When you can accurately predict your results in each operating unit, it means less risk and a greater opportunity to scale your company without blowing your capital (missed quarters get more and more expensive as you grow!). Being able to make accurate predictions also means that:
- You have an operating model (not just a collection of people), which allows you to scale better,
- You understand the key drivers of output in your operating model,
- You are consistently managing the unit to your operating model,
- You have a set of early warning signs (your key drivers) that you can focus more attention on when they get below certain thresholds (i.e., it helps you to know where to spend your time),
- You have a set of measures that you can benchmark against other companies to understand where you have opportunities to move to best practices, and
- You know when you need to add staff or other resources well before you get caught short.
Finally, the understanding of the above gives you a solid platform for experimenting with new approaches and accurately evaluating the effectiveness of the new approaches (thereby allowing you to kill the approaches that don’t work and expanding the approaches that do work).
Most technology driven businesses tend to be under-managed, with board meetings organized as social gathering and public reading of very thick board pack that lack the simple data about the top 5 metrics and trends from one quarter to the other (furthermore, one interesting metric seems to be that the more confused a project is, the larger the board-pack is (NB of pages = function of square of (confusion))).