For the past few months, we’ve been working on driver-based analysis and planning for our different business units at Spreadshirt. The effort reminded me of why so many businesses do not attempt such an analysis. The main reason: lies, damn lies, and statistics. What happens is that you start at the highest level. Like most retail businesses, for us, we can start with traffic, conversion and basket size for each of our business units. Kind of feels cold, huh?

The next step for the drivers is to get to what makes each business unit special to its customers. For us:

Shop Partner. Number of selling shop partners and sales per shop is where you head next. And, once you have that, you start thinking about the different levels of shop partners used to judge sales per shop. For example, major accounts, power sellers and then the “long tail” are typical classifications. Then, what about recruiting of those different partners? Lead generation and direct advertising can be broken into impressions, click through, registration, activation, and shop set-up. What about shop traffic and customer WOW (I believe in Net Promoter for this measure)?

For each of these, you then argue more critical drivers. And, we haven’t even gotten into regions, and their maturity, which has a big impact on the drivers.

The question is where do you stop? When do the numbers matter and when do they become details that are distracting? My experience… stay at 5-7 drivers. No lie. Pick 5-7 and stick to them. Period.

Team members can focus on levers that impact these drivers, but don’t let those levers become drivers themselves. Keep the team focused on the drivers for their business, which will help you focus on the business as a whole versus get stuck on one number.

Another recommendation… be careful not to let drivers be self-referencing. For example, we could define major accounts as accounts over a certain level. The problem with this is that you don’t know if an account is major until it becomes major. You want to be able to target leads as having “major” potential. We did this at QuickBase by defining major accounts as Fortune 500, with a special emphasis on Fortune 100, as an example. While not all Fortune 100 accounts turned major, the hit rate was higher than going after accounts with “potential”, than waiting and seeing if those became major to define them as major.

What are your thoughts and experiences with driver-based analysis and planning? When have you seen business drivers used well and when not?

What am I wearing on my shirt? To bring some levity to a serious post, I’m going to turn to one of my favorite mood lighteners, Yogi Berra.

Don’t make the wrong mistake