Digital Superfecta Leg 4: Analytics
It’s time for the final leg of the Digital Superfecta. Over the past three weeks, we have looked at three of the four must-haves in order to successfully grow your digital revenues. We started by looking at how you can generate qualified leads online. Then we looked at what you must do to convert these leads to paying customers. Last week, we examined product management best practices. This week, we will focus on analytics.
Does that word scare you? It shouldn’t. Analytics is why I love the digital world – everything you do is measurable! Using analytics gives you a license to fail! Why? Because you can run an experiment, measure the results, analyze what worked and did not work, course correct, then try again. It’s a virtuous cycle.
In this article, I will describe a very simple, practical way to use analytics to drive your business. It comes down to a 7 step process.
1. Define your business model.
It’s important to understand what business you are in and how it works, so you know what metrics to look at. I highly recommend buying and reading Business Model Analysis for the Entrepreneur to get a good framework for building your business model (it’s only $8.95).
In the article, Richard Hammermesh, Paul Marshall, and Taz Pirmohamed describe a process for building a “fishbone” diagram of your business model. This diagram methodically breaks down all the drivers of your business. For example, here is a fishbone for The Grateful Dead:
2. Determine points of greatest leverage and greatest risk/uncertainty in your model.
Look at your fishbone and decide where there is the most leverage. This is where you can make a small improvement that results in a large increase in total revenue. Then, look for areas of concern: where are you not sure you will do well or where there is a large chance of failure. What keeps you up at night?
This step provides you with a list of the most important metrics to track – let’s call the items on this list your Key Performance Indicators, or KPIs. Narrow down your list to 5 to 9 items, MAX (7 is ideal).
3. Set goals for each KPI.
For each KPI, set a desired outcome. You can base the target on growth over historical performance, benchmarks from similar companies, or even visionary aspirations.
4. Set up a dashboard to measure the KPIs.
Figure out how to measure each of the KPIs. If it’s not measurable, consider finding a proxy. For example, if you want to measure “number of people who buy something per live event” but for some reason that is not tracked, use something like “number of items sold per live event.” Get creative.
5. Start tracking and review regularly.
Depending on how rapidly your business moves, review your dashboard daily, weekly, or at least monthly. Get a good feel for your numbers. After a few weeks you should know the key metrics off the top of your head.
6. Get curious about variances.
I hate to break it to you, but you will probably be wrong about every single target. On some you will do better, some you will do worse. Explore BOTH the areas where you exceeded expectations and where you missed the goal. It would be helpful to have an analyst who could slice and dice the data for you. For example, if “total email sign ups” is above target, you might want to analyze that number by source – how many email names came from social versus organic search versus paid search. If you find that the most successful channel was paid search, you might decide to “double down” and spend more on fruitful channels to further grow your email list.
7. Make the changes, and go back to step 5.
Make the changes based on your analysis in step 6. Then go back to step 5 and repeat the process.
Two or three times per year, you should go back to step 1 and make sure you are still measuring the right things and have the right targets, based on how your business evolves.
How The Sterling Woods Group Can Help
We can coach you through the process of setting up a dashboard, including technology selection, so you can measure the right KPIs. Also, through our TrailBlazerTM solution, we act as your strategic partner, always monitoring your KPIs, analyzing data, recommending changes, and even implementing them for you.
For a free 30-minute consultation, please contact us at email@example.com.
About the Author, Rob Ristagno
Rob Ristagno is the founder of The Sterling Woods Group and partners with companies to drive rapid digital revenue growth. Prior to creating Sterling Woods, Rob served as a senior executive for several niche media and e-commerce companies. Rob started his career as a consultant at McKinsey and holds degrees from the Harvard Business School and Dartmouth College. He has taught Product Strategy at Boston College.