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Operational Dashboards Drive Profits and Customer Retention

by David White, BI Specialist, Aberdeen GroupWednesday, January 19, 2011

Recent research drawn from our Aberdeen’s May 2010 survey on dashboards looked at the penetration of dashboards into business operations.  We split 215 organizations currently using dashboards into one of three groups, depending on how many of their key performance indicators (KPIs) they were showing in dashboards. The three groups were labeled "Few" (enterprises with 20% or less of their KPIs visible), "Some" (21% - 60% of KPIs visible) and "Many" (61%+ of KPIs visible in dashboards).  With this segmentation complete, a couple of big differences in business performance were obvious.  First of all, those companies showing many KPIs were notably more profitable than the others (Figure 1).

KPI tracking chart
Figure 1: Companies tracking many KPIs are more profitable
Source: Aberdeen Group, November 2010

One factor contributing to such a disparity in profitability is the relative customer retention rates.  It's far more profitable to sell more products and services to a customer you already have than it is to try and hunt and snare a new one.  All other things being equal then, it's natural that companies with higher customer retention rates have higher profitability.  And that’s the second obvious difference in business performance – companies showing many KPIs in their dashboards enjoy a much higher customer retention rate than their peers (Figure 2).

Business Dashboard Usage
Figure 2: Intense Dashboard usage Drives Customer Retention
Source: Aberdeen Group, November 2010

So, companies that display more of their KPIs through dashboards are more profitable and enjoy far higher customer retention rates than their peers.

Notably, companies whose dashboards are KPI-rich are far more likely than other firms to have higher dashboard usage in the parts of the business where customer interaction occurs. For example, 60% of organizations with many KPIs use dashboards in the customer service or customer support function, compared to just 26% of the firms with few KPIs available. Similarly, 68% of organizations managing many KPIs have deployed dashboards within operations functions, compared to just 27% of those businesses with few KPIs available through dashboards. In due course, the operations and customer service functions significantly shape the customer’s perception of the value they derive from a product or service. Putting operational metrics at the fingertips of line managers who are ultimately responsible for a large part of the customers’ perception of value helps to drive high customer satisfaction and ultimately customer retention.

All well and good.  But, what are the technologies and capabilities that organizations need to have in order to use dashboards so pervasively?  Aberdeen’s research data identified four contributing factors:

  1. Organizations with many KPIs are more likely to have a formal process to define the key performance indicators at an operational level that are necessary to execute against strategic objectives. This is a key step to ensure that individual business units are aligned with – and execute against – corporate strategy. Organizations with many KPIs shown in dashboards on average have dashboards available to 39% of their employees. To be at all useful, those dashboards must show metrics that matter to those business managers and decision-makers.  However, to achieve outstanding business performance, those metrics also need to align with strategic goals and objectives.  As one survey respondents noted, “We try to peel back to understand the drivers of revenue and cost, and then define a KPI for that driver.”
  2. In parallel with this, line managers also need to be educated on their role in executing corporate strategy.  Top performing companies not only make performance metrics available to operational managers, they also make sure those managers know how they need to act in order to achieve corporate goals.
  3. Use of a dashboard tool that allows key performance indicators to be defined independently of the source data required to populate them.  To understand why this development approach is so valuable, consider an example. Imagine a dashboard developer is working with a customer service manager to create a dashboard to show their key metrics. One of the metrics the manager wants to track frequently is “first call resolution rate”. As the developer creates that metric in the dashboard, one of two things can happen. Either the developer has to immediately identify the source data to populate that metric, or they can postpone that task until later. If the developer is able to postpone the identification of the source data, the definition of metrics and visual elements of the dashboard can move ahead without interruption. Developer and business user can work side by side to capture, prototype and refine their specific business needs in a single working session. If KPI definition and source data cannot be de-coupled in this way, the business manager is frequently going to be idle and frustrated while the developer spends time hunting down source data.  De-coupling metric definition in the dashboard from the source data allows the dashboard design process to become interactive and more productive.
  4. Dashboards can be created without programming. The ability to develop dashboards by configuration, without programming, further supports rapid iteration of dashboard design. Companies with many KPIs in their dashboards are more likely to have configurable dashboards than others. Configuration is a faster way to develop dashboards - organizations that were able to configure their dashboards were able to complete dashboard projects in an average of 45 days. By contrast, companies that relied on a programmatic approach took 100 days to develop dashboards. Logically, it follows that if dashboards can be developed faster using configuration, then more management dashboards can be developed in any given amount of time. And that is borne out by Aberdeen’s research data. Organizations that have many KPIs in their dashboards – those most likely to use configuration – have dashboards available to more of their employees. Thirty-nine percent (39%) of employees at companies with many KPIs have access to dashboards, compared to 27% and 15% at companies with some or few KPIs respectively.

In summary then, frontline managers at top performing companies have key data at their fingertips so that they can execute strategy and achieve corporate goals.  Overall, across all survey respondents, the highest dashboard use is in the sales and business development functions. Fifty-six percent (56%) of companies with few KPIs, 55% of those with some KPIs and 62% of organizations with many KPIs are using dashboards in this role. However, organizations presenting many of their KPIs in dashboards have much higher usage than others in areas such as corporate management, finance, customer service and operations. For example, 60% of firms with many KPIs use dashboards in customer service, compared to just 36% of those with some KPIs and only 26% of those with few KPIs in dashboards.  Over time, the operations and customer service functions mould the customer’s perception of the value they derive from a product or service. Putting operational metrics at the fingertips of line managers who are ultimately responsible for a large part of the customers’ perception of value helps to drive high customer satisfaction and ultimately customer retention.

About the Author

David White is a Senior Research Analyst in the business intelligence practice at the Aberdeen Group.  David can be reached at david.white@aberdeen.com.

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