Data-driven tips: looking back

Number three of the data-driven tips for 2023 is looking back. In this blog, Data Strategy Leader Louis de Roo tells you more about the disadvantages of only looking back and how leading KPIs can help you with this.

KPIs

For many organizations, KPIs are the way to keep management or the board informed about the state of affairs within the company. KPIs tell us whether we've achieved our goals, whether profit, revenue, and costs are on track, and whether our company's results are in line with the objectives. Organizations that want to work more data-driven therefore often start by automating and digitizing the KPIs and the accompanying reporting, expecting this to open the door to a more data-driven approach.

Unfortunately, there's a major objection to this method: your approach doesn't actually change. Most KPIs within organizations are "lagging KPIs": measurements that look back after the action and report on the results. And even though those results achieved in the past sometimes do tell you something about what might happen in the future, by looking back you keep your focus on what has already happened.

Disadvantages of looking back

The disadvantage of looking back is, of course, that you're more focused on the results achieved and less on the decisions you still need to make. If you're driving a car, your rearview mirror is less important than your windshield. So why would you only want to look back when steering a company?

Looking back with your KPIs isn't really "data-driven" working, but rather "data-checked." You only use the insights from your data after the fact, meaning you're only basing your decisions on data by way of a detour. And while there's of course nothing wrong with wanting to know whether you've achieved your goals and booked good results, the real added value for your organization lies in making the right decisions for the future.

Leading KPIs

So we need to look for KPIs that give us the information earlier in the process to make the right decisions: "Leading KPIs." By taking measurements earlier in the operational process, we can also more easily adjust course and intervene when one of the decision factors in our process changes. Generating this kind of insight used to always be quite difficult, because instead of one clear KPI, you suddenly have to work with many more variables. But this is now precisely one of the points where we can gain an advantage from the available amount of data and the smarter and faster ways to generate the right insights from it.

Fitting leading KPIs into your decision process doesn't happen automatically, of course: as with any new way of working, it's important here too to realize that it's a significant change, and that it will take some time to translate the intuitive knowledge within your organization into data-driven decisions. It's therefore wise to let your company get used to this gradually, and above all to check with your employees whether your new data-driven decisions also deliver the desired results. This not only creates support within the organization, it also mobilizes the knowledge and experience within the organization to help think about the right KPIs to base data-driven decisions on. So that in the end — looking back — you can also verify whether your data-driven decision was the right one!

Written by Louis de Roo
Data Strategy Leader
E-mergo