Indicator System Construction丨Thoughts triggered by the white paper on the indicator system of a well-known BI company

A few days ago, a well-known BI company released a white paper that threw out an indicator pyramid to disassemble indicators in layers. The author of this article expounds his views from the perspectives of the purpose, principle, classification and decomposition of indicators.

Some time ago, a well-known BI company released the "White Paper on the Construction of Enterprise Indicator System", throwing out an indicator pyramid as shown in the figure below, and using this pyramid to disassemble indicators in layers.

To be honest, this classification is a bit dizzying. It seems right, but in fact, there is no systematic way to guide the construction.

• Operational indicators, business indicators, and core indicators are not one category, and year, business, and event are not one category (if you list the indicator dimensions as an example, you can do it).
• In the subsequent decomposition, it is thrown out to clarify the analysis goal, determine the problem, and disassemble the problem, which is a different category. What are you sure about, what are you trying to express? I don't understand.

The above is an example to analyze the construction of the indicator system, do not take detours, for your reference.

Below, I will explain my views from the perspectives of the purpose, principle, classification, and index decomposition of the indicator system:

First, the purpose of the indicator system

Based on the strategic purpose, the actual business process and results are presented in a quantitative way, with three purposes:

1. Monitor operational results, identify problems, and formulate measures to improve them in a timely manner.
2. Predict future trends, predict whether strategic goals can be achieved, or what conditions are needed to achieve them (i.e., forward forecasting, reverse projection to find gaps)
3. Measure the level of organizational management and the efficiency of resource utilization.

2. Related concepts: indicators, measures, dimensions, and indicator systems

Indicator is a business concept, derived from KPI, used to measure the operation and management of enterprises (see the purpose of the indicator system above), such as the sales index in the sales index, the first "indicator" refers to the combination with the evaluation field or object, such as the sales field of the indicator set (can also be called the sales indicator system), in addition to sales, there are sales volume, etc. The second "metric" is a measure, which refers to the quantification of "sales" as an evaluation item. Dimensions are different perspectives of a metric or metric characteristic, such as region, product, team, and so on.

The index system can be divided into business domains, or according to the evaluation objects, such as sales indicators, production indicators, etc., and evaluation objects such as commodity indicators, customer indicators, etc.

3. Principles related to indicators

Principles to be taken into account when setting indicators:

• Uniformity: Unified management, unified definition, and unified statistical caliber of indicators. If an indicator is defined differently in different teams, there is no way to compare it horizontally, and only unified management and definition can make the indicator valuable. For example, the lead conversion rate of the automotive industry is different in terms of definition and statistical caliber (data scope, data source, and calculation method) of different enterprises, and there is no way to compare it horizontally.
• Comprehensiveness: The combing of the index system covers all aspects of enterprise operation and management as comprehensively as possible.
• Relevance: There is a direct or indirect correlation between the indicators, which needs to be taken into account when comprehensively combing through the indicators.
• Scientific: In order to quantify the business process and results, the index must be carried out around the object and purpose of the index and dismantled at multiple levels. Indicators that have no guiding significance for enterprise operation are worthless and unscientific.
• Stability: The business process and the achievement of strategic goals are a time-bound and continuous process, and the indicators should also remain stable in a certain period.

Principles to be considered in the implementation of indicators:

• Accuracy: The data scope, data source, and calculation method on which the statistical caliber of the indicator depends need to ensure that the accuracy of the results reaches a certain level before it can be used for business operation analysis. For example, it is wrong to use 2 hours to observe the vehicle data of an intersection with an hourly flow of only 100 vehicles to determine the occupancy rate of new energy vehicles, and the accuracy of its indicators cannot be guaranteed.
• Real-time: Real-time feedback on the business process and results is expected by everyone, but not all indicators should be real-time.
• Economy: The presentation of indicators requires 5 links: data collection, storage, transmission, processing (cleaning/conversion/calculation), and presentation, each of which is a cost, so the economy should be measured in the realization of indicators, and the balance between the value of indicators and the cost paid cannot be ignored for the sake of the richness of indicators.

Fourth, the classification of indicators

The classification of indicators is divided into basic attributes and business attributes.

Fundamental attributes: Metrics are viewed from the perspective of evaluating the organization. Organizational responsibilities are different, hierarchical levels are different, and indicators and dimensions are different.

• Business indicators: Evaluate the results of business operation from the perspective of business volume and changes in business volume, such as the number of leads and orders.
• Management indicators: Evaluate the level of business operation from the perspective of management efficiency, such as lead conversion rate.
• Financial indicators: Evaluate the resource utilization ability of business operations from the perspective of value creation, such as revenue, costs, expenses, profits, assets, shareholders' equity, such as sales, human efficiency, return on equity, etc.

Business Attributes:

• Core indicators/general indicators: Determine whether it is a core indicator from the degree of correlation between the business purpose of the company or business unit and the index, such as the number of leads, test drives, and orders in the automobile sales system are the core indicators, and the related lead order conversion rate and test drive order conversion rate are also core indicators. The second arrival volume is a general indicator, which does not directly support the order volume indicator. Business, management, and finance will all have core indicators.
• Assessment indicators/non-assessment indicators: assessment is set up for business purposes, and there is a certain periodicity, and the assessment objectives will be different due to the different business and competitive environment faced by different cycles. For example, the newly opened 4S store, in order to enhance the brand, market reputation, boost team morale, and evaluate sales capabilities, will take some incentive measures to let the sales take out all the clues in their hands and convert them. Order volume and lead conversion rate are core indicators, but they are not necessarily assessment indicators in different periods.

The classification perspective of process indicators and outcome indicators that we sometimes talk about has no management value, and is only used as a reference when setting core indicators or assessment indicators. For example, the timeliness of the first follow-up of clues is a process indicator of the distribution and distribution of leads, but it can be treated as an assessment indicator.

Fifth, the decomposition of indicators

Metric decomposition is not a simplistic equation, but a stack of metrics that are split down multiple levels by business objectives, and are composed of multiple metrics. For example, the marketing balance index system of automobile sales is composed of business indicators and management indicators of the marketing system and sales system, which can intuitively present the business level and management level, and the level of marketing and sales business cooperation.

In terms of dimensions, it can be subdivided into 9 dimensions: lead ownership, channel, activity, car series, intention level, status, organization/individual, time, and year-on-year comparison, which can be used for multi-dimensional analysis and horizontal comparison.

6. Definition of indicators

Metrics are a business concept that measures how well an organization is managing its operations. From the definition, we know that there is at least an organization, a measurable object, and a dimension, such as time, region, etc. In addition to these clear business definitions, there are also some indicators that need to be considered in the management. To summarize as follows, I will take lead conversion rate as an example: (Why choose lead conversion rate, because there is a lot of fun in calculating logic)

1. Business Definition Section

• Metric Name: Lead Order Conversion Rate (not Lead Transaction Conversion Rate)
• Metric description: The ratio of the number of leads to the total number of leads in the statistical period is the conversion rate of lead orders. (It seems clear, but in fact, there are many ways to play, and the frequent fights between business teams are also caused by the lack of rigorous definition)
• Indicator Object: Leads
• Data scope: Only the lead data in the marketing service platform, and the organization scope is the organization/individual corresponding to the assessment object
• Data source: Clue Center - Leads
• Calculation logic: The specific calculation logic will be discussed later
• Dimensions: There are 9 common dimensions: lead ownership, channel, activity, vehicle series, intention level, status, organization/individual, time, and year-on-year/month-on-month comparison.
• Core metrics: Yes
• Assessment indicators: Yes. If it is clear that it is an assessment indicator, it is necessary to clarify the assessment object (sales consultant, sales manager/director), corresponding organization/individual (individual/dealer or store), and assessment cycle)
• Service Target: Sales Consultant, Sales Manager/Director, Regional Management, Headquarters Lead Management, Headquarters Senior Management

2. Manage the definition section

3. A trick on the calculation of indicators

Let's sort out the data sources and calculation logic of these indicators together, and there may be some situations:

1. Data source: Clue Center - Leads. According to the rules of the lead center, the leads obtained by the marketing team are the original leads, and they need to be deduplicated, merged, cleaned, and judged to be effective before they can be followed up by sales. Generally speaking, the lead conversion rate refers to the lead transaction conversion rate of sales follow-up. If the lead transaction conversion rate is used to evaluate the marketing team, it is basically nonsense. However, the vice president of the company who manages the marketing and sales team can be assessed.
2. The number of clues in the statistical period: not only the order, but also the transaction and delivery in the statistical period, because the clue status is changing. This algorithm is backward extrapolation, and some companies also use the forward inference, that is, the new time with clues, if the cycle is long, there is not much difference, but the commonly used is the time of reverse extrapolation and instant results. For example, the conversion cycle of a car is relatively long, more than 3 months, but most of our assessments are monthly.
3. Total number of clues: There are more ways to play here, and the core is because the order data is very clear, and you can only use your brain on the denominator, which is the game and balance among the bosses, management, and indicator management.

• Is it the number of valid leads, or is it excluded from the number of invalid leads?The number of invalid leads includes the leads that are determined to be invalid during the customer service cleanup and the sales consultant follows up and determines that they are invalid within a limited number of times.
• Leads are effective, but after 9 months of follow-up, should they be counted in the total number of leads?
• Should the clues of defeat before the statistical period be counted?
• Does a newly created lead (not created by the sales team) count?
• Is it still in the state of cleaning and distribution (not yet under the management of the sales team) counted?
• If a clue sells 2 cars, is it counted as 1 lead or 2 leads? It is also necessary to set the lead transaction aggregation cycle.

Therefore, strictly speaking, it is not the total number of leads, but the number of leads that should be followed, that is, the number of leads that salespeople should follow up and make sales actions. Although it takes time to return to the user for leads that have been closed before the statistical period, it does not contribute to the sales target.

Look, there will be a lot of calculation logic for a lead order conversion rate, so in the definition of indicators, we must accurately limit the data scope, source, and calculation logic, otherwise there will be data fights.

Columnist

Wang Jianru, WeChat public account: Wang Jianru marketing digitalization, everyone is a product manager columnist. 20 years of experience in the digital transformation of large automobiles/large real estate and other industries, the planning, construction and operation of digital platforms for research, production and supply + marketing services, focusing on the marketing digitalization of B2B2C model, new retail C2M/OTD, and global digital operation. He used to be the product director of a new energy vehicle company, the CPO of a technology company, the person in charge of user operation and C-end products, the person in charge of IT, and a senior expert in CRM.

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