In order for small businesses to get the most out of a database, it must be designed with the goals, metrics, and levers of the business in mind.
In summary, goals aim to move the business in a given direction, levers are variables that can be changed with the intention of bringing about such a move, and metrics measure the progress of the goals and the levers.
This article aims to explain these three components in detail.
Understanding the Concept
A useful database is shaped by the goals of the business, with a large proportion of the data consisting of metrics. If a database is designed properly, the queries and reports produced by it will feed directly into the decision-making process of the business, enabling it to be well informed.
Goals, levers, and metrics are rarely static, particularly during challenging economic times. Therefore, in order for a database to have a long life, it needs to be able to respond to new requirements quickly. This can mean adding more tables or more columns to a table.
It would be highly restrictive if all database analysis was driven by business goals. Some margin for experimentation and surprise is healthy for a small business. Databases often contain hidden information that cannot be predicted in advance, but could be potentially useful.
In addition, the very nature of the structure of a database enables one table of data to operate in conjunction with other tables, irrespective of the goals, levers, and metrics of your business.
Having said this, using goals, levers, and metrics is a logical starting point for database design and one that has a high chance of producing a useful database.
Setting Goals
The goals of a small business should be influenced by its mission statement, since the mission statement describes the reason the organization was founded and the principles that lie behind it.
For example, Safaricom’s mission statement in 1993 was:
“Our goal is for our products and services to transform lives and contribute to sustainable living throughout Kenya.”
Google’s mission statement in 2013 was:
“Google’s mission is to organize the world’s information and make it
universally accessible and useful.”
Amazon’s mission statement for the last 18 years has been:
“Our vision is to be earth’s most client-centric company; to build a place where people can come to find and discover anything they might want to buy online.”
Goals are set with the aim of moving a business in a certain direction within the backdrop set by the mission statement. Goals should be a statement of a desired outcome; they start with a verb but give no information about how the goal will be achieved.
Examples include “increase profit,” “grow the client base,” and “cut costs.”
Goals are often separated into long-term and short-term, with long-term goals frequently running over several years. Short-term goals are there to help a company reach its long-term goals.
Setting goals and reaching them is a complex procedure as many outside factors can interfere, such as access to lending from banks, changes in tax and interest rates, increasing costs (such as energy and fuel), and skill shortages.
In addition, growing businesses will have more than just a few goals and these may conflict. In a very simple example, if a company has just two goals—“maintain high-quality products” and “maximize
profit”—it will have to maximize profit within the constraints of maintaining the quality of its goods.
Thus, it could increase profit by negotiating cheaper rates from its suppliers, but it may not be able to use cheaper and lower quality materials for its products.
Identifying Levers
Levers alter how the goals are achieved. By identifying a lever that can be “pulled,” it’s possible to make improvements to a related goal.
Levers are necessary, because the goals, which are set before the levers are considered, are the outcomes of a process and cannot be changed without the levers.
Examples of levers include “use the sale of complementary goods to encourage larger sizes of client transactions,” and “negotiate lower prices on supplies to raise profit margins”.
Designing Metrics
There is little point in guessing how well levers and goals are progressing. Both need to be measurable to make sure the business is advancing toward its goals and to assess how much impact each lever is having.
Such measurements, known as metrics, allow levers to be controlled and hopefully improved.
Metrics and databases are closely linked as the data collected as the result of a metric must be stored and analyzed. Databases are ideal for this purpose. Queries and reports are then generated within the database, which can allow decisions to be made regarding the progress of the business.
Most small businesses use some metrics, for example to measure the level of profit and loss. However, beyond what is absolutely necessary, many often operate on the basis of past experience, by intuition, or by looking at other products on the market
Factors to Consider when Developing Metrics
- Simplicity: Metrics should be straightforward to use and
to explain. - Number: Small numbers of metrics should be implemented at a given time to avoid confusion.
- Quality: It should be possible to collect accurate and complete data for all metrics.
- Collection method: Metrics should not interfere with operations
or create unreasonable overhead. - Impact on employees: Metrics should not cause employees to act against the best interests of the business.
- Appropriate scale: Metrics should be set to reveal changes of a suitable size to enable action to be taken to improve the process.
- Responsive: Metrics must provide feedback quickly so that
problems can be identified as soon as possible.
After the metrics have been determined, a “baseline” can be established. The baseline uses the metrics to measure the current state of performance and can be used to make comparisons with a future state.
Although it may seem obvious, it is important not to get carried away with metrics. Not everything can be measured directly. Relying to some extent on intuition may be helpful.
For example, you may feel that your clients would be happier with a smarter, more comfortable waiting area and it’s unlikely that metrics would inform you of this.
Metrics are best used alongside common sense and gut feelings rather than as a replacement for either.