Platt Perspective on Business and Technology

Putting change in perspective 5 – widening the range of change indicators and developing effective benchmarks for them

Posted in business and convergent technologies, strategy and planning by Timothy Platt on September 12, 2013

This is my fifth installment in a series on recognizing change and on evaluating its potential significance as it develops, so as to enable a more rapid and effective, and even a more proactive response (see Business Strategy and Operations – 3, postings 417 and loosely following for Parts 1-4.)

I began writing this series with an eye to what is perhaps the most lagging, internal to the business performance indicator that a business can turn to: its end-results financials as a source of insight into impact already realized as a consequence of change and that business’ response to it (see in particular, Part 1.) I then turned to consider the role that tapping into the online and participating in social networking can play, and both from conversations with the marketplace and with the members of your own organization’s community, as a leading indicator of change and its impact (see Part 2.) And as perhaps the most lagging and leading indicators under consideration here, these can be seen as bookend indicators that flank the two ends of what in principle can be developed into a suite of tools.

My goal here is to at least begin a conversation on widening out the range of tools that can be used for identifying change and its potential impact. And in this, a business that is more attuned to change as it would affect it, than its competitors are, holds a significant advantage from that when actively competing with them.

• The first business competing in a market that sees significant change and its potential starting to emerge from the background static and fluctuations of a steady-state market, gains a tremendous marketplace advantage from the lead that this gives them for meeting new and emerging marketplace needs and preferences.
• This type of distinction can and does create first-mover advantages.
• So where do you look for new measures and tools for identifying non-random change as it emerges from random business performance fluctuations?
• And how do you develop and utilize them more effectively as resources for evaluating emerging change for its precise significance and for its potential impact, so that this insight can become an actionable source of new value?

Begin with your suite of core business performance metrics, and in this I specifically cite a series that I have developed here in this blog for building performance metrics that more effectively support the business: Moving Towards Dynamic Performance Based Business Models (see Startups and Early Stage Businesses, postings 123 and loosely following for Parts 1-8.)

In general terms, best practices performance metrics that track a business through its ongoing operational cycles, are attuned to help identify change as it arises anywhere in those ongoing processes. Tracking these metrics can specifically help you as you identify deviations from baseline, routine practice and to identify trending change. And good performance metrics can help you map out the nature and likely impact of this change, and regardless of source, and in actionable detail – in ways that would help you map out specific value creating and maintaining responses. This, in fact, is one of the core goals of developing a dynamic performance based business model approach in the first place and it is one of the fundamental ways in which this type of business approach can create competitive strength. But this still leaves businesses with a challenge where disruptively novel and marketplace redefining change is a possibility.

And this brings me to a core question for this series, as it connects to my above cited performance metrics driven business model series:

• How can you use metrics that at first glance are primarily oriented toward tracking more routine activities, to identify disruptively novel change and correspondingly novel and unpredictable deviations from normal business flow?
• This brings me back to one of the core points raised in that business model series: effective performance metrics focus on operational points and benchmarks that directly measure where a business builds and maintains its sources of marketplace-defining value, and particularly its sources of unique defining value that make it stand out from its competition.

And with this, I introduce the concept of tripwire events.

• Random, business as usual performance can shift significantly, but statistically and as a matter of practice it generally stays relatively consistent and constrained.
• Seasonal and other simple, predictably recurring business performance trends can definitely create numerically significant shifts in business performance, and for both specific lines within a business, and for the business as a whole. But once again, and certainly for a stable business and marketplace, year to year (to follow through on a seasonal example) shifts tend to follow a simple, relatively reliably repeating pattern with levels of business at any general point in a seasonal cycle fairly predictable.
• Diverging, trending change that indicates business and marketplace evolution is not in any short period at least, necessarily any different from business as usual changes, for scale. It is just that these changes prove to be directional and additive, and that they cumulatively reflect long-term and even permanent overall change for that business. The key here is that the pieces to this change, over short timeframes can be and usually are relatively constrained too and deviation from that reflects a rarer and more notable event.
• Disruptive change and the emergence of the disruptively novel, breaks that pattern. And this is specifically where tripwire events enter this narrative.
• A tripwire event arises as a repeating series of statistical anomalies in the level and performance of a business, and in the source and direction of change observed. Statistical anomalies happen and if that is all they are they tend with time to balance out – but disruptive change creates an entirely new normal.
• And as with the rest of this series up to here, this is not necessarily about positive or negative change. This is simply about change as it takes on significance for its form or not.

I am going to continue this series in a next installment, returning to the issues and questions of taking a 360 degree perspective, there taking a fuller and richer range of performance metrics and benchmarks into account than I initially did in Part 2. And then with this framework in place I will more explicitly delve into a set of issues that I have been repeatedly touching upon, but without taking a more organized and systematic approach to it: the valence, or positive or negative value of change. Meanwhile, you can find this and related postings at Ubiquitous Computing and Communications – everywhere all the time 2 and at the first page to that directory. And you can also find this and related material at Business Strategy and Operations – 3 and at Page 1 and Page 2 of that directory.

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