This is a summary of the full article. To enjoy the full article sign in, create an account, or buy this article.

Microsite header filler Microsite header
2018
Register to download the full report

Download the Full Report (PDF)

*Registration Required

Accelerating technological innovation, intensifying competitive pressure, and increasing customer expectations are forcing business leaders to rethink how they use key performance indicators (KPIs) to lead and manage the enterprise.

Based on a global survey of more than 3,200 senior executives and interviews with 18 executives and thought leaders, we find business leaders worldwide are struggling to strike a workable balance between tactical and strategic KPIs; operational and financial KPIs; and KPIs that effectively capture the moment while anticipating the future. This imbalance is a source of measurable dissatisfaction and concern as data for KPI improvements continues to increase. Executives also appear torn between adding more detailed KPIs or lasering in on a smaller, simplified set. While no consensus KPI best practice emerged from the survey, we did find a small slice of companies are exhibiting sophisticated data-driven and analytically innovative approaches to maximizing the impact of their KPIs.


Overall, however, most companies do not deploy KPIs rigorously for review or as drivers of change. In practice, KPIs are regarded as “key” in name only; the most prevalent attitude toward them seems to be one of compliance, not commitment. The responses suggest this perfunctory treatment reflects cultural and organizational inertia, not technical or operational limitations. In terms of perceived effect and influence, our survey finds that, ironically, most organizations are KPI underachievers. They get less value than they say they want.

Rapid advances in machine learning (ML) — that is, a machine’s ability to improve its performance based on previous results1 — are poised to radically influence how executives use KPIs to monitor and spur growth. As next-generation predictive algorithms are incorporated into business process planning and design, they seem destined to inspire next-generation digital dashboards. KPIs will consequently offer predictive and prescriptive indicators, not just rearview-mirror reviews. Data-driven companies that leverage these advances by reconceiving their KPIs will enjoy distinct competitive advantages.

About the Authors:

Michael Schrage is a research fellow at the MIT Sloan School’s Initiative on the Digital Economy, where he does research and advisory work on how digital media transforms agency, human capital, and innovation.

David Kiron is the executive editor of MIT Sloan Management Review, which brings ideas from the world of thinkers to the executives and managers who use them.


Contributors

Carrie Crimins, Masha Fisch, Lauren Rosano, Allison Ryder, Deborah Soule, and Barbara Spindel


Acknowledgments

Simon Atkins, brand director, North America, Adidas America

Laura Beaudin, partner and global marketing lead, Bain & Co.

Mukul Deoras, chief marketing officer, Colgate-Palmolive

John Doerr, chairman, Kleiner Perkins Caufield & Byers

Hannah Grove, chief marketing officer, State Street

Robert S. Kaplan, senior fellow and Marvin Bower Professor of Leadership Development, Emeritus, Harvard Business School

Silvia Lagnado, global chief marketing officer, McDonald’s

Andrew Low Ah Kee, chief revenue officer, GoDaddy

Jonathan Mildenhall, cofounder and CEO, TwentyFirstCenturyBrand

Anand Narasimhan, head of controlling, Asia-Pacific, China, and Japan, Merck,

Christa Quarles, CEO, OpenTable

Amit Shah, chief marketing officer, 1-800-Flowers.com

Marty St. George, executive vice president, commercial and planning, JetBlue Airways

Glenn Thomas, chief marketing officer, GE Healthcare

Kelly Watkins, vice president, global marketing, Slack

Roddy Young, chief marketing officer, Boston Children’s Hospital

Jane Yu, senior director, digital analytics and ad operations, Experian Consumer Services

Tags: , , ,

References

1. “Machine Learning,” www.webster-dictionary.org.

2. J.R. Raphael, “30 Incredibly Useful Things You Didn’t Know Slack Could Do,” Fast Company, Feb. 20, 2018, www.fastcompany.com.

3. R.S. Kaplan and D.P. Norton, “The Balanced Scorecard — Measures That Drive Performance,” Harvard Business Review 70, no. 1 (January-February 1992).

4. T. Levitt, “Marketing Myopia,” Harvard Business Review 82, no. 7 (July-August 2004).

5. M. Strathern, “‘Improving Ratings’: Audit in the British University System,” European Review 5, no. 3 (July 1997).