This is the final post in our four-part series on Understanding Return on Investment. In the first three posts, we looked at:
- Understanding what to measure
- Picking the right measurement tools
- Interpreting the data
Today, we tie everything together, by shedding light on the role of a business analyst to present the data to management and stakeholders in the most compelling way possible.
SEEK HARMONY AMONG THE MEASURES
Constantly remember your goal. Even redefine it if necessary. If we do not know our destination, then all measurements that are supposed to get us there will be useless.
A business analyst definitely should be familiar with the domain of the business they work at in order to choose success measures that are consistent with the goal and vision of that business. For instance, in the manufacturing industry, the goal is to manufacture what the market is buying. The more of those products getting out of factory’s gate, the more successful that factory is. Also, a successful factory is always after efficiency. So, a typical plant manager may introduce several KPIs (key performance indicators) for the workshops and assembly line in his factory to acquire and maintain desirable efficiency levels. But, he should be aware that all those workshops are part of a bigger body, which is the factory, a body that has inflow of raw material and outflow of its product. So, at the end of the day, the efficient factory is what he should be looking for, not efficient individual workshops. Basically, in terms of mathematics, if you go for efficiency at the workshop level, then you are finding local optimums. But, if you seek efficiency at the factory level, you are finding the global optimum.
What should be important for the plant manager are the macro picture and the global optimum. At the global optimum level, the factory is supposed to have the fastest flow from input point to the output point, and to keep the inventory levels as low as possible.
For instance, workshop A is set for producing parts for product Alpha. But, today’s market demand is product Beta. And there might not be an order for Alpha within a month. Although setting up workshop A for producing Beta will cost time and money, that is more efficient than making Alpha units for possible sale one month in the future. Finishing some more Alpha units instead of immediately changing to Beta set up has more efficiency at the workshop level, but at the same time causes more Beta work in process inventory sitting before workshop A and adds incremental inventory costs. Besides, it will add opportunity cost by not selling Beta units in the market in time. In order to achieve such efficiency, fluctuations in each part of production should be measured to assess the global fluctuation at the plant. Moreover, the bottlenecks should be identified, as those are the points in the manufacturing process that have the largest effect on the process flow. Those measures will help management assign confident inventory levels before each workshop in order to maintain the desired global flow in the factory.
TAILORING THE REPORT FOR THE AUDIENCE
As we discussed at the beginning of this paper, all the measurements are designed to give us insights about how we are doing compared to our goal; insights that can give us a more accurate picture of our business. Reporting is the phase during which the mined insights are communicated to key stakeholders within the organization. Hence, analysts should recognize the interests and motivations of the different audiences to whom their reports will be sent. Thus, both the language and format of the report should be tailored specifically for those audiences.
For instance, in a business, let’s say our analysis reveals that 82.5% of consumers are coming from two specific demographics. Depending on for whom the report is being prepared, you may choose to position your insights a little differently.
- The best way to report that insight to the CEO might be to say: 4 out of 5 consumers are from these two demographics. The CEO needs a simple, top line report that offers an overview of the insights gained during analysis.
- On the other hand, the marketing team requires a different perspective on the success metrics. You may need to provide a more detailed breakdown of the two demographic groups, with specific suggestions as to the reasons why each contributed to the results. Such demographic insights are valuable to assist in more accurate planning for future efforts.
The key is to ensure that the final report provides a clear, succinct interpretation of the analysis, one that is relevant and actionable for the specific audience for whom the report is intended.