Dashboards are relatively new to the small business community (under 50 employees), yet the SBA (Small Business Administration) reports small businesses make up at least 50% of the nonfarm GDP (Gross Domestic Product) in the United States. The potential for dashboards to help this important sector is just as signficant (maybe more so) as with large enterprises.
The challenge is in being able to cost effectively design and implement something that works for the specific business model that is affordable to small businesses.
Even large organizations often fail in their dashboarding attempts, not because of the technology challenges but more often because the ability to reduce the organization down to key metrics and indicators is hard, and finding how to collect and present that information in a meaningful way can be even harder.
Most small business owners may not be aware of how a dashboard can help their business, and if they are aware they may not know how to get started. To help clear things up about what dashboards are we have created the CoreConnex Dashboard Maturity Model (CDMM). In future posts, whitepapers and presentations we will drill deeper into this subject.
The following is an overview of the CDMM, which we expect will evolve over time.
Level 0 – No Dashboard
Companies who use static reports from their accounting system or other systems have the data in reports, but often find themselves checking only one or two key numbers with no visibility into the picture the numbers create. There is no historical context or trend information.
Level 1 – Spreadsheets, Graphs & Charts
All of us have taken reports from various systems and exported them to spreadsheets, then spent hours creating nice looking graphs and charts. This really is a great place to start, but the data being looked at is usually several days, if not weeks old and may not represent an up to date picture of what is going on.
Level 2 – Scorecards
The first real concept of a dashboard has come out of creating scorecards. Scorecards are a great way to look at key data points in one report. Scorecards start to give you a sense of the relationships within the data. As business owners and managers have become more thirsty for turning data into information, software vendors have learned to make it easier for people to customize a wide variety of graphs and charts and customize how they are displayed. This has given people the ability to mix and match data into graphical representations of the data that exists in whatever system it was pulled out of and a single place to look at all the information.
Level 3 – KPIs, Leading Financial Indicators & Forecasts
We’ve all heard the business gurus talk about ‘knowing your numbers’ where they advocate the understanding of a few key numbers for your business that drive all your decisions about your business. There are really two key flavors of these numbers. KPIs (Key Performance Indicators) typically involve some mix of financial and operational data and often are a single set of numbers viewable from one screen, but don’t show trends or look into the future. Leading Indicators on the other hand show short-term trends of key financial areas of the business and are usually compared to annual goals. Forecasts start to give people a feel for the future performance in certain financial areas. No one can predict the future exactly so it is best to forecast using trend lines so you can see the future of financial relationships looking forward – like is revenue growing at a faster rate than expenses.
Level 4 – Goal Tracking and Benchmarking
When most people think of benchmarking they tend to think of a year over year comparison of performance – benchmarking this year’s performance over last year or the current month this year over the same month last year. A different school of thought is to have rolling 12-month average to smooth out cyclical spikes and valleys in performance. However, the real value in benchmarking is when you can benchmark against other businesses in the same industry with the same business model as your business. This, combined with tracking performance against annual financial goals enables you to keep pace with your industry and your goals.
Level 5 – Intelligent Best Practices & Alerts
This level is where dashboards (even in large corporations) are evolving, where the systems recognize the patterns and relationships of numbers and diagnose performance. The diagnotics can even alert business owners when certain patterns emerge as an early warning detection system. Then, based on benchmarking knowledge of a particular industry the system provides suggested actions to take to resolve issues, avoid pitfalls and build a stronger business.
Most companies who produce dashboards today fall somewhere between a Level 2 and Level 3.5. We will be blogging more on this subject soon. Also look for our white papers and presentations coming out soon. Until then, we encourage you to join the discussion.