In reading this article over at E-Myth, You Don’t Know What You Don’t Know, it certainly made me think about the way I track data. I must admit, when it comes to tracking, I’m a spreadsheet freak. I know there are tracking tools around that do the job perfectly (and if you can recommend any good ones, please do, before my Google Docs space gets used up :-), but I love to see every bit of data possible, and how it affects every aspect of the business.
According to the author of the article, some coaching clients of theirs were struggling to determine why exactly their pizza shop was doing so poorly. They kept good numbers, but unfortunately they were showing a decline in revenues, month-after-month. Perplexed at what the reason may be for such under-performance, they decided upon an inventive promotion strategy as a means to drive the numbers into the right direction.
So they began offering a coupon redeemable for a free draft beer with the purchase of a small pizza. They placed the coupon in the local paper, and waited to see what would happen. Soon after, the shop seemed noisier and busier than before, and they seemed to be selling more pizzas. The promotion had worked! But when they checked the numbers, they were stunned to realise that their bottom line hadn’t actually risen in proportion to the extra business that had been generated.
Convinced that this was because a shifty staff member had been stealing from them, they sacked the girl. They then continued with the promotion, fully expecting the bottom line to now turn a corner, with the supposed delinquent staff member disposed of…
Again, the shop seemed busier still, and the owners were sure that now, finally, things would be on the up. But it wasn’t to be. The numbers were just as poor as ever. They were dumbfounded. Were they rash in sacking the girl? Had the busy-ness merely been due to their being a staff member down? They were utterly clueless. Something that every business has no doubt experienced.
What They Didn’t Know…
In doing their sales numbers, they were doing a great job in measuring the data they did know about – turnover, overheads, etc. But what they hadn’t accounted for, was what they didn’t know about – specifically the mechanics of the promotion. According to E-Myth:
If Steve and Susan had begun with a simple quantification plan to track and record things such as: desired results, actual costs, and effectiveness of their innovation, they would have been able to measure and monitor an informed outcome before things got so out of hand.
Innovations, if not quantified, might not address the frustration that they were intended to deal with. Or, they might not address the frustration in the most efficient and compelling way possible. That’s where quantification comes in — innovations, once quantified, can become orchestrated into the operating reality of your business. Quantification systems allow you to measure the impact of the innovations that you implement in your business. Without quantification — and knowing exactly what it is you want the result to be and knowing, therefore, exactly what it is you will need to measure to tell you if you’ve obtained it — you don’t know if your innovation has worked, and you lack the controls to orchestrate it properly.
I suppose the lesson we must take from this, is that we must set our goals, and define exactly what it is we want (in business, as well as in our personal life) – including actual quantifiable figures – and then track that data as accurately as possible, so that if and when it starts going pear-shaped, we know why, and how to fix it.
You don’t have to become as crazy as I am with spreadsheets and statistical tools. But it can’t hurt, I suppose.
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