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Judging Health Through Metrics of Conformance

I have written in the past about the difference between market demand and operational capacity – and how difficult it is to determine what exactly is being measured in relation to either.  Has the demand for a product declined, or is the organization simply less capable of satisfying it?  For example, the fact there are no bananas in the grocery store does not mean that there is no demand for bananas; but the absence of revenues from the sale of bananas might be regarded, rather erroneously, as a decline in demand.  This is a straight-forward example; and so I doubt that the dynamics would be confused in real life.  How about a decline in clients served by Stan the salesperson – is this a market or operational issue?  It is a question that is not easily answered.  Yet a data scientist might be expected to assert the meaning of data regularly.

In this blog I will be considering the situation from a slightly different angle:  the health of an organization based on metrics of conformance.  These metrics are “prescriptive” – at least in the way I use the term – meaning that a person is highly graded by their ability to perform in a prescribed manner.  This is an aspect of operational capacity.  I will point out an interesting paradox in a moment.  Metrics of conformance is often conflated with metrics of performance.  I will just give an example to demonstrate the difference.  A metric of performance might be the number of products sold.  A metric of conformance might be the number of clients served.  A person can meet a lot of clients but not necessarily sell any products.  I am not going to build on this example since the possibilities are mind warping.

The paradox is that an organization might have, on one hand, reasonable objectives and, on the other, an equally reasonable means of achieving these objectives; yet one might not actually lead to the other.  The metrics might be designed to promote or reward behaviours (the means) that do not help the organization meet its objectives (the ends).  There is a difficult question not so much when to “rethink” the plan that doesn’t seem to be working but really how to build mechanisms or approaches to alert the organization that rethinking is necessary.  When there is a prescriptive regime, and one seems to be adhering to it, and all of the metrics are designed to point to one’s conformance, and there is a belief that conformance will lead to lollipops, it might be difficult to know when something has gone wrong.  Everything might be going “right” in an analytical sense even when everything is going wrong from a business standpoint.

Business conformance is a problematic obstacle.  Because I want readers to understand, if the path to success is all about conformance, this is nothing impressive.  A similar company can be constructed overseas to produce the product at a fraction of the cost by merely following the same formula – in a setting having lower costs.  Or a competitor can immediately take a slice of the local market merely by using copycat tactics.  Moreover, if the market begins to change as the organization is following a particular regime of behaviours and metrics, the likelihood of adapting quickly seems remote.  When everything in the organization is about sticking to its plan, then that plan is precisely what it will stick to, sometimes even to the bitter end.

This blog is inspired to some extent by the great many companies that refused to change with the times – and their apparent inability to recognize the detachment from the market.  So common is this situation, I actually suggest that every person reading this blog belongs to such a company.  Right there in a boardroom somewhere I can imagine somebody pulling out a cereal box:  “Nutritional content . . . Store in a dry place . . . Ah, pour milk, enjoy, and lead a balanced life.  That’s the ticket to a long and healthy life!  It is right here on the box.”  I don’t know how many people check the back of cereal boxes to make corporate decisions.  I’m saying that it is sort of normal to behave in a manner similar to this.  Moreover, data scientists might find themselves enablers in the change-prevention process by not really thinking about the strategic implications of their guidance.

Humans were cloned long before other creatures.  Practically every company is run by clones.  They think alike.  They usually look alike.  The army of suits in “The Matrix” enforcing law over a subservient and blissful human population isn’t all that far-fetched.  It is important to appreciate that in order to maintain a competitive difference, it is necessary to seek revenues that are literally different.  The beginning of this process involves developing metric beyond conformance.  It is necessary to get back to basics and start listening to the market.  Do we serve the paradigm – or do we serve the market?  Let us consider what the market actually is – because I think for many, the market is a bunch of shoppers carrying all sorts of plastic and smart devices to make payment.

The market – is complicated.  The market is data – or at least the source of it.  There are faceless masses hidden in the data.  This data has its own character, flow, and design.  In an effort to engage the market, companies impose over the data by extracting from it those aspects regarded as important.  The initial hurdle – in order to break away from the conformance trap – is to let the market set its own metrics.  It should tell its own story.  We participate in the market’s story not the other way around.  A company has to find its place in the market’s amazing story of which we are probably such a small part.  My approach is to use codified narrative – a means of catching different aspects of a dynamic reality.  Recognition through delineation, I call it.  This “delineation” must occur outside the limited scope of enterprise and more within the social context giving rise to the intersection between clients and companies.

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