What Gets Watched Gets Improved

Bob Parsons, Go Daddy CEO, had a very interesting post on his blog the other day.  It was called Everything That Is Watched Improves. 

I'm reposting it here because I think he makes some great points.

Everything That Is Watched Improves

One thing I learned early in my business career is that anything of significance that is measured and watched, improves.

John D. Rockefeller knew the importance of business intelligence.
Back before I started Parsons Technology I became impressed with something I read about John D. Rockefeller. In fact, I still think about it and use it to this very day. I learned that Mr. Rockefeller was one of the few people in his industry (perhaps the only one) who knew exactly how much it cost to extract, refine and deliver a barrel of oil. In fact, he was entirely aware of all his costs. Knowing this information (and acting on it) gave him a huge competitive advantage. He knew how much he could price a barrel of oil for and still turn a profit. He was always keenly aware of each area of revenue, cost and market share, and he worked on improving in every area. As a result, he did cost saving things like manufacture his own oil barrels, have his own cartage company, and on and on.

He eventually managed his way to where he could sell a barrel of oil, with impeccable customer service, and turn a profit at a price less than what it cost his competitors to deliver the very same product. By paying close attention to the things that mattered, Mr. Rockefeller made his Standard Oil Company so successful that he became the wealthiest man in the world!

I measured everything significant at Parsons Technology.
So when I started Parsons Technology, I began the habit of measuring everything that I felt was significant on a daily basis. I did this with unit sales cross referenced by the print advertising I purchased and direct mailings that I did throughout the month.

I worked to sharpen profits every day.
When I sold Parsons Technology, the company was snail mailing anywhere from 6 to 8 million offers each and every month. Because our monthly investment in printing, postage, and fulfillment systems was huge, it became imperative that we knew where we stood at all times. We developed a system that allowed us to project the success (or failure) with reasonable certainty of any mailing, after receiving just a few days of results. If the mailings appeared to be successful we planned more of them, and if the opposite was the case, we immediately cancelled anything similar we had in the works. This allowed us to sharpen our profitability each and every day. Also because we watched and constantly worked on improving each aspect of the cost of doing direct mail, our costs were just a fraction (often less than 50%) of what it costs our competitors to do the very same thing.

While our direct mail and advertising tracking systems at Parsons Technology became very sophisticated, they were very similar to the systems I developed and used much earlier when it was just my then wife and I trying to make the company succeed.

My staff and I try to watch everything important at Go Daddy.
I use the “measure and watch everything of significance” rule religiously at The Go Daddy Group. Today, we are one of the very few companies (in fact I know of no other company that does this) that prepares a detailed daily profit and loss snapshot, of the prior day’s business, for each of our operating companies and for each of our significant products. The benefits this has provided us have been tremendous.

Quick decisions based on real-time information made Go Daddy #1!
The Go Daddy Group is the market leader in the new domain name space. Our brand “GoDaddy.com” continues to have substantial momentum and customer mindshare. We make major business decisions daily and do so as soon as the information appears (which may be only a few hours old) to warrant key decisions. To quote an overused cliché, “We are able to turn on a dime.” As I hope I’m convincing you, there is a big payoff associated with knowing what’s happening in your business.

We've been able to save money in many areas.
Because we watch and try to improve on our key cost information, we've been able to shave costs in many areas. We've learned to do many things "in house" that our competitors hire "outside" companies to do. As a result our costs are often a fraction of what it costs the competition for the same product or service. We pass these savings along to our customers and are thus able to deliver quality products at very low prices. This enables us to be a very tough competitor.

Real-time information about your business is critical.
Real-time information that actually gets used is particularly helpful when launching a new product. It’s extremely handy for finding the right advertising and positioning that maximizes any new product’s sales. But the benefits don’t stop there. Current information can also provide an incredibly effective early warning system that lets you know if you need to react to something that a competitor may be doing, or maybe if there is a breakdown somewhere in our sales and ordering system that needs immediate attention.

Traditional financial reporting doesn’t cut it.
Traditional financial reporting is done monthly. In many businesses that’s when you’ll see the only financial statements showing how the company performed. Often these monthly “financials” are produced by the accounting department sometimes a few days after the end of the month, and often times much, much later. By the time the people in charge get their hands on this information and are able to digest it, small problems have become large problems, and many an opportunity is long gone.

You need to know how you’re doing on a daily basis.
I think business, particularly in today’s age of the internet, needs to be managed on a daily basis. On an overall basis, knowing how each key part of my business did the prior day tells me where I should focus my time. I also use other statistics which I get real-time to pinpoint opportunities and problems. This data ranges from visits to our website, to market share, to unit and dollar sales of particular products.

I expect all the ads we place to be profitable.
The staff at Go Daddy also measures on a daily basis the results of each and every one of our hundreds of advertisements in which we invest. If an advertisement is unprofitable (I have always expected every advertisement to contribute to profits), we know about it immediately -- often within hours -- and we do something about it quickly. In contrast, if the advertising is working we buy as much as possible. These decisions are made daily, sometimes even hourly.

We also care about market share and what people are saying.
The information we watch doesn’t stop with our business statistics. We also measure and watch what we believe is our market share, the business that is moving between us and our competitors (in the domain industry it’s possible for customers to move their accounts from one registrar to another), we even watch what people are saying about us in chat rooms throughout cyber space. And when it is warranted, we act on the information we’re seeing.

Old news has little value.
As you might already guess, one of the big points I’m trying to make here is that for business information to have any real value, it has to be current, and ideally real-time. Beyond that, someone needs to be paying attention to it, thinking about it, and making an effort to improve upon it.

I spend less than a half-hour with my monthly financial statements.
When my accounting department provides the monthly financial statements a few days after the month is complete, my executive staff and I typically spend less than a half-hour reviewing them. The reason we pay so little attention to the monthly numbers, is because we’ve kept our fingers on the pulse of the business each and every day (including weekends). In fact, I dislike looking at our monthly financial statements. The reason is because they tell me what I already know.

You can start building your business intelligence systems in small steps.
There used to be a time, before the computers and the problem solving software we use (like spreadsheets, databases, etc.) today, when knowing how your business stood on a daily basis was quite a challenge (of course that didn’t get in the way of John D. Rockefeller). With the tools we have today, there is no reason why every company doesn’t have this type of information. If you don’t have daily performance information at your company, you can’t make it appear all at once. What you can do is to implement your information systems in small steps and improve them daily. Start with the stuff that really counts, and then as the ideas flow (and flow they will) build upon your systems. Before you know it, you’ll be in control like never before and you’ll marvel at your systems. The point is to get started. That’s how it’s always worked for me.

My rule even helps me stay in shape.
Measuring everything doesn’t just help with business systems. I also use this rule to help keep me in reasonable shape. I don’t track much but I track enough to keep me working out and building physical strength. Every time I work out, I keep track of the day, how many minutes of cardio exercise I’ve done and how many calories I think I’ve burned. I also track how many push ups I do. Just seeing this information (I keep it on a spreadsheet on my laptop) let’s me know if I’ve been lagging, and when I notice that I've been falling behind, I do something about it. This simple little system works well for me. In fact, I can tell you how often I’ve worked out every week for the past three years.

Bob makes some great common sense points in this post.  I hope you find it to be as useful as I did.

That's it for today.  Thanks for reading.  For more common sense ideas of leadership, careers and entrepreneurship log on to my website www.BudBilanich.com.

I'll see you around the web, and at Alex's Lemonade Stand.

Bud

PS What have YOU done for your career today?

Comments

[Skip Reardon]

Great repost of an essential (and common sense) approach to continual business improvement, which is a fundamental design element of the Six Disciplines Methodology and related Internet technologies.

[Robert Benson]

Bud,

I wholly agree with the basic statement made by Bob Parsons in his Blog. In my experience in founding and managing companies and consulting with companies, it is extremely important to have metrics. The simpler they are the better. Once established, Senior Management then needs to show constant interest in the metrics.

Costs: Our company, GordianKnot Consulting Group, does consulting work on cost and supply chain management. Most companies don't have a good way to measure costs, because their ERP system is set up for accounting and inventory valuation, not management information. It is extremely important for Senior Management to have a complete understanding of the Cost Structure and to develop some key indicators. A Cost trend metric is very important graphic to measure. I have posted some ideas that may be useful to readers(http://gordknot.com/PDFIndex
/GK_CostAnalysis_09-02-05RevA.pdf)

Another tool that is very useful is a clearly directed Staff Meeting. Most people complain about the uselessness of meetings. I received some sage advice from Jim Ashton which I have applied at my companies to make staff meetings effective.

Each staff member reports on his/her area on four areas:

1. Significant accomplishments for last week.
2. Significant challenges for the next week.
3. What will be accomplished in the next week.
4. Metrics - Graphical.

I use Powerpoint slides, and I require that they be turned in to me (or put on the intranet) the day before the meeting so that I can review and coordinate.

We also have a monthly Staff + meeting where the next level of managment and employees (if a small company) participate with the same format (month focus instead of week).

It is amazing how this process gets the team working together on the "correct" areas to make the company successful. Once initiated, It also makes the CEO's job easier.