KPI Fever: Beware Magic Metrics

Every company I visit these days is talking key performance indicators (KPI’s). This tells me that people understand that financial metrics aren’t (and never have been) enough to measure organizational success. But I worry about how using the shorthand KPI for all non-financial measurement could doom companies’ efforts from the start.

The problem is the word “key.” A lot of experts recommend finding a small number of key indicators that can be tracked easily so that you don’t get overwhelmed and spend all your time on measurement. I am sympathetic to this view but I am much more concerned about the danger of narrowing down your metrics too far. Part of the answer was in my last post about using some metrics for management and some for learning.

One thing is clear, however, it is never a good idea to rely exclusively on a small number of indicators. This warning is necessary because business publications are full of articles about what we call magic metrics. They offer an easy solution that will seemingly solve all your problems. Following are just a few examples. Read more

Case Study: Visualizing and Communicating Corporate Value Through Intangibles Management

Last week, I helped lead a full afternoon workshop organized by the Intangible Asset Finance Society at the Think Tank and Auction hosted last week by ICAP Ocean Tomo in San Francisco. (The auction was fun to watch–here are a few Tweets about the auction).

My co-presenters for the afternoon were Nir Kossovsky of Steel City Re and Andy Gibbs of CXO IP Advisory. We opened up by each making some comments about our perspectives on intangibles management and emerging intangibles markets. My slides are here–I will add links to Nir and Andy’s presentations if they are posted online.

Then we moved to a case study discussion. The discussion was very robust. Since we usually cannot share the contents of client work when we engage in this kind of exercise, it is a great opportunity to share with you how this kind of approach works in practice.

Here’s a summary of the case we gave the participants. Read more

Intangibles Measurement IV: Indicators and Performance Management

Here’s the next post in my intangibles measurement series. The last two posts have provided details on investment and assessment. This time, I am going to talk about the third kind of data: indicators.

Indicators and performance management are the most widely used forms of intangibles management today. This approach arose in direct response to the limitations of financial data in understanding the knowledge era business. Common approaches build a dashboard to show key performance indicators (KPI’s) of the company’s operations. Sometimes the dashboard is associated with a balance scorecard as well.

The idea is to identify data points that are leading indicators of strategic success and track them closely. Read more

Intangibles Measurement

I just took a quick break from my vacation week to participate in the IAFS monthly conversation about intangibles. Here’s the presentation I made on Intangible Asset Performance and Financial Results.

It builds on the recent video we posted that shows how to model the intangible factory. Read more

Gartner on Investor Communication

The McKinsey Quarterly recently ran an interview here with Gartner CFO Christopher Laford. In the interview, he explained that:

When our new CEO, Gene Hall, joined, we established a long-term financial road map as a key element of our investor communications. We told our investors how we were running our businesses and where we thought we could drive performance over the long term-key measures, like revenue growth by business segment and margins.

And when we did that, we also identified the two or three metrics, for each segment, that would help investors understand Read more