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Flying blind: businesses without dials

Sitting on the boards of entrepreneurial businesses can be very interesting. They are all characterized by high energy ownership and very sincere operating leadership. But many of them do not have or appreciate the notion of management by metrics.

I was recently returning from Mumbai with one of our managing directors after a board meeting. An audacious visionary with an instinctive flair for business, he didn't have the patience for MIS, business analytics and other grunge stuff.

Midway our flight experienced some turbulence. The gentleman (who doesn't do well in bad weather flying) was noticeably disconcerted.

‘How do you think the pilot is flying this plane?’ I asked him. He paled for a second wondering what I meant and then replied ‘He has a set of controls of course, and he looks at them constantly to see where he is going.’

I was quick to pounce on that ‘But, maybe, he doesn’t like grunge stuff. He may have more interesting challenges!’

He grimaced then smiled and said ‘Go on.’

'Think of a pilot taking off at midnight over the Atlantic on course for New York. He doesn't look through his windshield and fly. He doesn't look 12 km below for milestones or road signs to tell him how he is progressing. He doesn't honk at passing aircraft requesting them to give way.'

Our CEO gave me a long look and then turned to nervously gaze out of the intractable aircraft.

'Businesses are exactly like long haul flights' I offered. 'You can't fly them by brute force or instinct. How do you ensure then that you can navigate the business plan to schedule and within fuel capacity?'

Like long haul flights, all good businesses are run on a good instrument panel system. When a plane is in trouble (or even just flying into normal turbulence) the first thing a pilot will look at is his dashboard. What height, how much storm cloud ahead, fuel consumption rate and so on. He can then pinpoint the issue and take action to return to smooth flying and then back to course.

Now the CEO looked genuinely confused 'But I thought you were the brand expert on our board?'

'Brands are nothing if not business assets. And you often pay a ransom to acquire them (the Gillette brand name alone was worth $18 bn when P&G bought the business 8 years ago). In which, case don't they have to be as accountable for business performance as any infra asset. Today, the best businesses measure their intangible performance more closely that their quarterly financials

Is it a coincidence then that the best brands in the world are also the most profitable and liquid? BusinessWeek’s most valuable brand this year has over $ 100 bn in cash reserves!'

In the case of my co-passenger's business, we found that holding the price at a mere 2.5% over the current average, the intrinsic value of the business changes by a whopping 23%! The business itself will suddenly be worth a lot more. But we all know that you cannot hold an elevated price without a very resilient brand.

Here's the thing: Unless we're capturing all the relevant metrics on a customized dashboard, we can never figure out what needs to be managed. If we can't, we will have to "guess" and "gas" your way through every quarter.

Tell me about an interesting business you know of that runs on good dials. 


Anonymous said...

what would be the most important metrics on this dash? Top 3?