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- Deadly Business Mistakes—Strategy, Execution, and Culture
This chapter is from the book
This chapter is from the book
Deadly Business Mistakes—Strategy, Execution, and Culture
Some years ago, Peter Drucker wrote an article4 describing 'Five Deadly Business Sins' that have driven many companies into deep strategic and financial trouble. His characterization of these 'sins' included:
'Worship of high profit margins and premium pricing'
'Mispricing a new product by charging what the market will bear'
'Slaughtering tomorrow's opportunity on the alter of yesterday'
'Feeding problems and starving opportunities'
These, and others we will discuss, are primarily examples of longer-term cultural mistakes that companies make with regularity. Damage does not occur overnight; it occurs slowly and consistently until someone or something breaks the chain and fixes the problem. Breaking the chain for these types of mistakes is difficult because the decision criteria and mindset are hard-wired into the brains of company managers and executives as a result of past successes.
As we will discuss later, the U.S. auto industry has been guilty of many of these mistakes and is trying to change, but serious remedial action was delayed for years until their market share and profitability was decimated by competition from Japan and Germany. Sometimes the initial recognition that a problem exists is the biggest hurdle.
In other cases, individual companies, such as IBM, have made one or more of these mistakes but have realized it early enough, changed, and recovered. But for every company that has detected its mistakes and taken action in time to survive, there are many more that never saw the danger that was coming until it was too late.
Strategic mistakes, particularly those affected by the organization's culture, are among the most difficult to deal with because, at any given point in time, it may not seem like there is a huge crisis. In cultures not known for rapid change, it is too easy to feel comfortable with the way things have always been done until there is a huge crisis that wakes you up to the need for change. This is analogous to an individual's problems with weight control. The problem does not result from a single bad decision or action but from a thousand small bad decisions over a period of time. Just as with weight control, however, if allowed to go too far, these types of business mistakes become life threatening.
Other cultures make it difficult to expose and deal with mistakes of strategy or execution even if they are detected early. Organizations that are paternalistic, hierarchal, consensual, or family dominated all have unique characteristics that may make them inept, defensive, or slow to act on bad news. Many organizations do not even understand what their culture is, much less think about how to take advantage of its strengths and design around its weaknesses, which is necessary to avoid mistakes.
Most execution mistakes are related to operations but may have strategic implications. Execution mistakes usually revolve around tangible actions that are more visible than strategic blunders. They happen more rapidly and are usually measurable in customer dissatisfaction, lost sales, warranty returns, or other shorter-term measures. They have immediate consequences and are thus easier to see and understand.
Culture-driven mistakes, especially around strategy, are usually colossal and fairly permanent in their damage. AT&T attempted to enter the computer business by acquiring NCR—a colossal cultural mistake chain that took years to clean up and cost both companies dearly. While this was a strategic mistake, it affected operations directly with confused product offerings, angry customers, and conflicts over resource allocation and resulting poor financial performance. It eventually resulted in spinning off NCR, which should never have been acquired in the first place.
Execution mistakes can be fatal as well but are more often just very expensive, unless they continue so long that they become cultural. There are many categories of execution mistakes, from not following procedures, as in many airline crashes, to not understanding markets enough to bring out the right product, to bad timing with good products. The dustbin of product development is filled with things like the RCA Videodisk. Introduced in the early 1980s, it was actually a decent product in a clumsy format that was inconvenient for the market at the time. This product was the result of a series of mistakes related to market understanding, technology, product design, and pricing.
Subsequent chapters will deal with the impact that culture can have on the likely success or failure of organizations in avoiding multiple mistakes. A common theme that runs through all the cases we will explore, whether strategy or execution related, is that in most cases it takes three, four, or five mistakes that must occur in sequence to create a serious failure. We will also look at the dramatic effect that organization culture has on affecting a positive or negative outcome.
The reality is that the business world, and perhaps life in general, is more forgiving than we realize. More often than not, you have to mess up a number of times and pretty badly to get a really bad outcome.
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Summary: When used correctly, business dashboards will help you make sense of your data and drive your business. However, not all dashboards are created equal. Many businesses make key mistakes with their dashboards, which can limit their effectiveness and kill the project altogether. In this article, we explore a few of the most common mistakes, and how to avoid them.
As data volumes grow, more organizations are gravitating towards business dashboards. Dashboards help these businesses make sense of their data–turning mountains of information into actionable insights.
When used correctly, dashboards are powerful tools. They drive decision-making. They save time. They improve business processes. They alert leaders to problems before they get out of hand. The list could go on.
The problem is, dashboards are often misused. Businesses make key mistakes when planning and building their dashboards. These mistakes limit the dashboard’s effectiveness, and can even kill it altogether.
What are these mistakes? Today, let’s explore this topic and explain how to avoid each one. Here are 7 common mistakes businesses make with their dashboards:
1. Failing to define the dashboard’s purpose
“One big mistake is not being clear on what purpose dashboard is serving,” says Joe Wang, CSO at ServicePower. “A dashboard that is good for leadership is typically useless for operations and vice versa. Operational dashboard needs to tell you where the issues are so you don’t waste time looking at everything. You can go straight to the problem. Leadership dashboard rolls up and is typically an average of everything.”
Business dashboards come in all shapes and sizes, but typically fall into one of three categories. Here’s a brief explanation of each:
Strategic Dashboards: Strategic dashboards help business leaders monitor company progress towards predefined goals. They help executives keep tabs on the strategic direction of the business.
Operational dashboards: Often used at the departmental level, these dashboards monitor day-to-day operations of their department. They help managers catch problems as they occur, and ensure that everything flows smoothly.
Analytical dashboards: These dashboards provide insights into data collected over time. They help users understand what happened in the business, and what changes they should make in the future.
The problems arise when a business doesn’t define their dashboard’s purpose. Or, worse yet, they try to create dashboards that serve multiple purposes.
What happens when you don’t define your dashboard’s purpose? You’re left with a dashboard that doesn’t fit anyone’s needs.
2. Offering too much information
photo credit: Walter Benson via photopincc
It’s probably the most common problem found in business dashboards. Rather than choose important metrics, the business tries to cram an overwhelming amount of data into a single dashboard.
As a result, they negate the biggest benefit of a dashboard: Simplicity.
“Data Dumping is a common dashboard mistake,” says Jordan Goldmeier, author of Dashboards for Excel. “This is the process of placing everything on a dashboard because you are either unsure of what stakeholders truly want or because you want to make everyone happy. Either way, the result is usually a confusing mess. Dashboards that attempt to be everything to everyone become nothing to anyone.”
What’s the general rule of dashboards? “If your dashboard does not fit on one page, you have a report, not a dashboard,” states Avinash Kaushik in his article “Five Rules of High Impact Web Analytics Dashboards.
“This rule is important because it encourages rigorous thought to be applied in selecting the golden dashboard metric,” he says. “It acts as a natural barrier to cramming in too much information, makes data presentation easier, makes the dashboard more understandable.”
3. Failing to automate data feeds
A dashboard is only as good as the data behind it. Any successful dashboard needs clean, current data. If you feed your dashboard old data, you’re better off not creating one in the first place. This type of dashboard will lead to poor decisions, and will eventually be abandoned.
However, many business make this very mistake. They design dashboards with the assumption that the data will get updated manually. While this may work in the short term, it’s a long-term nightmare.
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“One common mistake is failing to automate the data feeds,” says Tim Montgomery, President of TIMIT Solutions, LLC. “Do not make the mistake of designing a dashboard dependent on people supplying updates. Out of date data can be worse than no data at all, and people will not keep data up-to-date. Realize that in design phase.”
4. Displaying unclear metrics
Let me ask you a question: What makes an effective dashboard? Does it need fancy charts and graphs? Does it need real-time data?
While the answer varies depending on your business, there’s one aspect everyone can agree on: An effective dashboard is one that drives a decision. Too many dashboards amount to nothing more than charts on a page. Why? Because they’re not designed around action. They’re not designed to drive business objectives.
An effective dashboard must deliver the message without forcing the user to dig around the data. How do you know if your dashboard is clear enough? As explained below, give it a simple test.
“Give it the 5-second test,” says Montgomery. “An executive must be able to “feel” good or bad within 5 seconds of looking at the dashboard. Use Red/Yellow/Green and/or other visual effects to achieve this. If it takes longer than 5 seconds it’s back to drawing board!”
How do you know which metrics to add to your dashboards? Before adding any metric, ask yourself this question: “What action will this metric drive?” If the data spikes or falls, will that metric lead to a decision? If you don’t know, that metric doesn’t belong on your dashboard.
5. Building the same dashboard for different users
photo credit: geralt via pixabaycc
A single dashboard cannot be all things to all people. Yet, many make the mistake of trying to cram their dashboards full of data that applies to different audiences.
What happens? The dashboard is so overwhelming, no one uses it.
Before creating a dashboard for any group of users, do your research. Understand their goals, needs, and technical skill level. Then, create a dashboard focused on that user group.
But, it doesn’t stop there. Different users within the same user group want their dashboards customized in different ways. Jay cutler club. Some want to see different data. Others want their dashboard formatted in a different way. As explained below, this creates a big problem if not addressed from the start.
“I’ve seen too many businesses fall into the customization trap after their dashboard is released,” explains Rick Hurckes, Services Director at mrc. “Every user wants something a little different, which traps the dashboard creator in an endless loop of customizations. One way around this problem is to provide users with customizable dashboards. Give users the option to control which graphs/charts to display on their dashboard as well as the layout. This lets every user customize their own dashboards, and helps you avoid the customization trap.”
6. Misusing color
When used correctly, color is a powerful tool in dashboards. It helps users identify good and bad trends at a glance, without the need to examine every data point.
The problem is, color is often misused. When used incorrectly, color will detract from your dashboard and make it even more confusing.
How is color misused? As explained below, color is misused in two common ways:
“One common mistake found in many organizations’ first iteration of executive dashboards is a misuse of color,” says Douglas Briggs, Director, Business Intelligence at Washington University in St. Louis. “While color is often one of the most heavily-requested features of a dashboard for its ability to draw visual attention to anomalous data conditions effectively and quickly, organizations often misuse color in dashboards in one or more of two distinct ways:
Overuse of color: Companies will often populate their initial draft of a dashboard with a variety of visual data displays, each using color. This can create a visual presentation that has too much of a “carnival” feel to users, whose eyes become distracted by each separate use of color. The end result is that users find it impossible to rely on visual cues that color is meant to create in order to focus their attention on the most important pieces of data shown on the dashboard. Organizations can fix this by defining clear expectations for what expected data ranges or values are for each represented graphic or metric and leveraging color only for meaningful exceptions.
Conflicting “meaning” of color: A more subtle misuse of color occurs when companies mix metrics on a dashboard that have different (or even inverted) value scales. Using green to show high values and red to show low values might be consistent for a sales target dashboard, unless the metrics are for out-of-stocks (for example), when low values are preferable. Companies using colors to designate value ranges need to adopt a strategy that designates a single palette of colors that is applied not based on the values of the metrics, but on the meaning of the components themselves (i.e. “green is good, red is bad” or “green is stable, red is unstable”).”
7. Providing no context
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A common mistake with dashboards revolves around their lack of context. Without context, your data means nothing.
What does that mean?
For instance, suppose you have a chart that lists website conversion rates. It tells you what percentage of website visitors purchased your product.
Now, suppose your conversion rate is 10%. Is that good? Is that an abnormally high conversion rate, or a low one? Can it be better? Without context in your dashboard, you can’t answer those questions.
So, how can you provide context in your charts? Here are three ways:
Compare your numbers with industry standard. If available, track down the industry standard for that metric, and list it on your chart. This gives you a good sense as to how well you’re doing in that area. For instance, the industry standard conversion rate might be 1%–meaning your conversion rate is great by comparison.
Compare your numbers with your business goal. One of the most common ways to provide context involves listing the goal on the chart. This not only lets you know how you’re doing, it gives you something to shoot for.
Compare your numbers to year-over-year results. Every business strives to at least improve on the last year’s performance. Listing your statistics from the last year (or month) at the same time, helps you understand if your business is moving forward or falling behind.
While this list could certainly go on, the points listed above are some of the most common dashboard mistakes. What do you think? Would you add anything to the list? If so, please feel free to share in the comments.
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