Chapter 11 – Turning Data Into Knowledge as Fast as Possible

Turning Data Into Knowledge as Fast as PossibleYour team isn’t providing information that meets the growing demands of your business.  Your founders are frustrated with the data that your competitors produce but you do not.  What now?

 

The entrepreneurs that hired you at Unicorno have dreams of disruption.  You take the job because these founders have a clear vision of what can be disrupted, the ability to make independent and positive decisions, and relentless determination to carry them out.  The reason they hired you is that they have a problem with reality.  There is not only one reality in their world.  What happened in the past, what is happening today, and what will happen in the future is a vast population of possible results.  They need you to turn their data into knowledge as fast as possible.

 

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Needless to say, operating in an ocean of potential realities instead of just one reality is a huge pain.  There’s a saving grace, however, in that good reporting will limit your potential realities to forecasts of the future.  Reporting, delivering the right information about past and current activity to the right people at the right time, turns a multitude of potential realities into one actual and verified reality.

 

Reports containing the results of past activities are the easiest to design and deliver.  The information in these reports is typically delivered to senior management, investors and regulators.  Fortunately, nearly all the information required from these customers can be delivered through your Financial Close.  A good Financial Close includes reports to internal and external customers as the final step of the close process.

 

Just as with the Financial Close (see Blog #9), a Value Stream Map and a Reporting Checklist can provide an understanding of every process that contributes to your two key external reports of past events:  your financial statements to investors and your tax returns.  Map the step-by-step flow of information required backwards from these reports to the original inputs.  Then, incorporate your reporting checklist into the overall Close checklist.  Just as with Close, the reporting checklist includes a calendar of times and dates when information needs to be delivered.  The reporting checklist alerts the team when something is amiss with the flow of work in one of the processes.  It allows the team to allocate workloads so that nothing arrives too early or too late, and it can isolate whether a system constraint, an error, or waste in a process is holding up the flow for a particular step of work.

 

Just because it is a subset of the Financial Close does not mean that reporting past events is easy.  Pitfalls abound, and no source of data can be taken for granted.  Bright ideas – remember the virtual close – may not turn out to be not so bright once you try to implement them.  You will quickly discover that most original sources of transactional data needs to be cleansed of errors, especially invoice and payment amounts that are often transposed.  You will need to debug system errors as data is transferred from system to system.  To do all of this requires practice.  At first, each step will be painful.  Over time,  it will become automatic.  You cannot perform an efficient cash reconciliation or deliver a perfect set of financial statements on your first attempt.  Like playing an instrument you will learn how to Close and Report through experience.

 

You will get better with practice but not at a constant rate.  Initially, results may not be pretty.  During the first couple of months you may feel as if you are taking one step back for every two steps forward.   Eventually, once you become somewhat proficient, improvements take longer to occur.  To reduce the duration of producing financial statements from ten days to six days is much easier than cutting the duration from five days to four.  Much like getting down to your target weight, the last five pounds are much harder to lose than the first ten pounds.

 

Reporting what is happening today is difficult because customers want this information in real time, corporate speak for saying they want it NOW.  From a back office perspective, real time information consists of transactional data and a correlated measure of time or activity, such as cost per lead, revenue per click, cost per core, etc.  As Unicorno has grown, what has been measured and reported on a daily basis has evolved.  How it has been measured and recorded needs to evolve too.

 

When Unicorno was founded cash was in short supply and everything in the back office was done manually.  The founders directly met and knew their customers.  They were intimately familiar with the details of orders, costs and other operational details.  They also monitored their  cash inflows and outflows at least daily.  This was great for the founders, but it did not scale.

 

As Unicorno grew it needed more people and tools to serve its rapidly growing list of customers, partners and suppliers.  Surprisingly, it initially hired new people and rolled out new products and programs without any specifically tailored performance metrics.  As one of those hired, you need to fix this problem.

 

Just as nobody would drive a car without a speedometer, Unicorno should not roll out of its “garage” without a specifically tailored set of performance measures.  Some older measures, like the daily cash position, are relevant, but many are not.  New metrics, typically focusing on how the organization is contributing to performance over the short and long term, need to be framed.  This is best done by setting aspirational goals.  Simple, clear key performance indicators are the way forward.  For example, you might set a goal to improve the revenue per leads your site delivers to customers and ask to see the results daily.  Once you set the goal get out of the way, let your team work, and let the data do the talking.

 

Reporting what is happening today through key indicators is not easy in a different way from reporting what has already happened.  As your products and customers proliferate your choices of what data to collect and analyze becomes more difficult.  You need measures that can cut through the accumulating fog of data to improve your product and your service.  And you need it quickly.  The race is on against your competitors as whoever learns fastest usually wins.

 

In order to learn fast you need a manageable number of indicators.  You need to monitor each indicator continuously just as the founders monitored their first infusions of cash.  These indicators are strategic assets that will help you orient yourself versus your competitors.  How well you induce knowledge from these indicators is a key indicator of how well you are performing your job.

 

Takeaway questions:

  • Have you implemented a financial reporting checklist?
  • Does the checklist include a calendar of times and dates when information needs to be delivered
  • Does your reporting include measures that focus on how the organization is contributing to performance over the short and long term versus aspirational targets or goals.

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