Sunday, 17 October 2010

Unusual Key Performance Metrics

The writer Terry Pratchett has a word – Substition. It is the opposite of superstition. Superstition is things that everyone thinks work, but in reality don’t – like crossing your fingers for luck. Substition is things that no one thinks work, but in reality do.

I’ve just been reading Moneyball by Michael Lewis, which to me is about substation. He writes about a baseball team, the Oakland A’s, who in the early part of this century were successful on a very modest budget because they had developed metrics for measuring the worth of a player that were different to everyone else’s. Rather than focussing on the outputs, they were focussing on the process. Players who did the right things at affordable prices, rather than the stars. Rather than RBIs (runs batted in) they evaluated players on their ability to get to first base (i.e. not get out). I suppose in football terms it is like picking players who have a good record of winning corners or drawing fouls rather than scoring goals – the goals will come from the corners if you get enough of them. In cricket maybe it would be bowlers who bowl very few no balls in 20-20 rather than take a lot of wickets.

Terry Pratchett also coined the word “narrativium” for the fact that sometimes the world seems to be driven by a good story rather than anything else. People love a good story, and in business and in sport, we are sometimes guilty of wanting to believe the story rather than the facts. Indeed in Moneyball there are times when the “good story” element dominates over the business lessons.

I’ve read a couple of Michael Lewis’s books – Liars Poker, the New New Thing – and he is always extremely readable although you should always remember that he is writing as a journalist rather than an academic. His books make you see the world in a slightly different way, and make you think about what else you might be missing.

In this case it has made me think a couple of things about business in general. Firstly, I wonder whether there might be novel metrics in business that we could use that would better track business success rather than the traditional ones of turnover, return on assets. Rather than customer satisfaction, perhaps ease of doing business? I don’t know. If anyone has any ideas, I would be most interested. The key point from Moneyball is that these should be measurable so that they can be proven, rather than just a “gut feel”. My first thought is that there is a huge (and sometimes contradictory) set of knowledge held by Business Schools and Academia, that most small businesses just don’t know about. How do we get it out there to where it can be used?

The other thought was to wonder about the superstitions and substitions of business. What are they? What are the things that work, though no one thinks they are important, and what are the things that everyone does but don’t actually work? Again, any thoughts and ideas gratefully received.

Monday, 4 October 2010

OECD Trade and Innovation: Chemicals Sector

The OECD has just published a report on the linkage between Trade and Innovation in the Chemical Sector. You can read it here. I was one of the contributors to this study, along with Dr. Harry Ziman of PHS consulting.

I hope you find it interesting.