Are KPIs Relevant to All Strategies?

November 15, 2016 by Stacey Barr

In the Harvard Business Review this month, Martin Reeves of the Boston Consulting Group writes an interesting piece on how our increasingly uncertain world requires us to have a more deliberate strategy. He says our strategy needs a strategy. But with increasing uncertainty, is there still a role for measuring that strategy with KPIs?

Often I hear people saying that change is happening too quickly to get much stability or insight from measuring performance or KPIs.

That’s a bad assumption, because no matter what the rate of change, if we have a strategy then we have results we want to create. And measuring is the only way to know how much those results are happening. Why pursue a result if we’re not interested in knowing whether we’ve attained it?

So it’s more a question of how do we use measures in the most useful way, depending on the speed and type of change we’re facing.

Strategy Approach #1: Classical.

Reeves says:

“This represents the traditional approach of analysis, planning, and execution against a one- or five-year plan.”

The classical strategy is about results that are longer term and have a high likelihood of staying relevant. The organisation can invest itself deeply in pursuing those results. The role that measures take here are to monitor those strategic results through time, and to set up a cause-effect model of how operational measures will drive those strategic measures.

Measures and KPIs for a classical strategy are helping us create a well-oiled organisation.

Strategy Approach #2: Adaptive.

Reeves explains that:

“In the growing number of unpredictable environments, businesses will have to iterate their way toward the future by using disciplined experimentation.”

This means that strategy will unfold as hypotheses about what drives strategic results are formed and tested. To test any hypothesis, we need to know how to measure the effects we want, and design experiments to test the impact of various strategic initiatives on those effects.

Measures and KPIs for an adaptive strategy help us find new leverage in the organisation.

Strategy Approach #3: Visionary.

Reeves meaning for a visionary strategy is this:

“In malleable environments, such as in newly created or disrupted markets, they will need to envision and realize new possibilities.”

New possibilities are often not tangible, because they haven’t been realised before. When articulating a new vision of what the organisation could create now, measures can help to make that vision more tangible by describing observably the new possible results.

Measures for a visionary strategy redefine the purpose of the organisation.

Strategy Approach #4: Shaping.

Reeves defines a shaping strategy as:

“In environments that are both malleable and unpredictable, businesses will have to orchestrate the activities of entire ecosystems of companies using platform-based business models.”

This means that strategy will be about results that are shared across the whitespace between organisational boundaries, results that not one single organisation has sole control over. Supply chains are a good model of this, where measures monitor important hand-off points along the end to end process.

Measures and KPIs for a shaping strategy connect our organisation’s role to a much bigger purpose.

Strategy Approach #5: Renewal.

Reeves say:

“When viability is threatened by demand, supply shocks, regulatory change or competitive developments, they need to decisively transform their business models.”

Measures or KPIs are a very powerful anchor to focus us, more so that rhetoric or plans or even goals. In my new book Prove It!, I describe measures as gravity that pulls our attention and
action toward a centre, toward the most important things we should
focus on and improve. In renewal, we must start measuring what has become relevant, and stop measuring what is no longer relevant.

Measures and KPIs for a renewal strategy redefine the way the organisation works.

DISCUSSION:

Which strategy approach is your organisation taking on now? What thoughts do you have about how to use KPIs to give more power to that strategy?

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