I have been reading “How to Measure Anything” for a few months now. It is has blown me away how simple the concepts are but how accurately the author describes our measurement paralysis. For example, I have always wondered how much of our revenue, as a company, comes from services and how much is generated by our software development/sales. This has always been tricky because I wasn’t sure if I should include the consulting revenue from direct product sales (we sell a product, and also sell consulting time to configure the application) or should I include revenue from support contracts or if should training sales around our products be included, and so on. Anyway, after reading through the book I realized I couldn’t let those variables slow me down.
I started to measure the revenue breaking out each of the possible parts of the whole. What I mean is, it doesn’t matter if I include them or not in my final numbers. what matters is that I understand what those numbers are. During the management review meeting we can decided where we want to realize the profit. The important thing is, for the time we had these numbers to actually start to draw conclusion and make decisions.
As it turns out, we are a products company the majority of our revenue comes from selling our products (according to our decision to realize most income as product related – your realization of income may vary). This was enough of an eye opener to drive change in management, to identify the need to focus efforts are the product sales and to start thinking like a product company. When we look at building a new solution for a client, the first question we ask internally is “Could this be a product we commercialize?”. The shift in mindset has been fantastic – solutions are more powerful and less specific to a single client’s needs, which allows them to learn from each other’s usage.
Dont be afraid to measure and analyze everything. It will drive better decisions and if nothing else, it will educate stakeholders on what is truly important to the business.