Distinguish traditional and dynamic metrics

Traditional business metrics include standard financial and managerial accounting categories such as
quarterly statements of net cash flow, profit and losses, and changes to balance sheet items such as
shareholder’s equity. Traditional business metrics have their origins primarily in paper and pencil after
the fact’s reported. Some of these metrics were once innovated too, like 500 hundred years ago, when
bankers in Florence in Italy invented double book-keeping. Business decision that might be made based
on these metrics will happen usually long after deliberation, sometimes on the scale of multi years, they
remained extremely important and worthy to study but we just don’t have time for that

We want dynamic business metrics that are defined and can be communicated in a manner that conveys
urgency, metrics that address the right question: What changes in our business processes can we make
right now to increase revenues, maximize profitability and reduce risk

2 attributes make a business metric dynamic first will a metric change significantly over interval of a
month or less? If not, it’s not very dynamic. For example, the monthly rent a stand alone retail store in a
mall pays on its three year lease is of course a business metric related to its efficiency and profitability,
but it is not a dynamic business metric. There’s no point in tracking it because it won’t change any time
soon. On the other hand, if a national retail chain with 1000 more based stores is individually
negotiating and signing average of 7 new 3 year leasings each week. It can’t ensure track average
monthly rent per square foot on new real estate leases as an important dynamic metric against with the
set goal and tracked progress

Are there specific actions the company can take that can visibly or significantly impact the metrics in the
short-term. If not, then the metrics doesn’t land itself as dynamic track. Whether a metric is dynamic
may also depends on the business context. For example, if the 1000 store retail chain we just mentioned
is neither adding nor closing stores, and it simply renewing leases on current base where the old leases
have renegotiated the term to be extended, it will difficult to make much impact on the average
monthly rent per square foot. On the other hand, if that retail chain publicly announces that it’s going to
close 25% of its US stores As the GAP changed in June 2015, it may go back to landlord with the
proposition either leave at the end find new tenant if you can’t who can’t pay more than we do or
renegotiate our lease term now. The average month rent per square foot for newly negotiated leases
would be a dynamic metric for GAP as it’s a place that they can save money

This is why announcing all your bad news at once is often a good business strategy. How much impact a
business change can have on a metric is another important thing that we need to observe. If themetric is
noisy, then lots of thing affecting it