When I have discussions with people about Business Intelligence, one of the questions the inevitably come up is about building KPIs and how to accomplish that. From a technical level the concept of a KPI is very simple, almost too simple in that it is like the tip of an iceberg floating above the water. The key to that iceberg is not really the tip, but the mass of the iceberg that is hidden beneath the surface upon which the tip sits. The analogy of the iceberg is not meant to indicate that the foundation of the KPI is overly difficult or complex. The disparity in size in meant to indicate that the larger thing that needs to be defined is not the technical tip, but the underlying business definition of what the KPI means. From a technical perspective the KPI consists of primarily the following items: Actual Value This is the actual value data point that is being measured. An example would be something like the amount of sales. Target Value This is the target goal for the KPI. This is a number that can be measured against Actual Value. An example would be $10,000 in monthly sales. Target Indicator Range This is the definition of ranges that define what type of indicator the user will see comparing the Actual Value to the Target Value. Most often this is defined by stoplight, but can be any indicator that is going to show a status in a quick fashion to the user. Typically this would be something like: Red Light = Actual Value more than 5% below target; Yellow Light = Within 5% of target either direction; Green Light = More than 5% higher than Target Value Status\Trend Indicator This is an optional attribute of a KPI that is typically used to show some kind of trend. The vast majority of these indicators are used to show some type of progress against a previous period. As an example, the status indicator might be used to show how the monthly sales compare to last month. With this type of indicator there needs to be not only a definition of what the ranges are for your status indictor, but then also what value the number needs to be compared against. So now we have an idea of what data points a KPI consists of from a technical perspective lets talk a bit about tools. As you can see technically there is not a whole lot to them and the choice of technology is not as important as the definition of the KPIs, which we will get to in a minute. There are many different types of tools in the Microsoft BI stack that you can use to expose your KPI to the business. These include Performance Point, SharePoint, Excel, and SQL Reporting Services. There are pluses and minuses to each technology and the right technology is based a lot on your goals and how you want to deliver the information to the users. Additionally, there are other non-Microsoft tools that can be used to expose KPI indicators to your business users. Regardless of the technology used as your front end, the heavy lifting of KPI is in the business definition of the values and benchmarks for that KPI. The discussion about KPIs is very dependent on the history of an organization and how much they are exposed to the attributes of a KPI. Often times when discussing KPIs with a business contact who has not been exposed to KPIs the discussion tends to also be a session educating the business user about what a KPI is and what goes into the definition of a KPI. The majority of times the business user has an idea of what their actual values are and they have been tracking those numbers for some time, generally in Excel and all manually. So they will know the amount of sales last month along with sales two years ago in the same month. Where the conversation tends to get stuck is when you start discussing what the target value should be. The actual value is answering the What and How much questions. When you are talking about the Target values you are asking the question Is this number good or bad. Typically, the user will know whether or not the value is good or bad, but most of the time they are not able to quantify what is good or bad. Their response is usually something like I just know. Because they have been watching the sales quantity for years now, they can tell you that a 5% decrease in sales this month might actually be a good thing, maybe because the salespeople are all waiting until next month when the new versions come out. It can sometimes be very hard to break the business people of this habit. One of the fears generally is that the status indicator is not subjective. Thus, in the scenario above, the business user is going to be fearful that their boss, just looking at a negative red indicator, is going to haul them out to the woodshed for a bad month. But, on the flip side, if all you are displaying is the amount of sales, only a person with knowledge of last month sales and the target amount for this month would have any idea if $10,000 in sales is good or not. Here is where a key point about KPIs needs to be communicated to both the business user and any user who might be viewing the results of that KPI. The KPI is just one tool that is used to report on business performance. The KPI is meant as a quick indicator of one business statistic. It is not meant to tell the entire story. It does not answer the question Why. Its primary purpose is to objectively and quickly expose an area of the business that might warrant more review. There is always going to be the need to do further analysis on any potential negative or neutral KPI. So, hopefully, once you have convinced your business user to come up with some target numbers and ranges for status indicators, you then need to take the next step and help them answer the Why question. The main question here to ask is, Okay, you see the indicator and you need to discover why the number is what is, where do you go?. The answer is usually a combination of sources. A sales manager might have some of the following items at their disposal (Marketing report showing a decrease in the promotional discounts for the month, Pricing Report showing the reduction of prices of older models, an Inventory Report showing the discontinuation of a particular product line, or a memo showing the ending of a large affiliate partnership. The answers to the question Why are never as simple as a single indicator value. Bring able to quickly get to this information is all about designing how a user accesses the KPIs and then also how easily they can get to the additional information they need. This is where a Dashboard mentality can come in handy. For example, the business user can have a dashboard that shows their KPIs, but also has links to some of the common reports that they run regarding Sales Data. The users boss may have the same KPIs on their dashboard, but instead of links to individual reports they are going to have a link to a status report that was created by the user that pulls together all the data about the KPI in a summary format the users boss can review. So some of the key things to think about when building or evaluating KPIs for your organization: Technology should not be the driving factor KPIs are of little value without some indicator for whether a value is good, bad or neutral. KPIs only give an answer to the Is this number good\bad? question Make sure the ability to drill into the Why of a KPI is close at hand and relevant to the user who is viewing the KPI. The KPI is a key business tool when defined properly to help monitor business performance across the enterprise in an objective and consistent manner. At times it might feel like the process of defining the business aspects of a KPI can sometimes be arduous, the payoff in the end can far outweigh the costs. Some of the benefits of going through this process are a better understanding of the key metrics for an organization and the measure of those metrics and a consistent snapshot of business performance that can be utilized across the organization. And I think that these are benefits to any organization regardless of the technology or the implementation.Did you know that DotNetSlackers also publishes .net articles written by top known .net Authors? We already have over 80 articles in several categories including Silverlight. Take a look: here.
