Performance Metrics: Differentiate Correlation and Causation

Business and technology leaders it is critical that you understand the difference

Research Note

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Summary

In today’s dynamic business environment, we are all seeking metrics and information to help make better investment, management and operational decisions. The challenge is most organizations can only access correlating metrics, and risk making unwise investment decisions and policies based solely on limited and incomplete correlating metrics. In this note, we explore the difference between correlating and causational metrics.

Introduction

During a recent Aragon Research webinar on Defining High Impact Business Value Metrics In the Digital Era, we discussed how organizations need to focus on business-value metrics, not just task metrics and engagement metrics. 

After the webinar, I had a discussion with a client who shared some frustration because he felt that his management was creating more metrics and making conclusions based on metrics that he felt had little to do with the actual performance. The problem is that the organization’s leadership had fallen into the trap of confusing correlation and causation, and furthermore it was making policy mandates based on loosely defined correlated metrics. 

It is critical that business and technology leaders understand the difference between correlation and causation when making decisions. Leaders must also recognize that the vast majority of business and technology decision are based on correlated data points.

Research Note Details

Topic: Digital Business Strategy and Architecture
Issue: How do effective organizations support a high impact digital business strategy?
Research Note Number: 2021-25

Length: 6 pages
File Size:  750 KB
File Type: Portable Document Format (PDF)
Language: English
Publisher: Aragon Research
Authors:

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Betsy Burton, VP of Research and Aragon Fellow

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Jim Lundy, CEO and Lead Analyst

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