They are going to be predictive whether you come back.
The other thing that you want is you don't want measures that bounce up and
down all the time onness stuff.
And what you get it a lot of times with these measures is because you use
like very small sample sizes, they bounce up and down.
They don;t actually tell you much, so what we want is a measure that's valid and
reliable.
Predicts what you wanted to predict and it's not what's called too noisy
which means it just bounces up and down we don't know why on this.
Next step.
I've got a casual business model, I has some constructs of measures that I think
It actually captured the dimensions I care about.
Let's verify the linkages, let's see if it's actually true,
because again, we're guessing here, right?
The strategic plan maybe based on your intuition or whatever, right?
It is a hypothesis about how things are going to work.
Let's verify, if I said A should lead to B should lead to C, let's verify this.
Let's do some analytics on this to see if these linkages that you
hypothesized actually show up.
And again, I want to know why because if they aren't,
either I gotta change my measures, change my strategy, or figure out what
are the organizational barriers that are blocking this from happening?
Okay, so here's an example, we've got a major fast food chain.
The company's got 6,000 plus stores in the United States, and
the offer both in-store purchases.
They also offer delivery.
Now their overall profitability wasn't growing fast enough to meet either their
internal or external expectations.
So like a lot- >> Can you say that again-
>> Yeah.
>> One more time.
>> So their overall profitability was not growing enough to meet either their
internal or external expectations.
Like a lot of companies, this is public, you've got the analysts saying here's
an earning per share target that we have to hit.
They weren't hitting that and
they weren't hitting their internal targets either, so what happens?
They have a series of meetings, we got the senior level executives,
all the functional areas.
We're going to get together and we're going to build a consensus business model.
We're going to actually go through this process.
Let's take our strategy.
Let's lay out what we think the consensus business model is, right?
And then we're going to come up with performance measures based on that
consensus business model, right?
Now like a lot of companies, and even you in a lot of cases,
you have to start out somewhere.
So this consensus business model was developed using only management intuition.
There really wasn't any data analysis upfront,
we've been in this fast food business a long time, we know our customers,
we know our competitive environment.
Here's what we think is going to take to meet our financial objectives, so
here's their consensus business model.
Well, they're going to use something called the customer service profit chain
which is very common in retailers.
The idea is, I've got to start out looking at my employees, right?
So, if I've got very good employees, the idea is well,
that is going to lead to a better customer experience.