illustrated example for all three steps. The goal: to improve the customer experience of the retail platform.

Step two: identify the unchanging drivers of goal achievement

Once you have written your goal, we breakdown what the goal drivers are - the factors that must be delivered in order to deliver the goal.

To do this, ask: 'what outcomes drive the delivery of this goal?'. Another way of asking this same question is: 'what are the factors that will never change that I can keep improving on to better achieve my goal?'

We will give two examples. First, is the Amazon platform'what are the factors that will never change that you can keep improving on to deliver a better customer experience?'

With these three factors defined, we now have a guide for how to improve the customer experience of the Amazon platform. We focus on problems or improvements that drive: price; selection; and convenience.

To this extent, Amazon created the flywheel above which shows their model on how customer experience leads to having more third-party sellers which leads to greater customer experience. It also shows that as Amazon grows as a company, their marginal costs go down which lets them set lower prices - driving the customer experience further.

Our second example, is a sales goal: 'what are the factors that will never change that we can keep improving on to win more sales?'

There are more factors here for sales, but the point is, once I begin identifying the drivers, I can now consider how any problem or improvement works towards improving awareness, understanding, relevance or another driver that drives sales outcomes.

Step three: focus on inputs not outputs!

Our final step once we have chosen our goal drivers is to identify the inputs we control to focus on improving. This is as opposed to focusing outputs that are out of your control.

Using our sales goal example to illustrate, you don't control what % of people understand what your business offering is, what you do control is how many experiments you have run, how many improvements you have made to your messaging and so on.

With your drivers set, ask: 'what inputs do I control that influence this driver?'.

Using Amazon as an example, the number of partners they have reached out to to provide offerings on the retail platform is an input they control that will drive the selection of goods (by introducing new goods from partners) which drives the customer experience.

How to identify the inputs that matter and your input metrics is a thought piece in itselfwhat are the inputs you control that will eventually lead to the achievement of your goal, and measure success by how you are progressing these inputs.

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