Valuable insights can be found not just in KPIs, but also in good management information systems. These insights, when used well, can really make a difference. They could, for example, instantly reveal that you can save millions of dollars. Or that the lead time in a process can be greatly reduced. Or that you can substantially increase your market share. An insight could reveal that you can increase the quality of a product with a single action. Unlike KPIs, such insights can be financial. Sometimes, these insights also contain KPIs.
Find the most valuable insights with the SMART KPI Toolbox
Passionned Group has developed a thorough handbook to help you define the most essential genuine KPIs for your organization: the SMART KPI Toolbox. Filled with countless examples, explanations, and exercises, this guide will help you find the million-dollar insights and Key Performance Indicators.
What is an insight?
Simply put, an insight is the ability to understand how something works: a thorough understanding of the issues. Insights lead to greater knowledge and expertise and enable better decision-making. An insight is the smallest unit of a professional information environment and contains three components:
- The query that results in the data.
- The associated data visualization.
Below, you’ll find two example of an insight. The parameters aren’t visible here. They ensure that the insight is closely matched to the role of the user.
Of course, an insight can also be visualized as a table, pie chart, or meter. It’s also not a hard requirement to display the score over time. In a business process, sequential steps add value to the products or services, so that the customer benefits. The transition from one step to the next is where it often goes wrong. Management information has to focus on that for that reason: to see where it goes wrong. For every step, see who fulfills what role, which decisions they have to make, and which insights are needed to optimize that part of the process.
Then, look at which insights can improve the overall process or encourage innovation and creativity. Then determine who can or should use that insight on a per-insight basis. Everyone from their own perspective, level in the organization, and role in the process with accompanying tasks, responsibilities, and authorizations.
8 million euros in annual savings
The point of insights is making money, improving the quality of a process, or otherwise improving performance. One of the most interesting and impactful examples in practice in my experience was an insight which saved roughly 8 million euros per year. The insight concerned what a specific pharmacy ordered from the top 25 suppliers in the market in gross revenue in relation to the average revenue in the market for comparable customers. This insight essentially told us which customers “cheated” with the competitor and broke their contractual agreements. This gave the account managers of the pharmaceutical wholesaler concrete information they could use to increase the revenue with those customers.
The most valuable insights expose where and how the behavior of your employees, customers, or vendors can be influenced, which is the ultimate goal of management information, by giving them new insights about the most critical steps in the business process. But also, so that they obtain the skills necessary to act on these insights.
A practical example
An example. One of the world market leaders in televisions produces roughly one thousand televisions per day. Roughly 1% of those proved to be defective after production. Some flaws were already spotted in the factory. In other cases, the TVs were returned by the customers. The company registered the defects, including which part was broken. They then produced a simple report with only three columns: name of part, name of vendor, number of defects. They shared this insight with the factory workers and team leaders. Within three months, the percentage of defective TVs decreased to 0,8%.
Then, someone had the brilliant idea to share this idea with all the vendors. None of them wanted to top the report, naturally. After another three months, the number of defective TVs further lowered to 0.5%. Every broken television cost the company around 850 euros in repairs, including factors like taking the TVs apart and choosing the right parts for reuse. The total annual savings came out to around a 1,5 million euros. A simple report proved to be of great financial value. An insight doesn’t always have to be displayed as a beautiful visualization.
In short: good insights let the organization continually improve its processes and grow and move in the right direction. But even with million-dollar insights, only the final result counts: what can be operationalized? The big question is which person in the organization has the right skills and management capabilities to turn an insight’s potential into actual profit.
Four rules of thumb for valuable insights
How can you reveal the most valuable insights? Aside from the necessary investments, these four rules of thumb can be of use:
- Find the transactions that aren’t there but should be. The data that’s missing in the systems sometimes contains more valuable information than the data that’s there. It’s what your customer didn’t buy!
- Find the transactions that appear multiple times. They indicate what your customer didn’t like and which products were returned.
- Compare transactions on a detailed level with aggregated transactions. That indicates what large groups of customers appreciated, but one specific customer didn’t. There’s an opportunity there.
- Discuss with the users which decisions they should take. Then, determine which insights they need.
The moral of the story: building a “report factory with data” is fairly useless when there’s no vision about which insights can really help the organization. Or like author Helen Keller once said: “the only thing worse than being blind is having sight but no vision.”
Find your insights
Passionned Group has a great deal of experience in implementing management information systems and helping organizations refine their strategies and business models. Contact us or take a look at our training courses.