KPI (key performance indicators) is the units of measurement used to quantify progress towards a stated goals or objectives. Its purpose is to create a foreseeable representation of the of the company / organisation to facilitate decisions on asset reallocation. The KPI measures CSF (Critical Success Factors) – The vital components for your strategy to be successful.

But the way we work with KPIs has a big inbuilt flaw. Except for the fact that goal alignment itself has inbuilt weaknesses. They are also based on a logic of probability. Historical data is interpreted through models and used as a blueprint for what will happen next. In an ordered world where there is a clear causality between the things you do and expected outcome this is a valid approach.

But in a unordered domain where causality is less strong (this is true for most of real life) historic data only tells you of what has happened. It has no bearing in guiding you on what will be different tomorrow. Furthermore the representation of the state of the company hides information by the use of averages. For example; all average revenue per ..whatnot (ARPx) tells the story of the average assuming that the behaviour of one is more or less the same as the whole. This is in almost all aspects a wrongful assumption since Pareto distributions (80/20 rule) apply more often in unordered domains. This way of thinking makes you and your organisation anomaly-blind. And the unfolding of reality happens regardless of your agendas, abilities and beliefs. Despite theories and management practices, it is the unpredicted events that have throughout history annihilated industries and notwithstanding prevailing narratives related to strategic intent, groundbreaking innovation can often be accredited to flukes and unintended outcomes.

Not recognising this inbuilt flaw, that KPIs will make you blind towards outliers and instead believing that one can take strategic decisions based on probability ans historical data (also referred to as evidence based) essentially makes you just do more of the wrong things. Doing this will accumulate asymmetric risk until a point where it burst and you will be the subject of black swan event. What will be different in the future is probably not a part of your KPIs or CSFs. Because if they where the change would already had happened. Pursuing a unknowable future  you need strategies from the obrydd playbook instead.