Change the Conversation: What does “Efficiency” really mean?
One of the great mysteries of the analytics space is the use of words that have almost no real meaning. Words like optimization, analytics, marketing, social, value, personalization, predictive, and segment have different meanings to different people. They become useful jargon to direct a conversation, but when it comes down to giving them a real meaning, so many groups struggle because it is a very personal definition. When we do find a meaning for those words, it is usually an old tired one that has lost all relevance in the modern world. To me, the most commonly abused term is efficiency.
What does efficiency mean? Is it just an outcome? Is it something that you can actually measure? If it is as simple as just ROI, why do we fail then to really measure against it? I want to present a simple way to think about efficiency, your actions towards improving it, and then give you real world ways to use that to measure your actions and to improve the “efficiency” of your organization.
Here is the way I suggest measuring efficiency:
This gives you a value, which you can then measure against others. The difference between values shows you what is efficient and what is not efficient. It is strongly related to ROI, but separates its components and allows you to look at any action, not just revenue. We are given the choice to interact with 1 or all 3 parts, and we can measure our ability to do so on the same scale.
It is important to understand the 3 components, to make sure that everyone is on the same page.
Scale – The size of the population that is impacted.
Impact – This is the measure of recordable lift or gain. This is your ability to influence. This must be towards a site wide goal, not just a dependent goal such as the next page or clicks.
Cost – This is how much in time, energy, money or other resources it takes to acquire and maintain the impact listed above.
To do this however, you must always keep all three things in mind, not just one.
Scale reminds us that a high increase of a small group is often less valuable then a small increase to a large group. We can try to increase the scale of something, but without knowing the impact or the cost to achieve it, we have nothing.
Impact reminds you that you can’t only look at lift. If you hear that you got a 12% lift, then you are still missing two really important pieces of information. If the 12% is to 100 people or 100,000 people, it dramatically changes the outcome.
The cost to achieve those two pieces tells us if we actually did something valuable or not. If it takes you 2 hours and $20 to achieve this outcome, or if takes you 6 months, 500 man hours, 1.2 million in new products and has a long term maintenance cost, then it is not going to be as valuable.
In order to enforce a conversation around maximizing return, you must first change the conversation so that you are no longer discussing only one of these metrics at a time. Do not accept a conversation that only tells you lift, or that only tells you a population without knowing the ability to impact that group and the cost to achieve that change. Do not just blindly hear that you have likelihood to change a metric, understand that you have to know the cost and scale of doing so. Do not just hear that a group has a different behavior, understand that you need to know the scale of impact and the cost to change them to understand the efficiency of that action.
So this may seem like a very simple definition for a complex issue, but it gives you the ability to truly view the world differently. To quote Jim Horning, “Nothing is as simple as we hope it will be.” We like to pretend we think these things all the time and that they are obvious in every conversation, yet time and time again we drop the entire context in the name of pushing an agenda. There are hundreds of conversations every day that talk about metrics that have nothing to do with improving performance (e.g. bounce rate) or that only talk about a single portion of performance (lift). Stop those conversations, and remind people that reducing costs or increasing scale is just as effective as improving your impact. Do not assume that everyone is putting everything in the right context, because they aren’t.
So what is efficiency? It is simply the act of making sure that you are improving this ratio, and you are remembering that you can not look at only one aspect to answer a question. We can’t fail to measure actions against each other. These are not just isolated events. It is acting in a way that you keep both the denominator and numerator equivalent in your discussions and actions, and that you do everything in your power to reduce low value actions and increase high value actions. Once you have an action, measure it against other actions, and continue to balance the discovery of the value of actions against your exploitation of the higher value ones.
Being efficient is simply taking resources away from low value actions and towards high value actions. The very concept implies that you will stop doing certain actions and that you will do new ones you aren’t currently doing. It is the entire discipline of knowing that what you are doing today is wrong, and that there is always a better way to do things.
It is not the concept but the constant discipline of following it and holding yourself and others accountable that will truly define your outcome. Nothing here is revolutionary, other than eliminating all of the other factors and excuses people love to throughout in their arguments. It gives you the way to measure different outcomes against each other, and because of that, you can truly see what the value of various actions are against each other.
If you are disciplined in your tracking, honest in your impact, and willing to evaluate actions as how they help your site, and not just you, you will arrive at amazing conclusions that will shift your organization. The only way to improve is to change, so do not fear change, embrace it. Do things you aren’t sure about, challenge common thinking, do the exact opposite to see what the value of what you are doing really is. Measuring things in this simple a form is not sexy or “advanced”, and it can seem juvenile, but it is only by doing the small things well that you will ever succeed at all those large things people promise revolutionize the world.