Cause-Effect Key Performance Indicators (KPIs) with examples

hey it's daniel here and in this video we're going to talk about a critical concept with kpis or key performance indicators and it's what i call cost effect kpis so if you're using kps in your business you really should pay attention to this video and learn this lesson because it will really change the game with how you work with kps in your business and how you actually utilize them to get results so it's something i've actually really been learning a lot about in the last like two years or so it's something i wasn't fully aware of before but i've just sort of really come to realize that this is very important and this is really what it's about in a lot of ways obviously you can use kps without this but this will really again change the game in terms of how you use kps specifically to drive results and get results and be more successful with your business so i'm really excited to share this with you and uh let's dive in so again this is called uh what we're going to talk about is cost effect kps so cost effect key performance indicators and the objective of doing this so the reason why we do this um is to identify like this is what we're wanting to do right identify measure and maintain high input on key drivers of performance which is our desired output so cost effect kpis really we're looking at kpis that either cause results to happen in your business or show the effect of what you're doing there's a big difference so again in this video we're going to identify or you're going to identify measure and then maintain high input so that means like high productivity or like good strong action on the key drivers of performance so the things that really drive results so that's the costs in your business provides desired output output slash results right so um so let me just really explain the concept for you right so basically i'll hop over here so basically um in any kind of business or anything you do um there are things that you actually do like activities actions you take that generate results and then there's a lot of action you can take that does not really generate a result or at least not the result slash the output that you desire in your business and most business owners uh most entrepreneurs are not clear on this um they're not clear on what actually drives the results like what are the things that we can do that actually cause the desired effect again so output the results that we want um and they're certainly not measuring it so most are not aware of it and then certainly very few are actually measuring what the input is like on those key drivers you know every single day every single week every single month every single year right is it high is low uh where is our energy where is our time where our resource is going but when you really sharpen the saw on this and you get really really focused with the way you work in your business where your team works in your business and with what you're doing then obviously the effect the result gets better right because there's cause and effect always in anything there's no accident or magic like it's cause and effect so most again business owners don't understand this cause and effect in the business and that's why they struggle to get results so i'll talk more about that here but first i wanna show you like how we arrive at these things so i'll talk through it here with the examples but basically what you wanna ask yourself so how you actually arrive at these kpis like what are these kpis in my business is to ask these questions right so the first question is what action drives results in my business and the key thing here the key word is action right so it must be controllable action this is the distinction you know because we're not looking to to um you know we want to make sure that we're actually uh understanding what is the action right not the effect because if we are looking at the effect that we want and we're trying to do more of that effect it doesn't work you know we have to understand the actual action the actual controllable action the actual thing that your team can't do and nothing can prevent you from doing it really you can do it uh that actually drives results so again i'll walk through examples here but that's the first question and um 80 20 rule applies so you really want to narrow it down to one to four things because there's plenty of things you could do like action you can take that could drive results but that's not what we're looking to discover we're looking to understand what are the twenty percent of things that produce eighty percent of the results you know it's much better to focus on that and do that extremely well with really high productivity then spread yourself thin across the things that you know most of them don't really they're not very effective they don't really produce a lot of result so usually it's just one to four things in a business usually it's it's like two or three things um so so that's what you want to identify like what are the key drivers of results and i'll again walk through the example so you can understand what sort of things they are usually in a business the second thing is so the second question you want to ask is how can we quantify and measure input on this action objectively objectively so um like how can you actually quantify and measure this action and do it in a way that's objective not subjective it is scientific it's objective um so those are two questions so i'll walk you through examples now to understand uh help you understand like what these things can be but this is what you want to do in your business every business is different so you want to ask yourself these two questions and then you can arrive at you know one to four things that you can measure in an objective way um your um or your team's input on is it high is it low how does it change in a week by week month by month and then you can catch yourself or the team if it's sleeping if it's going in the wrong direction and correct it before it stays like that too long or you can actually improve it and optimize it so that causes more of the effect that you want which causes better results and your businesses grow so with the examples right so what are you looking to do in the first question here is what action controllable action drives results in my business again one to four things these are some examples of those sort of things in a business obviously some of these might be the thing in your business as well but costs kpis are usually things like ad spent so how much money do you spend on ads obviously you're going to have kpis around the ads as well which the ads need to be within so like you don't want to spend more on ads if it's not producing a good roi or is not producing the result you want but if it is if you got a system that works then by spending more on ads you usually will drive more results right you will have more of the effect that you desire like revenue and profits so you can see what those sort of things are in here but um yeah so cost is really what it's about and this controllable action like you can control the ad spend right you have control usually over that you can just decide to spend more or run more advertising right so it's again it's controllable action uh another controllable action is how many skus or how many products are life like available for sale in stock of course there's always things that can impact it and outside your control but to a very large degree you have control over that and by having more live skews like more products available for sale let's say you're selling on amazon private label that usually means you get more of the effect that you want which is usually like more revenue more profit things like that so again the skus need to be good and high quality all that kind of stuff but um but you know a primary like cost of results in a let's say physical e-commerce business is how many skus how many products do you have for sale it's really that's a simple one but you have control over that uh another example is email sent so if you're doing like email marketing or outreach as part of sales then how many emails do you send usually the more you send i mean there's a limit upper limit and things but usually you know at least maintaining a certain level of email sent will really have a big impact on your results obviously again the quality of the emails what it is and things does matter but this is something assuming you're doing that properly you can measure your input or the team's input on this key driver of results you know are we sending two emails a week like we have defined that we want to do so usually you'll have an idea of what is uh what is optimal like where do you want to be at is something like that like how many emails for example do you want to send each week and you can define that and then you can make sure you uh you stick to that each week and if not you can see that and usually if like you want to send or you know it's optimal to send like three emails a week and you're sending one on average then the results will not be as good as they could be so you can troubleshoot another example is product developed so like how many new products do you develop um because it's applied you know to any business that sells products um but that would be another key driver of results in that kind of a business usually so how many products did you build or develop right free content so if you're giving out free content as part of your marketing strategy then that would be something you can measure like how much etc how often stores open so let's say you've got a brick-and-mortar business and you have physical locations if you want to grow that business most likely the number one way to do that is to open more stores right so you could measure that uh trade shows attended so let's say you're like a manufacturer and a primary now i'm just again hypothetical hypothetical examples but let's say you're a manufacturer and one of the primary ways you actually get new customers is through trade shows then attending more trace shields might be a good idea if you want to grow your business calls made so if you're doing like sales calls or outbound calls or something um doing more calls probably leads to more revenue and profit so this is assuming you have control over it so if you don't control it like let's say the calls you make are dependent on let's say ad spend then that would not be a controllable like driver of results then the cost really the cost kps would be things that then lead to calls which then lead to effect but let's say you have control you can just call more people than increasing how many people you call or many businesses you call which could be through more sales reps or something but that's probably going to cost then if that's a true controllable cost kpi that would then produce more of the effect that you desire so examples of the effect are things like obvious revenue and profit or sales how many sales clients like how many clients reviews like if you want to get more reviews or testimonials or things like that usually you drive that through something like this that's in here and then market sharing is another example obviously this is not a finite list just examples but like if you want to grow your market share percentage wise then uh you would usually do that through running more ads and things like this now one of the good things about doing this and being aware of this is you can really like you can actually define the kpis be aware of the kpis there are costs so kpis and you can actually seek to improve and optimize that as the primary focus of the business and then the effect will follow so a big mistake a lot of uh business owners make other entrepreneurs make a lot of i guess anything that is performance-based like if you're an athlete or something a lot of um a big mistake basically many make is that they think okay i want more of this like i want more of the effect let's say i want more revenue or i want more profit so they'll think okay i'm gonna make more revenue i'm going to make more profit and they'll focus on that but they don't have the clarity to actually do the things that produce it right so if you just think i want to make more profit then the question is okay how can you actually do that so if you're not clear on what produces a profit in your business and you don't have the ability to measure it and improve it then how are you going to produce more profit right you're probably going to be trying a lot of different things it'll be quite random and messy and a lot of it will not produce more profit because you don't know you know it's hit and miss versus if you are absolutely crystal clear on the costs in your business like the causal metrics and the key driver of results you know really you're again measuring action that you have control over so when you know that yeah what i can actually do or what we can do to produce more profit let's say is to spend more money on ads have more excused life like let's say those are the two main things now if you know you want to make more profit you want more of that effect you can then put all your energy and attention and your team's attention into spending more on advertising releasing more products and doing this better right improving the way you run your ads improving the way you select and research products and how good the products are etc so you can rally everything around the cost and produce more of the costs you know higher input and then obviously the effect the result the output uh that comes from doing that is what you want right so more profit for example so this is why it's so powerful to um like identify what is what and instead of just thinking we want more profit let's produce more profit um and you don't know what to do you can say we're gonna spend more ads and we're gonna release more skus and then you can measure that and monitor that is that happening and do everything to drive those things up and then naturally the effect will follow which is for example more profit so hopefully this makes sense and these are the questions again you can go through in your business to identify the controllable actions again there must be something under your control there must be things you can't do you know a big mistake would be to say that like something from the effect column is an action right this must be an actual cause right causal activity so identify the top one to four things that are the most impactful in your business and track those as cos kpis and then you must be able to quantify and measure the input on this action in an objective way so usually it's quite simple like with ads penozy that's a number that's objective it's what it is uh same with like number of skus live but make sure you have a clear objective way that you measure this that you define in advance and it doesn't change so it's not left up to um you know randomness and then it it's not nearly as effective so so yeah that's it uh again hope this is really helpful to me for me this has been super super useful to get clear on and something i've been learning a lot more about in the last like two years but i think this is a really big important piece of the kpi puzzle and really getting the most out of that system is using it in this way to try the results you want and keep yourself accountable and your team accountable on the key drivers of results in your business and optimizing that improving that or maintaining a strong level of input on those things and then your results again the effect naturally will be higher will be better now i'm also going to um like if you want to learn about kpis so if you don't already know how to use kpis how to track them how to work with them in general then i'll place a link below this video to free training i have made as well which you can watch where you can go through again free training on how to use kpis in your business and i'll even give you a free template uh free for you to use uh just to help you out so you can actually measure this and use kps effectively in your business with the training again plus the template that's uh what i use and it's worked really well for us so again hope you enjoyed this uh yeah so that's it i hope you enjoyed this video and talk to you soon bye for now you