the delta project

framework: metrics

Performance measurements and quantifiable indicators are essential for the development, execution and monitoring of the desired strategy. The Delta Model aligns performance metrics to the strategic options selected and their required Adaptive Processes, and recognizes that these metrics will be fundamentally different depending on the strategic position they intend to support.

In the Delta Model, we use two types of metrics. First, we need aggregate metrics to give us the overall, integrated view of the business and the firm's performance. Second, we need granular metrics in very specific parameters that will allow us to go in-depth for the necessary understanding of their behavior.

"Managing solely by the averages leads to below average performance."

Aggregate Metrics
The Aggregate Metrics we propose are those associated with the Adaptive Processes that support each distinct strategic option. Since these processes are the instruments for the execution of each strategic option, they also serve as the guidelines to define and measure strategic performance — Operational Effectiveness metrics focus on cost drivers, Customer Targeting metrics on profit drivers, and Innovation metrics on renewal drivers. The aggregate metrics used also reflect the nature of the strategic options whose performance they are measuring — the Best Product metrics are product-oriented; the Total Customer Solution, customer-oriented; and the System Lock-in, system-oriented. Of course, specific tailor-made metrics could and should be introduced in each individual business situation.

Granular Metrics
While aggregate metrics are essential for gathering the full picture of overall performance, they are not enough. They need to be complemented by individual granular metrics whose objective is understanding the variability in the behavior of some critical parameters such as product costs, customer profitability, workers productivity, as so on. The performance of these parameters is inevitably non-linear. This so called 80/20 rule is universal, in the sense that a small percentage of items (say 20 percent of customers) account for a disproportional amount of the output (say 80 percent of the profit). We need to measure this variability in order to assess what is the cause. With that knowledge we can begin to learn how to improve performance by making corrective actions or taking on innovative solutions.