Change Agent's Cookbook: How to Know Which Performance Indicators are Truly Key.

People talk a lot about KPI’s - Key Performance Indicators. They use various words to talk about them.

“What are your KPI’s?”

“What are your key metrics?”

“Do you have numbers you must hit?”

Merely accepting the first answer is a mistake. Remember, your aim at this point is to be a master appreciator. From great appreciation comes great inspiration.

Do not do what most people do. Do not merely accept the KPI’s, dutifully write them down to show you’re paying attention, and then move on to other things.

Instead, continue to drill in with questions in a Socratic attempt to appreciate why these are the KPIs.

When you understand why these are the KPIs, you will have built a mental model that allows you to think and imagine outcomes just as a CEO, board member or key investor in the company does.

If you understand why the KPIs are the KPIs, then you will be able to see change coming to those factors that affect success for the business. You will also be able to question the KPIs and help the client focus on the Performance Indicators that are truly Key.

For example, we worked for many years with an electronic broker. We asked the question, “What key measures drive the creation of value in the company? What key measures drive growth?”

After some discussion we got to three:

• Increasing the total number of active clients.
• Increasing client trading activity
• Increasing the total number of assets in accounts.

After some discussion, we decided that only the first two measures - the number of clients and their level of trading activity - were important drivers of value at that time. The reason for this was that interest rates were very low and therefore deposits were not a significant source of revenues, profits or business value.

Fortified with this appreciation of the drivers of growth in the value of this business, we were able to confidently move on to our next steps in generating that growth - asking and answering the question: 

What key actions or behaviors drive those KPIs?

The KPI “increasing the number of total clients” was driven mostly by increases in the numbers of new funded accounts.

So, the behavior that would drive growth in this KPI was, “More customers opening new accounts and funding them.”

This was wonderfully focusing.

Increasing client trading activity was the second key driver of growth. Whereas in other categories, marketers are focused on increasing revenue per customer - for example, people who run shoe stores want to sell more pairs of shoes per customer and people who run e-commerce sites want to increase the average cart size - retail brokers had remained focused on acquiring new customers.

There were exceptions. We helped Tom Sosnoff, Lee Barba, Ainslee Simmonds and Lee McAdoo build thinkorswim (now part of TD Ameritrade) from a small and interesting digital options broker to a powerhouse with the industry’s most valuable customers.

Sosnoff, a savvy trader, was an even savvier entrepreneur, a born teacher and a natural movement leader. In short, he made options trading cool and never played down the risk or danger. This got thinkorswim to the summit base camp from which it would begin an even more rapid ascent.

Options traders trade a lot and pay well for their trades. When thinkorswim merged with Investools - a pioneer and leader in the online education space - they immediately had a way to dramatically scale the creation of new options traders.

People paid good money to Investools to teach them how to trade options. In exchange, Investools helped them to transform themselves into active options traders. Investools needed a platform for these student traders to trade on. It would have to offer simulated trading as well as real live trading. 

Thinkorswim fit the bill perfectly.

Now, Investools students would learn to trade on the thinkorswim platform.

In addition, Investools substantial graduate list of tens of thousands of active options traders became available to thinkorswim for remarketing. Half of those former students became thinkorswim clients.

Next, thinkorswim began to integrate Investools training into its platform and customer service offerings. This increased trading volume and dramatically grew the value of the business.

The key insight here: new trading concepts and ideas lead to more trades.

We would mine this insight for our new client and take it even further, programming trade ideas into software apps that could also execute the trades.

Since our key driver of grow was increased trading volume, which we thought of as increased volume per client, the behavior that would drive this growth was defined as “one more trade per customer per month.” 

This would make a real difference in the value of the business, and it was just a start. Just trading volume summit base camp, a milestone on our way to the top.

Since the behavior was “the client makes one more trade per month” we went to work to address the blocks to that behavior. Our clients were already more active than nearly all the other retail brokerage clients in the industry. But, what kept them from being even more active?

Remember that if you want to increase a behavior, you need to combine motivation and ease in the same moment - (MxE)Same Moment = Behavior.

We spent thousands of hours watching traders trade. We got to know their multi-screen set-ups and the joys - and sometimes intimacy avoidance - of their basement trading lairs. We interviewed scores of them and the interviews were so compelling that we edited several of the audio recordings and paired them with animation to create authentic and effective tv commercials and digital videos.

The motivation was there. They wanted to trade more. In front of their screen was the moment. They only lacked the ideas, they told us.

All the time that wasn’t spent trading was spent trolling for ideas. They loved  the trading. The trolling for ideas was the hard work that made the trading possible. 

More ideas, delivered in the moment they are in front of their screens, made as easy as possible to understand and execute, would unlock the behavior we were looking for.

Trading ideas, programmed and ready to download and execute like apps on a mobile device, did the trick.

Traders reported being more satisfied and improved their performance. We got our one more trade per client per month and that was just the beginning of the growth in trading volume.

Inspiring Action:

As a master change agent, you’ll bring the much-needed clarity to each situation. You’ll walk into rooms where everything seems important and the list of things to be solved is as long a Vaynerchuk’s YouTube feed.

And you’ll go right to the essentials.

• What measures most affect growth?
• What behaviors drive those measures?

With those questions asked and answered, you’ll get down to work.

• How do we make those behaviors motivating and easy (in the same moment)? 

You are well on your way to building your Theory of Change. The next steps help you prioritize and focus still further.