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Finding the right Data Analytics Strategy

How to build meaningful KPIs and Dashboards

Photo by Mimi Thian on Unsplash
Photo by Mimi Thian on Unsplash

KPI is the abbreviation for Key Performance Indicator. The term refers to key figures that can be used to determine the performance of activities in companies. Which KPIs should be considered to measure success or failure depends on the company objectives [1]. These KPIs can be displayed together with other facts and figures on a so-called Dashboard. State-of-the-art (self-service) BI tools such as Microsoft Power BI, Google Data Studio or Tableau can be used for this purpose. In the following article I will describe how to strategically develop such KPIs and dashboards and what are the two approaches to do so.

Top-Down-Approach

Managing directors and other executives define KPIs that make sense to them from above. These KPIs and dashboards are then implemented according to strict specifications and should then become the quasi-standard for the company.

Top Down Approach Process - Image by Author
Top Down Approach Process – Image by Author

Pro:The process and the numbers are standardized – so you know where the numbers come from and can make them transparent and comprehensible. It also makes departments, regions and countries comparable.

Con:Special regional requirements and circumstances cannot or should not be mapped.

Bottom-Up-Approach

Business Units assign the IT department with building KPIs with the help of self-service BI tools or make use out of them by themselves.

Easy to use Self BI with Google Data Studio - Image by Author
Easy to use Self BI with Google Data Studio – Image by Author

These are not determined from above, but are rather iteratively developed by one’s own needs.

Pro: Individual departments and regions can build dashboards entirely according to their requirements.

Con: Provisioning may be more time-consuming, as extra data may have to be provided, for example. In addition, comparability is difficult because parts of the data integration, especially the creation of dashboards, are not standardized. This can also lead to more complex maintenance.

Bottom Up Approach Process - Image by Author
Bottom Up Approach Process – Image by Author

Summary

Both approaches often occur simultaneously in companies. The disadvantages of the bottom-up-approach can of course be offset by standardizing the KPIs established in the departments and rolling them out to the company. The challenges here are, that the parties involved have to agree on a standard, but once this is achieved, it is likely that the result will be more in line with true operational needs than is the case with the top-down-approach. One thing is clear, however – the prerequisite is to build a scalable and easy-to-use data platform. With which such analyses can be made possible in the first place.

"The use of KPIs is meant to improve and transform the organizational performance." ― Pearl Zhu [2]

Sources and Further Readings

[1] KPI.ORG, What is a Key Performance Indicator (KPI)? (2021)

[2] Pearl Zhu, Performance Master: Take a Holistic Approach to Unlock Digital Performance (2021)


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