There is nothing personal about business decisions.
Effective leadership originates from an objective evaluation of the business and a persuasive argument to impact change. While personal experience and knowledge can help to conceptualise and pinpoint problem areas in a business, it is the numbers that persuade managers to adopt and execute new ideas. Worthy business decisions are not based on anecdotal evidence but on sound rational facts built around the numbers.
Where do we start and how do we know which numbers are important?
If we are in a sales role the numbers are clearly stated in KPI's and sales targets. Sales people know revenue and product margin is the focus. Many sales incentive schemes are targeted at getting the product margin mix precise to achieve the expected gross profits - not just sales volume. However, the focus on sales margin is short-term and not all management decisions can rely on current sales performance as a good indication of future trends and progress in the business. For example, how do we know if the business will stay profitable when faced with major shifts in market conditions and competition, if we just measure current sales?
Organisations have traditionally relied on marketing to build long-term loyalty, market share and brand equity. These same organisations are now relying on short-term marketing campaigns to build quick sales. The focus on marketing metrics have shifted to digital campaigns and social media activities. Marketers are now looking for measureable values in SEO progress, digital marketing performance, qualified leads, likes, funnel conversion rates, marketing spend per customer, customer engagement, customer retention etc. These metrics are valuable tools. However, they are not enough to predict how the organisation can build long-term shareholder value and provide good leadership going forward.
While there are no crystal balls for the future, good leadership comes from predicting market trends and continuously measuring the health of the business in relation to competition and market changes. Market research forms the backbone of this process. Understanding customer needs, attitudes, behaviours and insights is critical. Strong business decisions are built around good customer insight measures within a quantifiable target market.
Building customer loyalty and increasing cash flow is critical for the business to be sustainable into the future. When making strategic marketing decisions, organisations need to measure future cash flows using present value models, portfolio analysis to determine the opportunity cost and tools to measure market and capital risk. Long-term measures such as market demand trends, changes in technology, shifts in customer value perception (price), and cashflow modelling (NPV) is critical to effective leadership.
Marketing organisations that model into the future are more likely to succeed in the present. This is the essence of good leadership with numbers.
"Always be looking forward. You can never plan the future by the past." - Warren Buffet