NPS is a waste of time. Use these metrics instead

 Ask any executive what the top 3 metrics they watch in their company are and you’ll get some combination of revenue and sales metrics and, of course, the company’s NPS. Net Promoter Score, a measure of customer satisfaction and loyalty, is so widespread and common that over two-thirds of the Fortune 1000 claim to use it. It’s popularity might lead you to believe it was introduced decades ago, forged in years of trial and error and scientifically tuned to become the “one metric to rule them all” in enterprise and startup alike. It turns out it was introduced in 2003 by Fred Reichhold in an HBR article called The Only Number You Need to Grow. In that article Reichhold rightfully sees word-of-mouth marketing as a key driver of growth and, in fact, without these “promoters” exponential growth is nearly impossible. He posited that a short survey with the right questions could predict customer loyalty. And so, the NPS survey was born.

(I’m working with the assumption that most of you know what NPS is but if not, there is a short overview here.)

The cult of NPS has grown so quickly that there is almost no service or commercial experience today that doesn’t end with a short survey. Often times those survey requests are accompanied with a nudge to rate the company highly. Over the years though, many have raised objections about the validity and supremacy of NPS as the core metric the organisation should work to improve. Along with complaints of organisations pushing for high ratings (gaming the system in essence) you’ll find concerns with whether asking consumers to predict future behaviour is accurate, how the scale is laid out and what makes someone a “9” vs “8” or “8” vs “7” — significant differences on the NPS scale — as well as many other critiques of this technique. The cult of loyalty survey scores has gotten so pervasive, annoying and prominent that it’s led even Reichhold himself to lament his creation.

So, if we can agree that word-of-mouth marketing and loyalty are critical to company growth and that measuring them with NPS surveys is highly flawed and likely yielding far less value than your organisation thinks it is, what should an organisation measure?

The real billion-dollar question

There’s a concept I use when working with organisations on their transformations into customer-centric, product-led companies. It’s the concept of outcomes — measurable changes in customer behaviour that drive business results. Outcomes are the indicators of future business success. We can apply this concept in search of customer loyalty and satisfaction as well.

Instead of asking your customers some variation of, “Are you satisfied enough right now to do something in the future we find valuable?” ask them nothing, observe their behaviour and pose the following question to your team:

“What do satisfied customers do in our product?”

The answers your team comes up with will be customer behaviours — outcomes. These are the metrics you should be measuring instead. They are the current behaviours of existing customers. Here are some examples:

Commerce:

• Number of items purchased per visit
• Number of visits per user per month
• Number of referral codes redeemed

B2B:

• Number of sales leads from current customers
• Number of products sold per customer
• Number of positive reviews in trade publications
• Number of licenses activated

Healthcare:

• Number of family members using the same practice
• Number of transactions handled via your website compared to in-person/telephone

Asking people to predict the future — what the NPS conversation is all about — is highly risky. In the future we always make the best decisions, we never make mistakes and we don’t make people feel bad. However, measuring, getting stories about or better yet, observing first-hand, recent behaviour in a particular product or service is far more telling about how well you’re meeting customer needs and whether it’s enough to retain those customers and attract new ones.

Modern businesses are complex and unpredictable. Your customers are too. Attempting to boil down how well you’re meeting customers’ needs with one question and one metric is naive and risky. Instead, do the work to understand what success means to your customers and what that looks like in the usage of your service. Measure that behaviour. Optimise your product to promote those outcomes. Remember, regardless of what the surveys say, whether your customers rate you a 7, 8, 9 or 10 doesn’t matter if they never act on it.

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How to Measure Creativity and Other Intangibles

 

by David Wilsey 

In a recent class I was challenged by a participant whose organization wanted to be able to measure creativity. They felt that it was key to their artistic process that they hire and develop truly creative people, but they were having a hard time pinpointing exactly what they wanted.

The textbook answer is to “trust the process”, as the discipline of asking your team to formulate concrete intended results usually drives the design of meaningful measures. But the more I help organizations, the more I am starting to think that subject-matter expertise is also an important part of the formula.

The basic measurement development process embedded in our MPRA model is straightforward. We always start by articulating strategic intent using a disciplined process. Then there are four basic steps in measure development:

• Identify objectives and intended result(s)
• Understand alternative measures
• Select the right measurement(s) for each objective
• Define and document selected performance measures

From there we move to target setting and an ongoing performance review cycle.

It is during the intended results and alternative measures steps that the team spend most of the time thinking through an intangible like creativity. The challenge is almost always to establish consensus across the team about what the desired result is in concrete, measurable terms. From there, various alternative measures can be designed and the ideal measure(s) can be selected through a disciplined scoring process.

During these two steps, having a subject-matter expert in the room can be invaluable. For example, a subject-matter expert will have a deep understanding on how others have approached your problem. Creativity, for example, is an intangible quality that academics have been trying to measure for decades. How one defines “creativity” can vary and will impact the desired result we want to measure. Some scholars define creativity as the ability to produce original and appropriate solutions to problems or challenges. Others view creativity as a combination of novelty, usefulness, and surprise. In general, creativity involves generating ideas, products, or solutions that are both original and valuable.

A subject-matter expert will likely also understand how others have approached measuring creativity. This is useful not because we want to blindly adopt something that others have done, but to learn from the past and apply ideas that seem appropriate.

Most methods that have been used in academia could be broadly categorized as either subjective, objective, or a hybrid of both. Subjective methods of measuring creativity involve using the judgment of experts or observers to evaluate the creativity of a person or their work. These methods are commonly used in the arts, such as music, painting, and writing, where the evaluation of creativity is based on subjective opinions.

Objective methods of measuring creativity could involve the production of products or sales generated. On the academic side, objective methods include standardized tests or measures to assess creativity. An example includes divergent thinking tests, which assess a person’s ability to generate multiple and diverse ideas in response to a given prompt. The most common divergent thinking test is the Guilford Alternate Uses Test, which requires participants to list as many uses as they can for a common object. Another example is the Remote Associates Test, which assesses a person’s ability to identify the common link between three seemingly unrelated words. If you are trying to create an organizational measure, these academic approaches might not seem that helpful in a literal sense, but understanding the reasoning behind those measurements might drive the right solution. Perhaps an index could be created that included end outcomes focusing on products and revenue generated, medium impact measurements around subjective evaluation of design, and contributing factor-type measurements around the skills tests.

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What is the Strategic Management Process? + How to Get Started

 

Every day in every department of your organization, people are making decisions.

It’s important that all of those decisions are aligned with the same goals — goals that give your business a competitive edge.

But how do you determine your company’s strategy? How can you be sure you’re headed in the right direction?

The answer lies in the strategic management process. The strategic management process guides you through planning, implementing, and maintaining the strategies that lead to the best business performance.

This article introduces the strategic management process and gives you tips on how to do it right.

What is the strategic management process?

Strategic management is the process of defining and implementing an organization’s strategy. It involves analyzing current circumstances, developing a plan to reach important goals, and executing that plan.

All businesses can benefit from strategic management to help them meet long-term objectives. The process is especially important when the organization is going through big changes or facing aggressive competition. For example, a start-up moving into the scale-up phase can implement strategic management to guide growth.

Why is strategic management important?

Strategic management ensures that the actions of everyone in your organization are aligned with your major goals. It helps departments and business leaders make better, faster decisions.

Strategic management keeps departments on the same page.

Instead of every department head making their own choices about what the company needs, a strategic plan provides a framework for prioritizing projects.

It helps your organization find new opportunities and anticipate new challenges.

Strategic management involves an in-depth analysis of your current circumstances, the market, and the competitive landscape. This helps you discover new opportunities for success.

Strategic management allows for more efficient organizational performance.

Having a strategy helps people in your organization make tactical decisions more quickly, and it keeps you from wasting time on projects that don’t align with the company’s mission.

This streamlines your processes and creates greater operational efficiency.

What are the 5 steps of the strategic management process?

Now you know why strategic management is so important, let’s take a look at the 5 essential steps in the strategic management process:

1. Goal setting

The strategic management process is all about creating a roadmap to help you achieve your vision. So before you go any further, you need to clarify what your company wants to achieve.

Many companies kick off the strategic management process by writing a vision statement. A vision statement communicates where you want to be in the future. It’s different from your mission statement — which describes why your company exists — but both statements should inform your strategic plan.

Once you’ve created or reviewed your vision statement, it’s time to pick some broad areas of focus. You don’t need to have specific, measurable goals yet, but you should go into the planning process with an idea of what you want to work on.

For example, growing revenue or improving customer service could be goals at this point.

Miro’s strategy map helps organizations identify and prioritize key strategic goals.

2. Environmental scanning and analysis

The next part of the process is analysis. Before you can define strategies and tactics, you need to know where you stand currently. That includes internal factors, like your location, structure, and talent, as well as external factors like your competition and market forces.

The more information you have, the stronger the foundation of your strategic plan.

 Here are some tips for conducting an analysis.

1. Solicit feedback.

Talk to team leaders to get a better understanding of internal operations. Employee surveys, interviews, and discussion groups can be used to learn about the perspectives of everyone in the company.

2. Learn about your customers.

You can survey your existing customers or email list to learn more about how your customers and prospects feel. For example, if they’re generally frustrated with your customer service team’s response time, then improving that can be a strategic objective. Or maybe you’ll learn about new product features they want, and you can plan to develop them.

3. Research the competitive environment.

Researching your competitors can help you find your weak spots and learn where you stand out from the crowd.

You can use Miro’s competitor analysis template to analyze and evaluate the competitive landscape for products, services, and companies.

4. Consider your resources.

When you’re setting your goals, you’ll have to know if you have the people and resources to accomplish them. Having a clear idea of your resources from the start will help you set realistic objectives.

5. Conduct a SWOT analysis.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. You can organize your SWOT analysis visually by using Miro’s SWOT Analysis template.

The basics of a SWOT analysis

3. Strategy formulation

It’s finally time to write your strategic plan. In addition to your mission and vision statement, a strategic plan has a few key components.

Strategic objectives

Strategic objectives are high-level goals that help you accomplish your mission. Some examples of strategic objectives include:

• Grow earnings per share by 10% per year
• Launch two new products per year
• Increase NPS to 50 by 2024

Tactics

For each strategic objective, use tactics that tell you specific actions to achieve the goal. For example, if your strategic objective is to increase awareness of your brand, a tactic could be to create profiles on the major social media sites.

Metrics

Part of the strategic planning process is determining how you’re going to measure your progress toward your objectives. Choose a metric for each goal and make sure you have the ability to track it.

What about projects?

Your strategic plan doesn’t need to go into the projects that each department will undertake. Projects are related to strategic planning as the vehicle for accomplishing a strategic objective. However, projects can be planned by individual departments once the plan is complete.

For example, if your strategy is to improve customer loyalty and your tactic is to implement a rewards program, the marketing or customer experience teams will be put in charge of managing the creation of the program.

Writing strategies with Miro’s Strategic Planning template

4. Strategy implementation

You’ve determined your organization’s strategy, but the work has just begun. Now you need to make a plan for implementing your strategic objectives.

Secure any resources you need.

Make sure you have the resources, budget, and approvals necessary to execute your plan.

Delegate the work.

Roles should be clearly defined at this point. Who’s in charge of communicating the plan to teams? Who will report on plan progress? Which departments will be responsible for which tactics?

Launch the plan.

Communicate the details of the plan to the company.

Depending on your organization, you may also need a plan to communicate your strategy with the board, key customers, investors, or the public.

Communication is a two-way street. Give people a way to ask questions or submit concerns about the plan.

Offer training.

If business decisions are going to be based on your company strategy, decision-makers need to know what that strategy is.

For people who require a deep understanding of your strategic plan, like department leaders, offer educational sessions to get them up to speed.

Make a plan to share your progress.

The whole company is working toward common goals — make sure you keep everyone updated on how they’re doing. Regular communication about how the strategic plan is going will increase buy-in.

5. Strategy evaluation

Most strategic plans cover the next three to five years. But that doesn’t mean you can’t adjust your strategies along the way.

Part of your implementation plan should be a schedule for continually reviewing your strategic plan, including its relevance to your current circumstances, its practicality, and how much progress you’ve made so far.

If any of your strategic objectives or tactics haven’t been implemented on time, ask yourself:

• Are we still making progress toward this goal?
• Do we have the resources to achieve the goal?
• Can the goal be accomplished if the deadline is extended?
• Is the goal still relevant to our current circumstances?
• Can the goal be changed slightly to accomplish something similar?

Some strategies may need to be removed from the plan or updated.

Strategic management process secrets for success

The strategic management process has many points of possible failure. Some organizations never agree on a plan, while others have great ideas that fall apart in the implementation process.

Following these best practices will give you the best chance of strategic management success.

Start with a core team that owns the process.

Brainstorming and collaboration are easiest if you start with a small group of stakeholders. This shouldn’t just be a few executives. Bring in a diverse group of thinkers from around the organization.

These people will help make and implement the plan. Their buy-in will also be important in making sure that every department is enthusiastic about the company’s new direction.

Make your goals optimistic but realistic.

Setting your strategy for the next several years is exciting — you get to decide the direction your company is headed and what you intend to accomplish. It’s okay to be optimistic about your vision.

But don’t get too carried away. If your objectives aren’t realistic, the plan will fall by the wayside quickly.

Agree on due dates.

To make sure your plan is carried out, everything should be on a schedule. That includes your strategic objectives (like “increase revenue 30% by the end of 2023) as well as elements of the strategic management process, such as holding the planning meeting, communicating the plan to your company, and reporting on your progress.

Have a plan for communication.

Part of the strategic planning process is letting everyone in the company know about the plan — and inspiring them to be enthusiastic about it.

Consider having a company-wide strategic plan kickoff event. When you introduce the plan, you can also let employees know about any rewards that will be given to teams or individuals that exceed the plan’s goals.

Use tools that make collaboration easy.

The strategic management process involves the entire organization, so collaboration is key. But group work can be disorganized and unproductive if you don’t have methods to stay on track and share ideas.

The right tools can help you keep planning sessions organized, share ideas, make collaborative decisions, and convey your ideas to others.

Miro’s online whiteboard is a full-featured digital space that makes it easy to plan, share, discuss, and review information in real-time. Try brainstorming ideas, add comments and questions using sticky notes, and vote on potential courses of action using our plugin.

Collaborative brainstorming with Miro’s Brainwriting template

Conclusion

The strategic management process sets the long-term direction for your organization, so it’s important to get it right. That means bringing teams together to share ideas and work toward a common goal.

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A summary model of the elements of strategic management

 

References

• Johnson, G and Scholes, K. "Exploring Corporate Strategy". 1984. Prentice-Hall, Englewood Cliffs, NJ.