Ricoh is a large, multi-national company currently going through a business transformation. As this case study by CFO Magazine by the CFO of Ricoh Americas illustrates, despite the difference in organizational sizes, there are many lessons that can be applied to SMBs and startups here in the San Francisco Bay Area.
Of particular interest is the lesson that "You get what you measure." That is, KPIs (Key Performance Indicators) need to be focused on the specific strategic, operational, and financials areas that the company wants to improve.
Here are some relevant excerpts:
“Many of the transformation challenges are ones I saw coming. As a CFO, you would expect to have a major role in directing investments, managing costs and projects, restructuring and realigning operations, pricing new offerings, business modeling, and addressing other financially related areas.
“For example, it’s a priority to ensure that we have the right people, skills, and technology to staff a business that’s becoming more consultative. We need to train or hire to become adept at selling far-reaching, highly complex business solutions.”
“We were hardwired to our older business focus – not only in our systems and data, but in the way we approached meetings, reviews, planning, forecasting, contracting with the customer, billing … in fact, how we measured and thought about most processes. ‘You get what you measure, and it turned out that many KPIs were focused on and incenting the behavior of a hardware company’”
“We needed to look more deeply at what we measured – our key performance indicators (KPIs) — and determine whether any were driving “old” behaviors. You get what you measure, and it turned out that many KPIs were focused on and incenting the behavior of a hardware company.”
“For example, our business units had revenue plans and quotas for services sales. To be sure, the business units were hitting their goals. But when we peeled the onion, we discovered that only a small population was actually selling services (and doing quite well at it). And even they were often working within the hardware sales cycle instead of focusing on any eligible prospect.
“In other words, the majority of salespeople were still focusing on hardware as they’d always done. So we added KPIs to measure the percentage of sales representatives who were successfully selling services, and now this number is steadily increasing. This was a critical factor in changing our mindset.”