"How to Build a Great Company" Series (11/18): SETUP KPI REPORTS (Stage 2)

Half time is over! You’re now firmly in the second half of the 100 Tasks. 

After completing the longest sub-stage, Build Functions, you’re now starting a very short, but very important sub-stage. This sub-stage is very important because it’s a huge source of competitive advantage for you. Most companies I’ve been hired to advise are very weak on this. In fact, my most common recommendation to any launchpad or to any venture is to ... wait for it … SET UP KPI REPORTS! :-)

This sub-stage is all about investing into your reporting infrastructure before launch so that — when your venture goes live — you’ll be measuring what matters. The goal is for you to fully understand your business and your customers. Excellent reporting is paramount because — as management guru Peter Drucker said — “If you can’t measure it, you can’t manage it”!

Since this sub-stage covers only three tasks, let’s cover each one and then illustrate everything through a real-life case.

Task 59: Define Top 20 KPIs

You will start this sub-stage by defining your top 20 KPIs. KPIs are key performance indicators. They are the most important metrics that you want to measure. 

Your top 20 KPIs must cover all important areas of your business. They must be the critical, often not obvious drivers of the success of your business model. It’s critical for you to look at what similar, successful companies are tracking religiously.

Sure, there are some KPIs that are relevant for virtually every company: like # of orders, revenues, average order value (AOV), cost per order (CPO), customer acquisition cost (CAC), and customer lifetime value (CLV). 

But then, there are the KPIs that are very specific to your business model — often operational KPIs. And they make all the difference!

Now, the detailed slide for Task 59 explains a thorough three-step process for coming up with your top 20 KPIs. Let me outline the process here:

1. Identify your KPIs: cover all areas of your business, think short term and long term, take KPIs relevant for every business model but also ones specific to your business model 
2. Define Top 20 KPIs: for each KPI, clearly define which data source(s) the KPI is extracted from, who is the single person accountable for that KPI, and which formula is used to calculate each KPI
3. Set Targets for Your KPIs: set concrete, specific numerical goals for within different time frames (monthly, quarterly, yearly); to guide you in setting targets, review the historical performance of your company, estimates from research tools, and the performance of comparable companies

Ultimately, your top 20 KPI report can look like the example shown in Task 69 (Navigate Using Daily, Weekly, and Monthly Reports). That task you actually received as part of your free teaser deck — check it out for your reference! 

(Note: After you have joined our 100 Tasks Community, you’ll have the opportunity to get The Top 20 KPI Report as a ready-to-use Excel template.)

Task 60: Set Up Data Warehouse

This task is one of the most technically complex tasks of the 100 Tasks. At a high level, Task 60 shows the process that your data scientist or business intelligence (BI) specialist should perform. 

• If you are a startup, then this key person is either on your payroll or subcontracted for the big pre-launch setup (and for ongoing post-launch work)
• If you are a launchpad (i.e. venture studio, incubator, accelerator), then this key person should do the big setup for all ventures to make sure everything is set up right for launch (and he or she should also do ongoing post-launch work)

He or she should set up your data warehouse (DWH). Your DWH will be the single source of truth for your KPIs. It will be the central place where all of your data is loaded, calculated, and then turned into beautiful reports.

The actual Task 60 is much more detailed. It graphically shows the entire process — from your data sources to staging to your DWH then to your data marts and finally to your users. It also breaks down the age-old question of ETL vs. ELT — which decides the order of Extraction, Transformation, and Loading. It also recommends tools to use for the analysis and visualization of your data.

Yes, setting up your DWH is a big undertaking. But it pays off handsomely — short term and long term. It is the foundation for creating an organization that is thoroughly data-driven from day 1 (i.e. at launch). It is a huge source of competitive advantage for you — especially because most ventures are “too busy” to do it.

Task 61: Prepare Daily, Weekly, and Monthly Reports

In Task 59 you defined your Top 20 KPIs. And in Task 60 you set up your data warehouse. Now in Task 61 you will use the data infrastructure and your defined KPIs to turn them into beautiful reports. 

Broadly speaking, those reports fall into two categories based on their timing: they are either ongoing (daily, weekly, and/or monthly) or ad hoc (as needed). 

• The ongoing (or recurring) reports will be covered in this task
• The ad hoc reports will be covered in detail in Task 70 (Dig Deeper Using Ad Hoc Reports for Each Function) in the SCALE stage, because ad hoc reports are not needed before launch

So, for your ongoing reports, this actual task will show you in detail how to decide what constitutes a daily, a weekly, and a monthly report. Here’s a preview:

• Daily Reports
• Objective: To exhibit transparency and act swiftly on identified obstacles
• KPIs: Top 20 KPIs
• Alignment: KPI owners meet with venture management to explain the status in case of significant deviations

• Weekly Reports
• Objective: To reflect on how to meet monthly target KPIs
• KPIs: Specific KPIs for each department (e.g. sales & marketing, product & tech, operations, etc.)
• Alignment: KPI owners meet with their own team to assign action items

• Monthly Reports
• Objective: To set next month’s target KPIs and to decide on actions on how to meet them
• KPIs: Top 20 KPIs + Specific KPIs for each department
• Alignment: Company-wide meeting to reflect on performance and set next targets

Based on my advisory of many different types of startups, I have often found a key difference in the frequency of reporting for B2C and B2B ventures. 

• For B2C ventures, doing daily reports is essential
• For B2B ventures, daily reports may not be needed — esp. in the beginning

The reason for this difference comes down to marketing vs. sales. More specifically, it’s that for B2C ventures marketing (esp. digital marketing) is very measurable and very real-time. Conversely, for B2B ventures, sales cycles are longer and may not require daily transparency.

Great! That’s a solid overview of the three tasks of “Set Up KPI Reports”. Now let’s jump into the case!

Case: From Quarterly to Daily and From Words to Numbers 

In 2017, the senior executive responsible for innovation and digitalization of a European logistics giant asked me to help him. One of his divisions — his launchpad for startups — was essentially a “money pit”. It wasn’t producing any of the desired results, he angrily told me. He asked me to work directly with Eleanor, the CEO of the launchpad. Our mission was to turn the launchpad and its 14 ventures into a success.

At first, the problem I had to solve looked straightforward. I thought, “I’ll ‘just’ co-design my detailed, 24-month ‘execution roadmap’ on the basis of the 100 Tasks with each of the 14 teams.” However, I immediately got stuck. The problem was systemic. The 14 ventures had virtually no data. Even worse, all of those ventures were live already; that is, they were in the SCALE stage.

How could I fix something when I had no data?

The only “data” I could unearth were the quarterly SWOT analyses that each venture prepared for Eleanor and the investment committee. That’s it. No more than one glossy slide every 90 days. Rarely did the slides have any numbers. Instead, several sentences were meant to summarize the early stages of unproven business models. I was shocked.

The absence of data created BIG problems:

• Poor management: no concrete goals, slow and unfounded decision-making 

• No growth: no learnings about customers or business, wasted funding, wasted time

• Low morale: smart people but lack of engagement, direction, and drive; even high absenteeism

The confluence of these three problems created a downward spiral. 

To quickly turn this downward spiral into an upward one, we had to tackle the root of the problem — no data. While that should’ve been taken care of pre-launch, it’s never too late.

The first thing we did was to hire a data scientist to be on launchpad payroll but to work with all ventures. Note: Task 7 (Design Target Organizational Chart) shows that someone to take care of data analytics & reporting is a key hire for a launchpad. 

Before that person started, I helped the ventures with Task 59 (Define Top 20 KPIs). 

• Step 1: We first identified our main KPIs (top 5) and then our supporting ones (top 6-20). To get there, our discussions were often heated because we would often go back to square 1 and question the whole business model

• Step 2: Then, we would “define” those top 20 KPIs. Defining them meant that we would decide the data source for each KPI, who’s the one person that’s accountable for each KPI, and which one formula is used to calculate that KPI. I’ve worked with startups in which teams defined the same KPI differently. For example, the finance team had one person responsible for cost per order (CPO) and so did the operations team. Also, finance calculated CPO differently from operations

• Step 3: Lastly, we set targets for all top 20 KPIs. To get to realistic yet ambitious monthly, quarterly, and yearly targets, we had to do lots of research

As soon as the new data scientist joined, he started Task 60 (Set Up Data Warehouse). He started with the ventures for whom gaining insight into their data was most important and most urgent. Getting through all ventures was a lot of work, but in the end we had one consistent reporting system for all ventures. Within just a few clicks, Eleanor could even compare all ventures along a set of KPIs. For Eleanor, it was a miracle.

Then, I helped the ventures instill ongoing reports into their culture. In each venture, we worked through Task 61 (Prepare Daily, Weekly, and Monthly Reports) to make sure that everyone receives the right automated reports. Only then would their culture become truly data-driven. 

Let’s take a look at the ongoing reports for one of their ventures:

• Daily reports: if the number of activations would be 50% less from one day to the next, the owner of that KPI would talk to the venture’s managing directors on how to fix that

• Weekly reports: if the number of active users would decline by 30% week-over-week, the owner of that KPI would assign action items within his team to rectify that issue

• Monthly reports: if the retention of customers would decrease by 15% month-over-month, the owner of that KPI would lead a discussion at the monthly all-hands meeting on how to improve that KPI

Yes, implementing tasks 59, 60, and 61 was a ton of work. The results, however, were amazing. We successfully solved their core problem! A data-driven culture was now instilled on the venture and launchpad levels. 

We now had the following outcomes in the ventures:

• Great management: concrete goals in the form of target KPIs, fast and well-informed decision-making 

• Accelerating growth: daily learnings about customers or business, faster iterations (even pivots) of business models, better ROI of funding 

• High morale: smart and engaged people who were motivated to achieve target KPIs; a more faster, agile culture in which people could quickly make a direct impact

The improvements were not only exceptional on the venture level. On the launchpad level, Eleanor gained the real-time transparency over the ventures that she never knew she needed. (In fact, now she cannot live without it!) Any ongoing daily, weekly, or monthly KPI report as well as any ad hoc report she wanted to make (more about that in sub-stage 3.2!) she could view within a matter of clicks. Those insights allowed Eleanor to help the ventures in a very targeted way. 

Two months after completing tasks 59-61, 4 of the 14 ventures were terminated. Eleanor and the investment committee realized that the qualitative SWOT analyses that were presented every quarter were misleading. In short, they masked their serious problems with carefully chosen words. And worse, trust was broken and the ventures were beyond repair. 

While that was an emotionally tough decision to make for Eleanor, rationally it was not. Data brings us clarity and confidence.

By going from quarterly to daily and from words to numbers, Eleanor and the ventures entered an upward spiral.