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About This Specialization

https://www.coursera.org/learn/analytics-business-metrics/lecture/mE04G/about-this-specialization
0:00
Welcome to the incredibly exciting field of business data analytics. >> I've worked in this industry for 20 years and I've never
been bored and you won't be either. The next 20 years will be even more exciting as the true potential of a single, global, big data
analytic culture is realized. >> I'm a neuroscientist who studies big data in the brain. I work with all kinds of data sets. Now I'm
applying statistical techniques and the problem solving techniques we discovered in the brain to business. And it's been really fun
for me because it turns out that many of the analytical challenges we have in science are now the same analytical challenges we
have in business, thanks to the big data ecosystem. The same skills that we used for getting a paper published in science are the
same skills we use for presenting something to an executive. It's all about critical thinking, data wrangling, and
communication. I've created new data analytics technologies as an inventor and an entrepreneur. And I've helped others realize
their dreams in business analytics as a venture capitalist. And for the past six years, as a teacher in Duke's globally known Master
of Engineering Management program. 
1:13
Our focus here is practical, how to help you harness data to create positive change. 
1:21
>> Big data in the business world is just shorthand for the idea that everything we used to write down, thing like product
invoices, doctors prescriptions, are now electronic and stored in a computer. That means they can be searched, explored,
analyzed, and, perhaps, exploited. 
1:37
>> The cost of storage for electronic data has become so low that there is no money to be saved throwing it away. Most of this
data will not prove useful but clever people will spend the next 20 years finding new ways to use portions of it to create
economically valuable products and services. Or to extract a temporary or lasting informational edge, a meaningful competitive
advantage for the products and services they already sell. 
2:08
No commercial for-profit company that is in a competitive market can remain profitable or even survive over the next five years
without incorporating best practices for business data analytics into their operations. 
2:25
>> Making efficient use of all this big data requires understanding the full life cycle of a data problem. This life cycle includes
assembling the data, cleaning it, analyzing it, and communicating to people what it means. The world needs people who can not
only navigate this entire cycle but also integrate and translate the language, all the people who contribute to it, from programmers
to statisticians to communications specialists to business domain experts. 
2:51
Such people have been called unicorns believe it or not by the popular press and that's because it seems hard to imagine that all
these skills could possibly be mastered by one person. >> Well, we are here to tell you that all of these skills can be mastered by
one person. And this specialization is designed to help you to take your first steps toward becoming your own personal big data
unicorn. 
3:15
By the time you tackle the capstone project, you will know fundamental business concepts and problem solving skills to help you
navigate the big data ecosystem, as well as the most important tools for business analytics. Including data modeling in Excel,
understanding and communicating data using Tableau, and assembling data using SQL. 
3:38
>> Some of you may already know some of this material, but we are interested in bridging the gap and helping you all to become
translators. We want to help business people with no technical background get comfortable with data. And we want to help
people with prior technical background get comfortable asking the best types of business questions. >> We both believe that big
data analytics is one of the most rewarding fields you can be in no matter what your technical background. The most exciting
developments lie in the future. 
4:06
Thank you for embarking on this journey with us. 

The Coursera Specialization: Excel to MySQL: Analytic Techniques for Business is about how “Big Data” interacts with
business, and how to use data analytics to create value for businesses. The specialization consists of four courses and a capstone
project. You will learn to perform sophisticated data-analysis functions using powerful software tools such as Microsoft Excel,
Tableau, and MySQL.
Great business analysts have been called the “unicorns” of the business world. They are supposed to deeply understand business
concepts, wield powerful quantitative skills, execute exceptional critical and structured thinking, and persuasively communicate
complicated concepts using exciting visualizations and non-technical knowledge. How is it possible for one person to even know
what all these things mean, let alone master them?
We’re here to tell you it is possible. By the end of this specialization, you will be able to:
Understand and be able to identify relevant business metrics (Course 1: Business Metrics for Data-Driven Companies)
Be an expert in using Excel to do business data analysis (Course 2: Mastering Data Analysis in Excel)
Be a Tableau power-user who can produce compelling dynamic data visualizations, and an experienced presenter of persuasive
business proposals (Course 3: Data Visualization and Communication with Tableau)
Be a specialist in using Structured Query Language, or SQL, to retrieve and analyze big data from industrial-sized relational
databases (Course 4: Managing Big Data with MySQL)
In the specialization final project: Excel to MySQL: Analytics Techniques for Business Capstone, you will combine all these
skills together to address a realistic business analytics project. In short, you will be your own personalized version of a business
analyst unicorn!
Introduction

Question. 
0:01
What will you be able to do after you complete this course? Business metrics for data driven companies. At least four
things. With module two, you'll be able to distinguish the numbers that are vital to the health and success of a business. Business
metrics from the flood of other, less useful data that surrounds every business. You'll be able to classify any business
metric. First, you'll be able to distinguish which of the three main categories of business data a metric falls into. Revenue,
profitability or risk. And you will be able to distinguish traditional metrics from what we call here dynamic metrics. Metrics often
quite new that offer the greatest potential to lead the innovation through rapid business process improvement. 
0:52
With module three, you'll be able to anticipate what types of data centric employees are needed in different types of
businesses. The typical job titles and skill requirements you will find in each type of company, as well as how employees in
different roles typically interact with one another. In particular, you'll hear directly from business analysts, business data
analysts, data scientists, and senior software engineers involved in data related work. 
1:23
We'll classify all companies into five categories, and consider how each category is responding to the impact of big data. You'll
even be able to score your own company, or any other company, individually on a 20 item checklist to determine how well it is
embracing big data analytic culture. 
1:45
After module four, you'll be able to identify what are currently corporate best practices in analyzing business metrics. You'll learn
some simple but powerful formulas to extract maximum value from those metrics. We'll look at a critically important horizontal
business area, web-based marketing, which is relevant to almost every company in the business world. 
2:08
And we'll explore a representative vertical market, financial services related to investing and portfolio management, so that you
can get familiar with how a group of metrics work together to define a market sector. 
2:22
The overall goal of our business analytic specialization is to prepare you for success if you choose to work as a business analyst
or business data analyst, or if you plan to embark on a career path that leads to becoming a data scientist, or simply wish to be
effective in your current role as data plays an ever more central role in business processes. 
2:45
Whatever your role, learning how to work productively as business analysts or business data analysts is highly useful in our
opinion. 
2:55
The world appears to be flooded with an ocean of data, much of it not so useful. After you've taken this course, you will be able
to find the treasure in that ocean to identify and utilize the key metrics that allow data driven companies to thrive. 

Glossary by Alphabet
0
0-level inventory (potential opportunity cost) - When a product is
"sold out" and none is available were a potential new customer to request it.
Week 1 - Profitability/Efficiency Metrics: Inventory Management
A
AB testing - Trying two versions of something to determine which is more
effective. Week 2 - Bricks-and-Mortar
Accenture -Week 2 - Strategic Business Consulting: Focus on Software/
IT Systems Integration
accounts receivable - Monies a company’s customers owe it for products
or services we have already delivered. Week 1 - Egger’s Roast Coffee
Case Study - Part 1 - Definitions
active investment - Investment in a fraction of all possible investments
in a universe, chosen because they are expected to generate a better return
than the benchmark index. Week 3 - Passive and Active Equity Managers
actual CPC - Because winning an AdWords auction only requires paying
$0.01 more than the next highest bidder, Actual CPC will be lower than
Max CPC - especially when an advertiser has a high "quality score." Week
3 - Web Marketing: AdWords Metrics
ad relevance - A metric developed by Google that is based on how closely
advertisement text relates to the viewers original search terms. Week 3 -
Web Marketing: AdWords Metrics
1
AdWords - Words purchased by auction to show sponsored links on Google
search results. Week 3 - Web Marketing
aged receivables - Tracking how long cash owed is overdue. Week 1 -
Egger’s Roast Coffee Case Study - Part 1 - Definitions
algorithms - A process or set of rules to be followed in calculations or other
problem-solving operations, especially by a computer. Week 1 - Revenue
Metrics - Amazon.com as a Leading Example of Use of Dynamic
Metrics - Part 2
annualized continuously compounded return - ln ( p1
p0 )
n
Where,
p1 = Price at time t1
p0 = Price at time t0
n = Number of years
Week 3 - Financial Services Metrics: Money Management & Investing
annualized discrete return - (p1
p0 )(1n
)≠1
Where,
p1 = Price at time t1
p0 = Price at time t0
n = Number of years
Week 3 - Financial Services Metrics: Money Management & Investing
annualized volatility of return - The standard deviation increases as
the square root of time; for example, if the standard deviation is 5.77% per
month, than it can be estimated that it is 5.77
Ò
(12)% = 20% per year. If
the the daily volatility is 1.26% per trading day, then we can estimate the
monthly volatility to be 1.26
Ò
(252)% = 20% per year. Week 3 - Equivalence
of Different Returns: The Sharpe Ratio
area under the ROC curve - A metric used to evaluate the effectiveness
of a binary classification model. Week 2 - The Business Analyst
2
B
balance sheet - The document that shows a company’s assets, liabilities,
and shareholder’s equity. Traditional financial accounting uses three systems:
profit and loss, cash flow, and the balance sheet, to capture all changes in
economic value. Week 1 - Distinguishing Traditional and Dynamic
Metrics
Bayesian Learning - Algorithms that interpret new information using
Bayes’ theorem in order in order to reduce the uncertainty of a probabilistic
outcome. Week 2 - The Data Scientist
benchmark return - The return of an index or other metric based on the
"universe" combining all possible investments a manager could make. Week
3 - Passive and Active Equity Managers
big data culture - Awareness that real-time data-processing is a positive
development that allows for better products and services to be delivered more
efficiently, and will soon be an essential part of almost all business transactions.
"Big Box" stores - Large retailers such as Walmart, Costco,
etc. Week 2 - Overview of the 5 Types of Companies
Week 2 - Roles & Companies
binary classification - Separating items into two exclusive groups. For
example, defining all credit card customers as "in default" or "not in default."
Week 2 - The Business Analyst
booking revenue (a completed sale) - When a commitment to buy
becomes contractually enforceable and is recorded under accounting rules.
Week 1 - Revenue Metrics - Traditional Enterprise Sales Funnel
bounce - When a visitor to a home page or landing page leaves the site
immediately, without clicking on any internal links. Week 3 - Web Marketing:
Segmentation
3
BRIC - Brazil, Russia, India, China. Week 3 - Passive and Active
Equity Managers
bricks-and-mortar - Traditional product and service companies with physical
stores and locations. Week 2 - Roles & Companies
browsing (to "view" a book in Amazon) - Clicking on the link referencing
a book to the web page with more detailed information about it.
Week 1 - Revenue Metrics - Amazon.com as a Leading Example of
Use of Dynamic Metrics - Part 2
burn rate - Actual net negative cash flow for a time interval, typically
a month, or projected net negative cash flow for the next month. Week 1 -
Egger’s Roast Coffee Case Study Part 2 - How a Profitable Growing
Company can go Bankrupt
business analyst - As defined here, someone who works with an external
or internal client to develop requirements, documents and reports. Week 2
- Roles & Companies
business data analyst - As defined here, someone who assembles information
stored in databases and translates it into business recommendations.
Week 2 - Roles & Companies
C
"call" or "draw" - When a fund manager makes a contractually obligatory
request for cash from fund investors. Week 3 - Venture Capital Investors
and Hedge Funds
capital expenditure - Synonym for capital investment. Week 1 - Egger’s
Roast Coffee Case Study - Part 1 - Definitions
capital investment - Money spent for capital assets such as manufacturing
4
equipment that, under standard accounting rules, is "depreciated", or allocated
across a large number of products or services over time. Week 1 -
Egger’s Roast Coffee Case Study - Part 1 - Definitions
cash flow - How cash "on hand" - meaning in the Company’s bank accounts
- has changed over a give time interval. Week 1 - Egger’s Roast Coffee
Case Study - Part 1 - Definitions
Cash on Delivery (COD) - Being required to pay in cash when items
are delivered. Week 1 - Egger’s Roast Coffee Case Study - Part 1 -
Definitions
churn rate - The portion of customers who leave within a year. Week
1 - Distinguishing Revenue, Profitability, and Risk Metrics
click-stream - The exact path a visitor follows through a website - what
they view, how much they spend on each page visited and etc. Week 1 -
Revenue Metrics - Amazon.com as a Leading Example of Use of
Dynamic Metrics - Part 1
click-through - When a web visitor clicks on an advertisement or sponsored
link and arrives at the "landing page" of the sponsor. Week 1 - Metrics
Help us Ask the Right Questions
click-stream - The exact path a visitor follows through a web site - what
do they view, where do they spend the most time, etc. Week 3 - Web
Marketing: Segmentation
cloud - Data storage with redundancy, and processing capacity, offered as
a service with access from anywhere. Week 2 - Hardware & Software
Companies
co-occurrence - When two events happen at the same time or within a
single defined interval, such as a web user session. Week 1 - Revenue
Metrics - Amazon.com as a Leading Example of Use of Dynamic
Metrics - Part 2
co-occurrence matrix - A way of representing mathematically all pos-
5
sible co-occurrence events. Week 1 - Revenue Metrics - Amazon.com
as a Leading Example of Use of Dynamic Metrics - Part 2
co-occurring sales - When someone buys two items during the same store
visit or web session. Week 1 - Revenue Metrics - Amazon.com as a
Leading Example of Use of Dynamic Metrics - Part 2
commitments - The contractual obligation to provide cash to a venture
or private equity fund when called upon to do so by the fund managers.
Week 3 - Venture Capital Investors and Hedge Funds
communications protocols - Week 2 - Hardware & Software Companies
complete wastage - When a product or service loses all value if not sold
by a certain date. Examples are hotel rooms and airline seats. Week 1 -
Profitability/Efficiency Metrics: Inventory Management
consulting with IT focus - Companies that sell business advice and as
part of their recommendations build or install custom information technology
systems for their clients. Week 2 - Roles & Companies
Content Delivery Network (CDN) - Companies that provide edge caching
for a fee. The best-known is Akamai. Week 1 - Distinguishing Traditional
and Dynamic Metrics
continuously compounded return - ln (p1
p0 )
Where,
p1 = Price at time t1
p0 = Price at time t0
Week 3 - Financial Services Metrics: Money Management & Investing
controlled-vocabulary index - An index with a relatively small number
of words. Week 1 - Revenue Metrics - Amazon.com as a Leading
Example of Use of Dynamic Metrics - Part 1
conversion - When a web visitor becomes a paying customer. Also used
6
to refer to a lesser step when a visitor registers and provides identity information.
Week 2 - Bricks-and-Mortar
conversion rate (to registration) - The percentage of not previously registered
visitors in a website who register and provide identity information -
typically an e-mail address, phone number, etc. Week 3 - Web Marketing:
Segmentation
conversion rate (to revenues) - The percentage of visitors not previously
customers who become customers. Week 3 - Web Marketing: Segmentation
correct decision-maker - Someone who has the budget and authority to
decide on purchases and sign purchase orders. Week 1 - Revenue Metrics
- Traditional Enterprise Sales Funnel
correlation with equity markets - What is the linear correlation of returns
between an investment and its appropriate stock market benchmark
over time. Week 3 - Venture Capital Investors and Hedge Funds
cost of goods sold - Costs that are allocated to each unit of production.
Week 1 - Egger’s Roast Coffee Case Study Part 2 - how a profitable
growing company can go bankrupt
cost of goods sold - P&L Item - The standard accounting calculation
of what it costs to manufacture a given unit of a product. Week 1 - Profitability/
Efficiency Metrics: Inventory Management
CPC - "Cost per Click-through" - for ads where the advertiser pays only
when a potential customer clicks through o the advertiser’s landing page.
Week 3 - Web Marketing: AdWords Metrics
Credit Bureau - A company that evaluates individuals and companies’
likelihood of default and ability to manage additional indebtedness. Week
2 - Traditional Strategic Business Consulting
customer loyalty - The fact that repeat customers are typically motivated
by more than only lowest price alone - they have positive associations with
7
the brand. Week 3 - Web Marketing
D
data scientist - As defined here, someone responsible for recommending and
designing new technologies including real-time or just-in-time data-processing,
in particular predictive analytics using machine learning. Week 2 - Roles
& Companies
days inventory - The average number of days between when a product
is completed (or arrives at a retail location) and when it is sold. Week 1 -
Profitability/Efficiency Metrics: Inventory Management
default - Failure to pay interest or principal on a debt. Week 1 - Distinguishing
Revenue, Profitability, and Risk Metrics
demographic categories - Common ways to classify people, such as by
income, age, employment, education, nation and region, etc. Week 3 -
Web Marketing
depreciation - Accounting methodology for reducing the value of a capital
investment over time and allocating that expenditure to products or
services produced. Week 1 - Egger’s Roast Coffee Case Study - Part
1 - Definitions
derivatives - Financial instruments such as puts and calls that derive their
value from the market price of some other asset, such as a stock, which is
known as the "underlying" asset. Week 3 - Venture Capital Investors
and Hedge Funds
device (when tracking origin of web site visitor) - A metric that considers
whether the visitor viewed the site from a PC or Mac, or a mobile
device. Week 3 - Web Marketing: Segmentation
digital businesses - Internet-based companies, typically with minimal phys-
8
ical stores and locations. Week 2 - Roles & Companies
direct - A metric for website visitors meaning the visitor typed the Company
URL directly into their browser themselves. Week 3 - Web Marketing:
Segmentation
discrete return - p1
p0 ≠ 1
Where,
p1 = Price at time t1
p0 = Price at time t0
Week 3 - Financial Services Metrics: Money Management & Investing
duration - The time interval that a visitor spends on some part of a company’s
site. Week 3 - Web Marketing: Segmentation
dynamic metrics - Defined here as Business metrics that show significant
change over time intervals of a month or less, and can be impacted directly
by changes in business processes. Week 1 - Distinguishing Traditional
and Dynamic Metrics
E
early adopter - A group of customers who are motivated to try new products
or services before they are established as mainstream. Week 2 - Strategic
Business Consulting: Focus on Software/IT Systems Integration
economies of scale - Rising marginal profits on higher sales and production
volumes - due to fixed costs and capital investment being high compared to
variable costs. Week 1 - Egger’s Roast Coffee Case Study Part 2 -
how a profitable growing company can go bankrupt
edge-caching - Paying third parties (Content Delivery Networks) to locate
copies of one’s web content on servers physically nearer to customers
and other visitors. Week 1 - Distinguishing Traditional and Dynamic
9
Metrics
efficiency - Delivering products or services of consistent quality while minimizing
the cost of doing so. Week 1 - Distinguishing Revenue, Profitability,
and Risk Metrics
efficient market - A market, such as the U.S. public equities market, where
active investors rarely outperform a passive index of the market assets. The
efficient markets theory states that this failure is because the information
that moves prices is available to everyone and stocks already reflect this information
in their market prices - they are priced "efficiently." Week 3 -
Passive and Active Equity Managers
enterprise - Defined here as any sale that requires involvement by fulltime
sales people. Enterprise sales must be large to be viable. Week 1 -
Revenue Metrics - Traditional Enterprise Sales Funnel
excess return (over benchmark) - The manager’s return minus the return
of their designated benchmark, usually an index of the stocks from which they
chose - their "universe."Week 3 - Passive and Active Equity Managers
excess return (over risk-free rate) - An investment return minus the
return offered by stable governments for bonds in their own currency - this
return is considered to have no default risk and so have zero volatility of
return. Week 3 - Passive and Active Equity Managers
Exchange Traded Fund (ETF) - A fund that holds all the stocks in
an index or market, passively, and simply tries to maintain the ratios used
in the index. Week 3 - Passive and Active Equity Managers
expected click-through rate - When used to generate a "Quality Score"
- Google’s estimate, based on historical data or mathematical models, of
the percentage of viewers who will click-through a particular sponsored link.
Week 3 - Web Marketing: AdWords Metrics
expense ratio - The costs of running an investment fund each year, including
fees paid to the fund’s managers, divided by the total value of assets
under management. Week 3 - Passive and Active Equity Managers
10
expiration - "sell-by" dates - Legal requirements that a product can only
be sold within a certain time interval. Week 1 - Profitability/Efficiency
Metrics: Inventory Management
expression of interest - When a decision-maker informs you that they want
to engage with you about the possibility of buying your product. Week 1 -
Revenue Metrics - Traditional Enterprise Sales Funnel
F
factoring (accounts receivable financing) - A short-term loan secured
by accounts receivable. Week 1 - Egger’s Roast Coffee Case Study
Part 2 - how a profitable growing company can go bankrupt
fixed costs - Costs that do not increase or decrease with small changes in
production. An example are salaries for current full-time employees. Week
1 - Distinguishing Revenue, Profitability, and Risk Metrics
fixed costs - Costs that do not increase or decrease with small changes in
production. An example are salaries for current full-time employees. Week
1 - Egger’s Roast Coffee Case Study - Part 1 - Definitions
floor rate - The minimal price of a room, based on accounting breakeven -
its share of fixed costs plus variable cost. Week 1 - Profitability Metrics
Examples: Hotel Room Occupancy
frequently bought together - An Amazon metric for items with a high
likelihood of co-occurring sales. Week 1 - Revenue Metrics - Amazon.
com as a Leading Example of Use of Dynamic Metrics - Part 2
fund life - The pre-agreed number of years that a temporary investment
vehicle, such as a venture fund, will be in operation. At the end of the "fund
life" any remaining liquid assets, such as shares of stock, are distributed to
investors. Week 3 - Venture Capital Investors and Hedge Funds
11
G
gatekeeper - People whose job it is to stand between you and the person
who will ultimately make a decision. Week 1 - Revenue Metrics - Traditional
Enterprise Sales Funnel
general and administrative (G&A) expenses - Overhead not directly
tied to individual products or services - for example, rent, utilities, insurance,
required business licenses, salaries of central office employees. Week
1 - Egger’s Roast Coffee Case Study - Part 1 - Definitions
geometric mean return - For a series of various returns r1, r2, ..., rn, the
geometric mean return is defined below: n
Ò
(1 + r1)(1 + r2)...(1 + rn) ≠ 1
ri = rate of returni
n = number of periods Week 3 - Financial Services Metrics: Money
Management & Investing
Google Ad Rank - Google’s system for rating a company’s desirability as
bidder on a sponsored link. It combines the bid expected click-through rate,
ad quality and landing page experience. Week 2 - Bricks-and-Mortar
gross profit - Usually refers to the difference between the sales price of
a product and its marginal cost. Does not include indirect costs that should
be allocated to the product to determine net profits. Week 1 - Risk Metrics:
Leverage and Reputational Risk
GSPC - The stock ticker symbol for the S&P 500 index. Week 3 - Passive
and Active Equity Managers
12
H
hardware & software - Companies that sell information technology. Week
2 - Roles & Companies
home page - The main web page of a company, linked to its primary URL
address. Week 3 - Web Marketing
horizontal metrics - Business metrics that are useful for many types of
industry. Week 2 - The Business Analyst
hosting services - Companies that are paid to offer web sites or applications
for public, or private, corporate access. Week 2 - Digital Companies
I
index (equal weighted) - An index in which the contribution to the overall
index return has equal weights among the stocks. For example, EWI is an
index tracking the same stocks as in the S&P 500 but with equal weights.
Week 3 - Passive and Active Equity Managers
index (market-capitalization weighted) - An index in which the contribution
to the overall index return is weighted according to the market
capitalization of each company with stock in the index. An example of a
market-capitalization weighted index is the S&P 500. Week 3 - Passive
and Active Equity Managers
index fund - A fund, usually but not always structured as an Exchange
Traded Fund, that is intended to mimic as closely as possible the performance
of an index. Week 3 - Passive and Active Equity Managers
information ratio - The ratio of annualized excess returns over a manager’s
benchmark, divided by the standard deviation of the time series of
excess returns. Week 3 - Passive and Active Equity Managers
13
information theory - Information theory is a branch of applied mathematics,
electrical engineering, and computer science involving the quantification
of information. Week 1 - Revenue Metrics - Amazon.com as a Leading
Example of Use of Dynamic Metrics - Part 2
insolvent - When a company does not have the cash to meet its immediate
obligations to creditors. Week 1 - Risk Metrics: Leverage and
Reputational Risk
internal rate of return (IRR) - Rate on which the present values for
the cash inflows equalize to the present value of the cash outflow(s) as defined
below:
Payment 1
(1+r)t1≠1 + Payment 2
(1+r)t2≠t ...Payment n
(1+r)tn≠t = Payment out
(1+r)tout≠t Week 3 - Financial Services
Metrics: Money Management & Investing
inventory - Finished goods on hand and not yet sold. Week 1 - Distinguishing
Revenue, Profitability, and Risk Metrics
inventory management - The optimization process of simultaneously minimizing
days inventory while avoiding the opportunity cost of having zero inventory
when more product could be sold. Week 1 - Profitability/Efficiency
Metrics: Inventory Management
inventory on hand - (value as balance sheet item) - The value of
inventory on hand at a given moment in time (usually the end of the fiscal or
calendar year). Week 1 - Profitability/Efficiency Metrics: Inventory
Management
inventory turnaround - same as inventory turnover - Synonym for
inventory turnover. Week 1 - Profitability/Efficiency Metrics: Inventory
Management
inventory turnover = 365/days’ inventory - The inverse of days’ inventory
- simply calculates how many times in a year a given product on
average is delivered and sold to a retail location, based on days’ inventory.
Week 1 - Profitability/Efficiency Metrics: Inventory Management
14
IP address - The unique numerical ID for devices connected to the internet.
Week 2 - Bricks-and-Mortar
J
just-in-time data - When all relevant historical information about a customer,
including prior sales, support, and complaint contacts, is available at
the time a customer interacts with a company employee, whether in sales,
product support, etc. Week 2 - The Data Scientist
K
key words - On Google, the words bid in AdWords auctions. Week 3 -
Web Marketing: AdWords Metrics
L
landing page - The web page URL, not necessarily a home page, that a
sponsored link or marketing campaign link points to. Week 3 - Web Marketing
landing page experience - A metric developed by Google that is based
on how focused, factual, current, and informative the landing page text is,
relative to key word and sponsored link text. Week 3 - Web Marketing:
AdWords Metrics
latency - The time delay in a computerized response caused by processing
requirements or distance a signal must travel. Week 1 - Metrics Help
15
us Ask the Right Questions
layers - Distinct functional parts of an information technology system. For
example applications and operating systems can be thought of as two layers
of software. This course uses a simple three-layer model for the IT "stack" -
hardware and communications, enterprise software systems, business desktop
software. Week 2 - The Senior Software Engineer
lead - A person whose name and contact information you know, whom you
believe may be interested in buying something from you. Week 1 - Revenue
Metrics - Traditional Enterprise Sales Funnel
leverage - Purchasing an asset, in particular an investment asset, partly
or completely with borrowed money. Week 1 - Risk Metrics: Leverage
and Reputational Risk
leverage - Using borrowed money to buy an asset. Week 3 - Equivalence
of Different Returns: The Sharpe Ratio
linearity of log wealth - Describes how linear is the return when evaluated
on a log wealth scale. A continuously compounded rate of return that
never varies (volatility of 0) will have a linear correlation of 1. Week 3 -
Venture Capital Investors and Hedge Funds
local knowledge - Ability to identify the most important and relevant business
metrics in a particular market sector or niche. Week 2 - The Business
Analyst
logistics - Planning for all physical stages of a commercial enterprise from
delivery of raw materials to a factory through delivery of products to customers.
Week 1 - Distinguishing Revenue, Profitability, and Risk
Metrics
long-only" funds - Funds, such as U.S. equity mutual funds, that are forbidden
by rule from investing in options, or in selling shares "short" in order
to make money if their price goes down. Week 3 - Passive and Active
Equity Managers
16
LTV - various measures - Life Time Value - a metric intended to estimate
the discounted present value of all future revenues from a new customer. It is
calculated a number of different ways depending on context. What method
to use is a matter of individual preference and judgment. Week 3 - Web
Marketing: Segmentation
M
machine learning - The process by which computers improve their models
when they take in new information. Week 2 - Overview of the 5 Types
of Companies
manager skill - Manager skill is usually defined as the ability to consistently
generate an excess return over the manager’s benchmark, without excessive
additional volatility - the risk-adjusted return should be better than
the benchmark index. Week 3 - Equivalence of Different Returns: The
Sharpe Ratio
managerial accounting - Accounting used to determine the profitability
of individual products and services and make management decisions. Week
1 - Distinguishing Traditional and Dynamic Metrics
marginal profit - Profit per one additional unit of production. Week 1 -
Egger’s Roast Coffee Case Study Part 2 - how a profitable growing
company can go bankrupt
market differentiation - The ways in which a product or service is described
as being different than competitive offerings. Week 3 - Web Marketing
market-capitalization - Market-capitalization of a company equals the
most recent market price per share, multiplied by the number of shares of
stock of that company not held by the company itself (shares "outstanding").
Week 3 - Passive and Active Equity Managers
17
marketing - The systematic process of creating and increasing positive
awareness about a brand, product, or service with a target audience. Week
3 - Web Marketing
max CPC - The maximum cost per click-through that a Google AdWords
bidder is theoretically willing to pay. Week 3 - Web Marketing: Ad-
Words Metrics
maximum drawdown from high water mark - A peak-to-valley measure:
If you entered in the investment at the unluckiest possible moment,
what would your maximum % losses be? Sometimes it is referred as maximum
draw down from water mark. Week 3 - Venture Capital Investors
and Hedge Funds
Membership programs - Programs where companies offer additional benefits
to customers who agree to register and provide identifying information,
or to pay an annual fee. Week 2 - Bricks-and-Mortar
metrics - Numbers with significant business relevance. Metrics guide the
process of inquiry - What decision should we make? What processes should
we change to increase revenues, improve efficiency, or minimize risk? Week
1 - Metrics Help us Ask the Right Questions
models - Simplified mathematical representations of complex real-world situations.
Week 2 - The Business Analyst
money manager - Someone who seeks to generate profits (returns) on someone
else’s money, either through dividends, interest, or through buying assets
that are expected to increase in price. Week 3 - Financial Services Metrics:
Money Management & Investing
N
natural-language processing - Algorithms for computer study of written
texts or spoken voice. Week 2 - The Senior Software Engineer
18
negative float - Needing working capital to make and deliver products or
services for which one is paid cash later. Week 1 - Egger’s Roast Coffee
Case Study - Part 1 - Definitions
net 60 - Paying cash for products or services 60 days after they are received.
"Net 30" and "net 90" are also common terms. Week 1 - Egger’s
Roast Coffee Case Study - Part 1 - Definitions
net cash flow - The change in actual cash on hand held by a business
over a particular time interval. Week 1 - Distinguishing Traditional
and Dynamic Metrics
net earnings - Synonym for profits. Week 1 - Egger’s Roast Coffee
Case Study - Part 1 - Definitions
"noisy" vs "twitchy" metrics - Informal terms to contrast aggregate metric
- which many factors impact - and highly focused metrics that can easily
be impacted by changing a single factor. Week 1 - Distinguishing Traditional
and Dynamic Metrics
O
obsolescence - When a product is no longer in demand due to newer, better,
or equivalent but less expensive, alternatives being available. Week 1 -
Profitability/Efficiency Metrics: Inventory Management
occupancy rates - The percentage of rooms in a hotel that are booked
by paying customers on a given night. Week 1 - Profitability Metrics
Examples: Hotel Room Occupancy
Online Travel Agencies (OTAs) - Companies that acts as intermediaries
and sell airline tickets or hotel rooms from multiple suppliers. Week 1
- Profitability Metrics Examples: Hotel Room Occupancy
19
opaque inventory market - A market, such as the market for hotel rooms,
where opaque pricing is offered. Week 1 - Profitability Metrics Examples:
Hotel Room Occupancy
opaque pricing - The practice of offering hotel rooms for (non-refundable)
sale in a given city without disclosing until after the sale what hotel is meant.
Week 1 - Profitability Metrics Examples: Hotel Room Occupancy
operational metrics - Metrics related to production, and in particular,
to production efficiency. Week 1 - Distinguishing Revenue, Profitability,
and Risk Metrics
operationalize - What specific steps need to be taken, by whom, in what
order, in order to solve the problem. Week 2 - The Business Analyst
options - Options give the contractual right, but not the obligation, for
a certain fixed period of time, to buy a stock at a pre-determined price (a
"call") or sell a stock at a pre-determined price (a "put"). Week 3 - Venture
Capital Investors and Hedge Funds
organic link - Search results that are not paid for. Week 3 - Web Marketing:
Segmentation
P
page-load time - How much time is required for a web page to be complete
and usable from the point of view of a visitor. Week 1 - Distinguishing
Traditional and Dynamic Metrics
passive investment - Investment in a basket of all the stocks in a market,
either in equal-weighted portions, or based on their market-capitalization.
Week 3 - Passive and Active Equity Managers
Populating (databases) - Importing data into a database structure for
later retrieval and analysis. Week 2 - The Data Scientist
20
positive float - Holding customer cash for a product or service to be delivered
later. The classic example is insurance. Week 1 - Egger’s Roast
Coffee Case Study - Part 1 - Definitions
pre-processed data - Data to which an algorithmic process has already
been applied so that the result can be retrieval rapidly. An example is
Google’s calculation of "pagerank" for all known web sites before any individual
text search is run. Week 1 - Revenue Metrics - Amazon.com
as a Leading Example of Use of Dynamic Metrics - Part 1
predictive analytics - Week 2 - The Data Scientist
preference engine - A computer system that makes customized recommendations
to users based on their prior purchase history, demographics, or
expressed preferences. Week 2 - The Data Scientist
Price per click-through (CPC) - Cost per Click-through - for ads where
the advertiser pays only when a potential customer clicks through to the
advertiser’s landing page. Week 2 - Bricks-and-Mortar
profit - The positive difference between revenue and expenses, using standard
accounting methods for capital expenditures. Week 1 - Egger’s Roast
Coffee Case Study - Part 1 - Definitions
profitability - Net Income, or gross sales minus all accounted expenses
during a certain time period. Week 1 - Distinguishing Revenue, Profitability,
and Risk Metrics
profits and losses - Accounting measure of whether a company is generating
net economic value, after including capital investment and other sunk
costs. Week 1 - Distinguishing Traditional and Dynamic Metrics
promotional rate - A rate between the rack rate and floor rate, typically
offered to repeat customers on a limited-time basis. Week 1 - Profitability
Metrics Examples: Hotel Room Occupancy
21
Q
qualified lead - A lead that you have determined to have the budget and
the decision-making authority to purchase your product or service. Week 1
- Revenue Metrics - Traditional Enterprise Sales Funnel
quality score - A metric developed by Google that combines expected clickthrough
rates, "ad relevance" and "landing page experience."Week 3 - Web
Marketing: Adword Metrics
query (query terms) - What someone types into a search engine when
looking for information. The exact characters they type are known as a
"string." Week 1 - Revenue Metrics - Amazon.com as a Leading Example
of Use of Dynamic Metrics - Part 1
R
rack price - The official, list price of a hotel room. Week 1 - Profitability
Metrics Examples: Hotel Room Occupancy
real-time - Computer systems that provide a customized response immediately
(typically in less than 1 second). Week 1 - Metrics Help us Ask
the Right Questions
real-time data - Data that is provided with an almost immediate response
(typically in less than 1 second). Week 2 - The Data Scientist
recurring-revenue customers - Customers who buy again repeatedly after
a first sale. Week 1 - Distinguishing Revenue, Profitability, and
Risk Metrics
reputational risk - Events that can damage a company’s brand, goodwill,
or future attractiveness to customers and potential customers. Week
1 - Risk Metrics: Leverage and Reputational Risk
22
retrieval - The process of recovering relevant information from an index
or database, in response to a query. Week 2 - The Senior Software Engineer
return on equity - The investment return on an investor’s cash. For example,
an investment that returns 5% would have a 5% "return on equity"
if it were purchased for cash. The same investment, if purchased 50% with
investor’s cash and 50% with money borrowed at 1% interest, would have a
return on equity of 9%. Week 1 - Risk Metrics: Leverage and Reputational
Risk
retweet - A tweet that originates with one author and is reposted by another
- the format is RT@username. Retweets indicate that the retweeting
party (a holder of a Twitter account) thinks your tweet will be of interest
to his or her audience as well as your own. Week 3 - Web Marketing:
Segmentation
revenue - Gross income, the dollar amount of sales booked during a certain
time period. Week 1 - Distinguishing Revenue, Profitability,
and Risk Metrics
revenues as an "aggregate number" - Total revenues are an "aggregate"
metric because they reflect sales across all products and services, and combine
new sales and long-term contracts, and involve an element of random
variation. For this reason even big process changes for the better or worse
may be hard to detect in total revenues. Week 1 - Distinguishing Traditional
and Dynamic Metrics
risk - The chance of a major negative event such as a product recall, default
on a debt, insolvency, etc. In finance, "risk" is often also used to refer
to volatility (standard deviation) of returns from an investment. Week 1 -
Distinguishing Revenue, Profitability, and Risk Metrics
risk-free rate of return - An investment return minus the return offered
by stable governments for bonds in their own currency - this return is considered
to have no default risk and so have zero volatility of return. Week
3 - Equivalence of Different Returns: The Sharpe Ratio
23
root mean square - For a set of n numbers or values of a discrete distribution
xi, ..., xn, the root-mean-square (abbreviated "RMS" and sometimes
called the quadratic mean), is the square root of mean of the values x2i
,
namely:
x(RMS) =
Ò
(x21
+ x22
+ ... + x2
n)/n
=
Òqn
i=1(x2i
)/n
The RMS difference between each value in a set x1, x1, ..., xn and the mean of
all values N equals the standard deviation for the set. Week 3 - Financial
Services Metrics: Money Management & Investing
routers - Hardware for communicating using Internet protocols. Week 2 -
Hardware & Software Companies
runway (for a company) - Net cash on hand divided by current monthly
burn rate gives the number of months a company can survive under present
conditions. Week 1 - Egger’s Roast Coffee Case Study Part 2 - how
a profitable growing company can go bankrupt
S
sales "funnel" - The metrics used to track the steps in the process of converting
individuals or Companies with a potential interest in one’s product
or service into paying customers. Week 1 - Distinguishing Revenue,
Profitability, and Risk Metrics
sales & marketing - The process of creating positive awareness about a
company’s products or services in a target audience, and converting members
of that audience into paying customers. Week 1 - Distinguishing
Revenue, Profitability, and Risk Metrics
secured creditors - Entities, such as banks, with the contractual right
to seize certain assets ("secured" assets) if they are not paid on time. Week
1 - Distinguishing Revenue, Profitability, and Risk Metrics
24
segmentation - The process of classifying one’s current customers or target
customers by recognizable, traceable attributes such as how much on average
they purchase in a year. Week 3 - Web Marketing: Segmentation
semiconductor chip - The technology that allows computers to be very
small and inexpensive. Week 2 - Hardware & Software Companies
sentiment analysis - The algorithmic study of large amounts of web-based
text to evaluate public opinion - and any changes in public opinion - about
a product or company. Week 2 - The Data Scientist
shareholder’s equity - Also known as "stockholder’s equity" - the accounting
value of a company’s assets minus its liabilities. Week 1 - Distinguishing
Traditional and Dynamic Metrics
sharpe ratio - the ratio of a manager’s excess return over the risk-free
rate (the manager return minus the risk-free return) divided by the volatility
of the manager’s return. Week 3 - Equivalence of Different Returns:
The Sharpe Ratio
short, also known as "short selling" or "shorting" - Practice of selling
securities or other financial instruments that are not currently owned, but
are merely borrowed, subsequently repurchasing them and returning them to
their owners. Week 3 - Venture Capital Investors and Hedge Funds
SKUs - Abbreviation for "Stock Keeping Unit" - every item sold has a unique
ID in the form of an SKU. Week 1 - Profitability/Efficiency Metrics:
Inventory Management
social link (when tracking origin of web site visitor) - A URL to
a company landing page that is embedded in a Facebook post, tweet, Instagram,
or other social media. Week 3 - Web Marketing: Segmentation
social signal - The fact that search engine rankings are influenced by a
company’s activity and success on social media, including Facebook likes,
retweets, etc. The stronger the "social signal", the higher the ranking. Week
3 - Web Marketing: Segmentation
25
soft-circle sale - A verbal commitment to buy that is not yet an enforceable
contract. Week 1 - Revenue Metrics - Traditional Enterprise Sales
Funnel
software engineer - Someone responsible for the application of engineering
to the design, development, and maintenance of software. Week 2 - Roles
& Companies
spoilage - The portion of inventory of a perishable product that becomes
unsaleable because it is held too long. Week 1 - Distinguishing Revenue,
Profitability, and Risk Metrics
sponsored link - An advertisement shown along with organic search results.
Week 3 - Web Marketing: Segmentation
SPY - The stock ticker symbol for the State Street S&P 500 Exchange
Traded Fund. Week 3 - Passive and Active Equity Managers
SQL - Structured Query Language. A standard for communicating with
databases. Week 2 - Distinguishing the Business Data Analyst and
Business Analyst Roles
stack - The combined "layers" of an information technology system. Week
2 - Hardware & Software Companies
standard deviation - The standard deviation, commonly represented by
the greek letter sigma, ‡, is a measure that is used to quantify the amount of
variation or dispersion of a set of data values. For a set of N discrete values,
the standard deviation is given by:
‡=
Ò
1
N
qN
i=1(xi ≠ μ)2
Where,
μ = Mean of the set Week 3 - Financial Services Metrics: Money
Management & Investing
straight line depreciation - Depreciation of the same amount over each
of several time periods: for example, 20% reduction in value over each of 5
years. Week 1 - Egger’s Roast Coffee Case Study - Part 1 - Defini-
26
tions
subject index - A pre-processed index consisting of defined topic areas
that permits documents to be located based on their subject matter. Week
1 - Revenue Metrics - Amazon.com as a Leading Example of Use
of Dynamic Metrics - Part 1
subtopics - A lower, more specific level in a hierarchical organization of
subject matter. Week 1 - Revenue Metrics - Amazon.com as a Leading
Example of Use of Dynamic Metrics - Part 1
sunk cost - Money already spent - such as the cost of an empty hotel
room even absent the variable costs of occupancy. Week 1 - Profitability
Metrics Examples: Hotel Room Occupancy
switching costs - The costs in time, money and inconvenience in leaving
one’s old supplier of a product or service and moving to a new one. Week
3 - Web Marketing
T
target demographic - A group with common characteristics, such as nationality,
age range, or participating in a Facebook interest group, that permits
a focused marketing effort. Week 3 - Web Marketing
terabyte - 1,000 billion, or 1 trillion, bytes of information. A byte is 8
bits - and a bit is simply a binary indicator, 0 or 1. Week 2 - Hardware
& Software Companies
text index - A pre-processed index used to permit a list of documents on
which all contain a common word or phrase to be retrieved rapidly. Week
1 - Revenue Metrics - Amazon.com as a Leading Example of Use
of Dynamic Metrics - Part 1
thesaurus - A specialized dictionary of synonyms or near synonyms. Week
27
1 - Revenue Metrics - Amazon.com as a Leading Example of Use
of Dynamic Metrics - Part 1
third-party web site - Any web site that is not part of a company or
its paid advertising network - blogs, review sites, news sites, etc. Week 3 -
Web Marketing: Segmentation
to book sales - To record sales at the time when, under accounting rules, a
mutual contractual obligation is created. Week 1 - Egger’s Roast Coffee
Case Study - Part 1 - Definitions
tracking error - The standard deviation of excess returns (difference in
returns) between a fund manager’s performance and their designated benchmark.
Week 3 - Passive and Active Equity Managers
traditional metrics - As defined here, Business metrics related to financial
and managerial accounting, in particular those used for required quarterly
or annual financial reporting. In contrast to dynamic metrics, traditional
metrics rarely, if ever, show significant changes within the time interval of
a single month, and as aggregated measures, are difficult to impact with
isolated business changes. Week 1 - Distinguishing Traditional and
Dynamic Metrics
traditional strategic consulting - Companies that sell business advice.
Week 2 - Roles & Companies
tranches - One of a series of payments spread out over time. Week 3 -
Venture Capital Investors and Hedge Funds
tweet - A 140-character message in response to Twitter’s "What are you
doing?" Week 3 - Web Marketing: Segmentation
28
U
universe (for a fund manager) - The pool of permissible assets from which
an active manager chooses when trying to generate an excess risk-adjusted
return. Week 3 - Passive and Active Equity Managers
unrecoverable (debt) - Money loaned out that will never be repaid. Week
1 - Risk Metrics: Leverage and Reputational Risk
unstructured data - Week 2 - The Senior Software Engineer
useful life - The time interval over which a capital investment is allocated
- in theory, it corresponds to the time required for a piece of equipment to
wear out and need to be replaced. Week 1 - Egger’s Roast Coffee Case
Study - Part 1 - Definitions
user experience - The subjective quality of a visitor’s interactions with
a web site - is the web site clear, informative, easy to navigate, or confusing,
unhelpful, and difficult to navigate? Week 1 - Revenue Metrics - Amazon.
com as a Leading Example of Use of Dynamic Metrics - Part 1
user experience (UX) - Week 2 - The Data Scientist
user session - One visitor’s single interaction with a web site from beginning
to end. Week 1 - Revenue Metrics - Amazon.com as a Leading
Example of Use of Dynamic Metrics - Part 1
V
variable costs - Costs that go up when production increases and go down
when production decreases. Week 1 - Distinguishing Revenue, Profitability,
and Risk Metrics
variable pricing - The practice of charging more or less for the same good
or service depending upon current supply and demand. Week 1 - Prof-
29
itability Metrics Examples: Hotel Room Occupancy
vertical metrics - Business metrics that are specific to a particular industry
or market sector. Week 2 - The Business Analyst
volatility of returns - The standard deviation of a time series of investment
returns. Week 1 - Distinguishing Revenue, Profitability, and Risk
Metrics
W
wastage - The portion of inventory that becomes unsaleable because it is
damaged or lost before sale. Week 1 - Distinguishing Revenue, Profitability,
and Risk Metrics
whales - Slang for repeat customers individuals who tend to gamble large
amounts at casinos. Week 2 - Bricks-and-Mortar
working capital (credit line) - Money provided by a bank or a factor
- or made available if needed - to cover negative float. Week 1 - Egger’s
Roast Coffee Case Study Part 2 - how a profitable growing company
can go bankrupt
Y
years to breakeven - How many years, at average return, it would take
to get back to breakeven from the maximum draw-down. Calculated as
|maxdraw ≠ downpeak ≠ to ≠ valley|/annualizedrateofreturn. Week 3 -
Venture Capital Investors and Hedge Funds
30

Glossary by Segment
Profitability
0-level inventory (potential opportunity cost) - When a product is
"sold out" and none is available were a potential new customer to request it.
annualized continuously compounded return - ln ( p1
p0 )
n
Where,
p1 = Price at time t1
p0 = Price at time t0
n = Number of years
annualized discrete return - (p1
p0 )(1n
)≠1
Where,
p1 = Price at time t1
p0 = Price at time t0
n = Number of years
capital expenditure - Synonym for capital investment.
complete wastage - When a product or service loses all value if not sold
by a certain date. Examples are hotel rooms and airline seats.
continuously compounded return - ln (p1
p0 )
Where,
p1 = Price at time t1
p0 = Price at time t0
cost of goods sold - Costs that are allocated to each unit of production.
cost of goods sold - P&L Item - The standard accounting calculation
of what it costs to manufacture a given unit of a product.
1
customer loyalty - The fact that repeat customers are typically motivated
by more than only lowest price alone - they have positive associations with
the brand.
days inventory - The average number of days between when a product
is completed (or arrives at a retail location) and when it is sold.
depreciation - Accounting methodology for reducing the value of a capital
investment over time and allocating that expenditure to products or services
produced.
discrete return - p1
p0 ≠ 1
Where,
p1 = Price at time t1
p0 = Price at time t0
efficiency - Delivering products or services of consistent quality while minimizing
the cost of doing so.
excess return (over benchmark) - The manager’s return minus the return
of their designated benchmark, usually an index of the stocks from which
they chose - their "universe."
excess return (over risk-free rate) - An investment return minus the
return offered by stable governments for bonds in their own currency - this
return is considered to have no default risk and so have zero volatility of
return.
expiration - "sell-by" dates - Legal requirements that a product can only
be sold within a certain time interval.
fixed costs - Costs that do not increase or decrease with small changes
in production. An example are salaries for current full-time employees.
general and administrative (G&A) expenses - Overhead not directly
tied to individual products or services - for example, rent, utilities, insurance,
2
required business licenses, salaries of central office employees.
geometric mean return - For a series of various returns r1, r2, ..., rn, the
geometric mean return is defined below: n
Ò
(1 + r1)(1 + r2)...(1 + rn) ≠ 1
ri = rate of returni
n = number of periods
gross profit - Usually refers to the difference between the sales price of
a product and its marginal cost. Does not include indirect costs that should
be allocated to the product to determine net profits.
internal rate of return (IRR) - Rate on which the present values for
the cash inflows equalize to the present value of the cash outflow(s) as defined
below:
Payment 1
(1+r)t1≠1 + Payment 2
(1+r)t2≠t ...Payment n
(1+r)tn≠t = Payment out
(1+r)tout≠t
inventory - Finished goods on hand and not yet sold.
inventory management - The optimization process of simultaneously minimizing
days inventory while avoiding the opportunity cost of having zero
inventory when more product could be sold.
inventory on hand - (value as balance sheet item) - The value of
inventory on hand at a given moment in time (usually the end of the fiscal
or calendar year).
inventory turnaround - same as inventory turnover - Synonym for
inventory turnover.
inventory turnover = 365/days’ inventory - The inverse of days’ inventory
- simply calculates how many times in a year a given product on
average is delivered and sold to a retail location, based on days’ inventory.
leverage - Using borrowed money to buy an asset.
3
logistics - Planning for all physical stages of a commercial enterprise from
delivery of raw materials to a factory through delivery of products to customers.
"long-only" funds - Funds, such as U.S. equity mutual funds, that are
forbidden by rule from investing in options, or in selling shares "short" in
order to make money if their price goes down.
marginal profit - Profit per one additional unit of production.
market differentiation - The ways in which a product or service is described
as being different than competitive offerings.
net earnings - Synonym for profits.
obsolescence - When a product is no longer in demand due to newer, better,
or equivalent but less expensive, alternatives being available.
occupancy rates - The percentage of rooms in a hotel that are booked
by paying customers on a given night.
operational metrics - Metrics related to production, and in particular,
to production efficiency.
profit - The positive difference between revenue and expenses, using standard
accounting methods for capital expenditures.
profitability - Net Income, or gross sales minus all accounted expenses
during a certain time period.
recurring-revenue customers - Customers who buy again repeatedly after
a first sale.
return on equity - The investment return on an investor’s cash. For example,
an investment that returns 5% would have a 5% "return on equity"
if it were purchased for cash. The same investment, if purchased 50% with
investor’s cash and 50% with money borrowed at 1% interest, would have a
return on equity of 9%.
4
spoilage - The portion of inventory of a perishable product that becomes
unsaleable because it is held too long.
straight line depreciation - Depreciation of the same amount over each of
several time periods: for example, 20% reduction in value over each of 5 years.
sunk cost - Money already spent - such as the cost of an empty hotel room
even absent the variable costs of occupancy.
tracking error - The standard deviation of excess returns (difference in
returns) between a fund manager’s performance and their designated benchmark.
user experience - The subjective quality of a visitor’s interactions with
a web site - is the web site clear, informative, easy to navigate, or confusing,
unhelpful, and difficult to navigate?
variable costs - Costs that go up when production increases and go down
when production decreases.
wastage - The portion of inventory that becomes unsaleable because it is
damaged or lost before sale.
efficient market - A market, such as the U.S. public equities market, where
active investors rarely outperform a passive index of the market assets. The
efficient markets theory states that this failure is because the information
that moves prices is available to everyone and stocks already reflect this information
in their market prices - they are priced "efficiently."
Revenue
actual CPC - Because winning an AdWords auction only requires paying
$0.01 more than the next highest bidder, Actual CPC will be lower than Max
CPC - especially when an advertiser has a high "quality score."
5
ad relevance - A metric developed by Google that is based on how closely
advertisement text relates to the viewers original search terms.
booking revenue (a completed sale) - When a commitment to buy becomes
contractually enforceable and is recorded under accounting rules.
browsing (to "view" a book in Amazon) - Clicking on the link referencing
a book to the web page with more detailed information about it.
cash flow - How cash "on hand" - meaning in the Company’s bank accounts
- has changed over a give time interval.
click-stream - The exact path a visitor follows through a website - what
they view, how much they spend on each page visited and etc.
click-through - When a web visitor clicks on an advertisement or sponsored
link and arrives at the "landing page" of the sponsor.
click-stream - The exact path a visitor follows through a web site - what
do they view, where do they spend the most time, etc.
co-occurring sales - When someone buys two items during the same store
visit or web session.
conversion - When a web visitor becomes a paying customer. Also used
to refer to a lesser step when a visitor registers and provides identity information.
conversion rate (to revenues) - The percentage of visitors not previously
customers who become customers.
correct decision-maker - Someone who has the budget and authority to
decide on purchases and sign purchase orders.
duration - The time interval that a visitor spends on some part of a company’s
site.
6
expected click-through rate - When used to generate a "Quality Score" -
Google’s estimate, based on historical data or mathematical models, of the
percentage of viewers who will click-through a particular sponsored link.
expression of interest - When a decision-maker informs you that they
want to engage with you about the possibility of buying your product.
floor rate - The minimal price of a room, based on accounting breakeven -
its share of fixed costs plus variable cost.
frequently bought together - An Amazon metric for items with a high
likelihood of co-occurring sales.
gatekeeper - People whose job it is to stand between you and the person
who will ultimately make a decision.
Google Ad Rank - Google’s system for rating a company’s desirability
as bidder on a sponsored link. It combines the bid expected click-through
rate, ad quality and landing page experience.
landing page experience - A metric developed by Google that is based
on how focused, factual, current, and informative the landing page text is,
relative to key word and sponsored link text.
latency - The time delay in a computerized response caused by processing
requirements or distance a signal must travel.
lead - A person whose name and contact information you know, whom you
believe may be interested in buying something from you.
LTV - various measures - Life Time Value - a metric intended to estimate
the discounted present value of all future revenues from a new customer. It is
calculated a number of different ways depending on context. What method
to use is a matter of individual preference and judgment.
manager skill - Manager skill is usually defined as the ability to consistently
generate an excess return over the manager’s benchmark, without excessive
additional volatility - the risk-adjusted return should be better than
7
the benchmark index.
max CPC - The maximum cost per click-through that a Google AdWords
bidder is theoretically willing to pay.
page-load time - How much time is required for a web page to be complete
and usable from the point of view of a visitor.
Price per click-through (CPC) - Cost per Click-through - for ads where
the advertiser pays only when a potential customer clicks through to the
advertiser’s landing page.
promotional rate - A rate between the rack rate and floor rate, typically
offered to repeat customers on a limited-time basis.
qualified lead - A lead that you have determined to have the budget and
the decision-making authority to purchase your product or service.
quality score - A metric developed by Google that combines expected clickthrough
rates, "ad relevance" and "landing page experience."
rack price - The official, list price of a hotel room.
retweet - A tweet that originates with one author and is reposted by another
- the format is RT@username. Retweets indicate that the retweeting party
(a holder of a Twitter account) thinks your tweet will be of interest to his or
her audience as well as your own.
revenue - Gross income, the dollar amount of sales booked during a certain
time period.
sales "funnel" - The metrics used to track the steps in the process of converting
individuals or Companies with a potential interest in one’s product
or service into paying customers.
sales & marketing - The process of creating positive awareness about a
company’s products or services in a target audience, and converting members
of that audience into paying customers.
8
segmentation - The process of classifying one’s current customers or target
customers by recognizable, traceable attributes such as how much on average
they purchase in a year.
sentiment analysis - The algorithmic study of large amounts of web-based
text to evaluate public opinion - and any changes in public opinion - about
a product or company.
soft-circle sale - A verbal commitment to buy that is not yet an enforceable
contract.
tweet - A 140-character message in response to Twitter’s "What are you
doing?"
user experience (UX) -
user session - One visitor’s single interaction with a web site from beginning
to end.
negative float - Needing working capital to make and deliver products or
services for which one is paid cash later.
positive float - Holding customer cash for a product or service to be delivered
later. The classic example is insurance.
Risk
correlation with equity markets - What is the linear correlation of returns
between an investment and its appropriate stock market benchmark
over time.
accounts receivable - Monies a company’s customers owe it for products
or services we have already delivered.
9
burn rate - Actual net negative cash flow for a time interval, typically
a month, or projected net negative cash flow for the next month.
churn rate - The portion of customers who leave within a year.
default - Failure to pay interest or principal on a debt.
information ratio - The ratio of annualized excess returns over a manager’s
benchmark, divided by the standard deviation of the time series of
excess returns.
insolvent - When a company does not have the cash to meet its immediate
obligations to creditors.
leverage - Purchasing an asset, in particular an investment asset, partly
or completely with borrowed money.
linearity of log wealth - Describes how linear is the return when evaluated
on a log wealth scale. A continuously compounded rate of return that
never varies (volatility of 0) will have a linear correlation of 1.
reputational risk - Events that can damage a company’s brand, goodwill,
or future attractiveness to customers and potential customers.
risk - The chance of a major negative event such as a product recall, default
on a debt, insolvency, etc. In finance, "risk" is often also used to refer
to volatility (standard deviation) of returns from an investment.
risk-free rate of return - An investment return minus the return offered
by stable governments for bonds in their own currency - this return is considered
to have no default risk and so have zero volatility of return.
runway (for a company) - Net cash on hand divided by current monthly
burn rate gives the number of months a company can survive under present
conditions.
sharpe ratio - the ratio of a manager’s excess return over the risk-free
rate (the manager return minus the risk-free return) divided by the volatility
10
of the manager’s return.
unrecoverable (debt) - Money loaned out that will never be repaid.
volatility of returns - The standard deviation of a time series of investment
returns.
years to breakeven - How many years, at average return, it would take
to get back to breakeven from the maximum draw-down. Calculated as
|maxdraw ≠ downpeak ≠ to ≠ valley|/annualizedrateofreturn.
Companies
Accenture
Adobe (Photoshop)
Airbnb
Amazon.com
AMD
Apple
Argus Information & Advisory Services
AWS
Bain
Boston Consulting Group
Cisco
11
Comscore
Deloitte Consulting
Equifax
Experian
Facebook
Fico (FairIsaac)
Google
Google Compute Layer
IBM
IBM Watson
Intel
LexisNexis
LinkedIn
Matlab
McKinsey
Mead Data Central
Microsoft
MS Azure
Nielson
12
Nook
Opera Solutions
Oracle
Palantir
Salesforce.com
SAP
SAS
Symantec
Tableau
Teradata
Texas Instruments
TransUnion
Uber
VMWare
Walmart
Zillow
13
Software/Programming languages
C++
Hadoop
Hive
Java
Javascript
Mapreduce
Matlab
Python
R
SAS
Spark
SQL
14
Glossary by Video
Week 1 - Metrics Help us Ask the Right Questions
click-through - When a web visitor clicks on an advertisement or sponsored
link and arrives at the "landing page" of the sponsor.
latency - The time delay in a computerized response caused by processing
requirements or distance a signal must travel.
metrics - Numbers with significant business relevance. Metrics guide the
process of inquiry - What decision should we make? What processes should
we change to increase revenues, improve efficiency, or minimize risk?
real-time - Computer systems that provide a customized response immediately
(typically in less than 1 second).
Week 1 - Distinguishing Revenue, Profitability, and Risk
Metrics
churn rate - The portion of customers who leave within a year.
default - Failure to pay interest or principal on a debt.
efficiency - Delivering products or services of consistent quality while minimizing
the cost of doing so.
fixed costs - Costs that do not increase or decrease with small changes
in production. An example are salaries for current full-time employees.
inventory - Finished goods on hand and not yet sold.
logistics - Planning for all physical stages of a commercial enterprise from
1
delivery of raw materials to a factory through delivery of products to customers.
operational metrics - Metrics related to production, and in particular,
to production efficiency.
profitability - Net Income, or gross sales minus all accounted expenses
during a certain time period.
recurring-revenue customers - Customers who buy again repeatedly after
a first sale.
revenue - Gross income, the dollar amount of sales booked during a certain
time period.
risk - The chance of a major negative event such as a product recall, default
on a debt, insolvency, etc. In finance, "risk" is often also used to refer
to volatility (standard deviation) of returns from an investment.
sales "funnel" - The metrics used to track the steps in the process of converting
individuals or Companies with a potential interest in one’s product
or service into paying customers.
sales & marketing - The process of creating positive awareness about a
company’s products or services in a target audience, and converting members
of that audience into paying customers.
secured creditors - Entities, such as banks, with the contractual right
to seize certain assets ("secured" assets) if they are not paid on time.
spoilage - The portion of inventory of a perishable product that becomes
unsaleable because it is held too long.
variable costs - Costs that go up when production increases and go down
when production decreases.
volatility of returns - The standard deviation of a time series of investment
returns.
2
wastage - The portion of inventory that becomes unsaleable because it is
damaged or lost before sale.
Week 1 - Distinguishing Traditional and Dynamic Metrics
balance sheet - The document that shows a company’s assets, liabilities,
and shareholder’s equity. Traditional financial accounting uses three systems:
profit and loss, cash flow, and the balance sheet, to capture all changes in
economic value.
Content Delivery Network (CDN) - Companies that provide edge caching
for a fee. The best-known is Akamai.
dynamic metrics - Defined here as Business metrics that show significant
change over time intervals of a month or less, and can be impacted directly
by changes in business processes.
edge-caching - Paying third parties (Content Delivery Networks) to locate
copies of one’s web content on servers physically nearer to customers and
other visitors.
managerial accounting - Accounting used to determine the profitability
of individual products and services and make management decisions.
net cash flow - The change in actual cash on hand held by a business
over a particular time interval.
"noisy" vs "twitchy" metrics - Informal terms to contrast aggregate metric
- which many factors impact - and highly focused metrics that can easily
be impacted by changing a single factor.
page-load time - How much time is required for a web page to be com-
3
plete and usable from the point of view of a visitor.
profits and losses - Accounting measure of whether a company is generating
net economic value, after including capital investment and other sunk
costs.
revenues as an "aggregate number" - Total revenues are an "aggregate"
metric because they reflect sales across all products and services, and combine
new sales and long-term contracts, and involve an element of random
variation. For this reason even big process changes for the better or worse
may be hard to detect in total revenues.
shareholder’s equity - Also known as "stockholder’s equity" - the accounting
value of a company’s assets minus its liabilities.
traditional metrics - As defined here, Business metrics related to financial
and managerial accounting, in particular those used for required quarterly
or annual financial reporting. In contrast to dynamic metrics, traditional
metrics rarely, if ever, show significant changes within the time interval of a
single month, and as aggregated measures, are difficult to impact with isolated
business changes.
Week 1 - Egger’s Roast Coffee Case Study - Part 1 -
Definitions
accounts receivable - Monies a company’s customers owe it for products
or services we have already delivered.
aged receivables - Tracking how long cash owed is overdue.
capital expenditure - Synonym for capital investment.
capital investment - Money spent for capital assets such as manufacturing
equipment that, under standard accounting rules, is "depreciated", or allo-
4
cated across a large number of products or services over time.
cash flow - How cash "on hand" - meaning in the Company’s bank accounts
- has changed over a give time interval.
Cash on Delivery (COD) - Being required to pay in cash when items
are delivered.
depreciation - Accounting methodology for reducing the value of a capital
investment over time and allocating that expenditure to products or services
produced.
fixed costs - Costs that do not increase or decrease with small changes
in production. An example are salaries for current full-time employees.
general and administrative (G&A) expenses - Overhead not directly
tied to individual products or services - for example, rent, utilities, insurance,
required business licenses, salaries of central office employees.
negative float - Needing working capital to make and deliver products or
services for which one is paid cash later.
net 60 - Paying cash for products or services 60 days after they are received.
"Net 30" and "net 90" are also common terms.
net earnings - Synonym for profits.
positive float - Holding customer cash for a product or service to be delivered
later. The classic example is insurance.
profit - The positive difference between revenue and expenses, using standard
accounting methods for capital expenditures.
straight line depreciation - Depreciation of the same amount over each of
several time periods: for example, 20% reduction in value over each of 5 years.
to book sales - To record sales at the time when, under accounting rules, a
mutual contractual obligation is created.
5
useful life - The time interval over which a capital investment is allocated
- in theory, it corresponds to the time required for a piece of equipment to
wear out and need to be replaced.
Week 1 - Egger’s Roast Coffee Case Study Part 2 - How
a Profitable Growing Company can go Bankrupt
burn rate - Actual net negative cash flow for a time interval, typically a
month, or projected net negative cash flow for the next month.
cost of goods sold - Costs that are allocated to each unit of production.
economies of scale - Rising marginal profits on higher sales and production
volumes - due to fixed costs and capital investment being high compared to
variable costs.
factoring (accounts receivable financing) - A short-term loan secured
by accounts receivable.
marginal profit - Profit per one additional unit of production.
runway (for a company) - Net cash on hand divided by current monthly
burn rate gives the number of months a company can survive under present
conditions.
working capital (credit line) - Money provided by a bank or a factor
- or made available if needed - to cover negative float.
6
Week 1 - Revenue Metrics - Traditional Enterprise Sales
Funnel
booking revenue (a completed sale) - When a commitment to buy becomes
contractually enforceable and is recorded under accounting rules.
correct decision-maker - Someone who has the budget and authority to
decide on purchases and sign purchase orders.
enterprise - Defined here as any sale that requires involvement by full-time
sales people. Enterprise sales must be large to be viable.
expression of interest - When a decision-maker informs you that they
want to engage with you about the possibility of buying your product.
gatekeeper - People whose job it is to stand between you and the person
who will ultimately make a decision.
lead - A person whose name and contact information you know, whom you
believe may be interested in buying something from you.
qualified lead - A lead that you have determined to have the budget and
the decision-making authority to purchase your product or service.
soft-circle sale - A verbal commitment to buy that is not yet an enforceable
contract.
Week 1 - Revenue Metrics - Amazon.com as a Leading
Example of Use of Dynamic Metrics - Part 1
click-stream - The exact path a visitor follows through a website - what
they view, how much they spend on each page visited and etc.
controlled-vocabulary index - An index with a relatively small number
7
of words.
pre-processed data - Data to which an algorithmic process has already
been applied so that the result can be retrieval rapidly. An example is
Google’s calculation of "pagerank" for all known web sites before any individual
text search is run.
query (query terms) - What someone types into a search engine when
looking for information. The exact characters they type are known as a
"string."
subject index - A pre-processed index consisting of defined topic areas
that permits documents to be located based on their subject matter.
subtopics - A lower, more specific level in a hierarchical organization of
subject matter.
text index - A pre-processed index used to permit a list of documents on
which all contain a common word or phrase to be retrieved rapidly.
thesaurus - A specialized dictionary of synonyms or near synonyms.
user experience - The subjective quality of a visitor’s interactions with
a web site - is the web site clear, informative, easy to navigate, or confusing,
unhelpful, and difficult to navigate?
user session - One visitor’s single interaction with a web site from beginning
to end.
Week 1 - Revenue Metrics - Amazon.com as a Leading
Example of Use of Dynamic Metrics - Part 2
algorithms - A process or set of rules to be followed in calculations or other
problem-solving operations, especially by a computer.
8
browsing (to "view" a book in Amazon) - Clicking on the link referencing
a book to the web page with more detailed information about it.
co-occurrence - When two events happen at the same time or within a
single defined interval, such as a web user session.
co-occurrence matrix - A way of representing mathematically all possible
co-occurrence events.
co-occurring sales - When someone buys two items during the same store
visit or web session.
frequently bought together - An Amazon metric for items with a high
likelihood of co-occurring sales.
information theory - Information theory is a branch of applied mathematics,
electrical engineering, and computer science involving the quantification
of information.
Week 1 - Profitability/Efficiency Metrics: Inventory
Management
0-level inventory (potential opportunity cost) - When a product is
"sold out" and none is available were a potential new customer to request it.
complete wastage - When a product or service loses all value if not sold
by a certain date. Examples are hotel rooms and airline seats.
cost of goods sold - P&L Item - The standard accounting calculation
of what it costs to manufacture a given unit of a product.
days inventory - The average number of days between when a product
is completed (or arrives at a retail location) and when it is sold.
9
expiration - "sell-by" dates - Legal requirements that a product can only
be sold within a certain time interval.
inventory management - The optimization process of simultaneously minimizing
days inventory while avoiding the opportunity cost of having zero
inventory when more product could be sold.
inventory on hand - (value as balance sheet item) - The value of
inventory on hand at a given moment in time (usually the end of the fiscal
or calendar year).
inventory turnaround - same as inventory turnover - Synonym for
inventory turnover.
inventory turnover = 365/days’ inventory - The inverse of days’ inventory
- simply calculates how many times in a year a given product on
average is delivered and sold to a retail location, based on days’ inventory.
obsolescence - When a product is no longer in demand due to newer, better,
or equivalent but less expensive, alternatives being available.
SKUs - Abbreviation for "Stock Keeping Unit" - every item sold has a unique
ID in the form of an SKU.
Week 1 - Profitability Metrics Examples: Hotel Room
Occupancy
floor rate - The minimal price of a room, based on accounting breakeven -
its share of fixed costs plus variable cost.
occupancy rates - The percentage of rooms in a hotel that are booked
by paying customers on a given night.
10
Online Travel Agencies (OTAs) - Companies that acts as intermediaries
and sell airline tickets or hotel rooms from multiple suppliers.
opaque inventory market - A market, such as the market for hotel rooms,
where opaque pricing is offered.
opaque pricing - The practice of offering hotel rooms for (non-refundable)
sale in a given city without disclosing until after the sale what hotel is meant.
promotional rate - A rate between the rack rate and floor rate, typically
offered to repeat customers on a limited-time basis.
rack price - The official, list price of a hotel room.
sunk cost - Money already spent - such as the cost of an empty hotel room
even absent the variable costs of occupancy.
variable pricing - The practice of charging more or less for the same good
or service depending upon current supply and demand.
Week 1 - Risk Metrics: Leverage and Reputational Risk
gross profit - Usually refers to the difference between the sales price of a
product and its marginal cost. Does not include indirect costs that should
be allocated to the product to determine net profits.
insolvent - When a company does not have the cash to meet its immediate
obligations to creditors.
leverage - Purchasing an asset, in particular an investment asset, partly
or completely with borrowed money.
reputational risk - Events that can damage a company’s brand, good-
11
will, or future attractiveness to customers and potential customers.
return on equity - The investment return on an investor’s cash. For example,
an investment that returns 5% would have a 5% "return on equity"
if it were purchased for cash. The same investment, if purchased 50% with
investor’s cash and 50% with money borrowed at 1% interest, would have a
return on equity of 9%.
unrecoverable (debt) - Money loaned out that will never be repaid.
Week 2 - Roles & Companies
big data culture - Awareness that real-time data-processing is a positive
development that allows for better products and services to be delivered more
efficiently, and will soon be an essential part of almost all business transactions.
bricks-and-mortar - Traditional product and service companies with physical
stores and locations.
business analyst - As defined here, someone who works with an external
or internal client to develop requirements, documents and reports.
business data analyst - As defined here, someone who assembles information
stored in databases and translates it into business recommendations.
consulting with IT focus - Companies that sell business advice and as
part of their recommendations build or install custom information technology
systems for their clients.
data scientist - As defined here, someone responsible for recommending and
designing new technologies including real-time or just-in-time data-processing,
in particular predictive analytics using machine learning.
digital businesses - Internet-based companies, typically with minimal phys-
12
ical stores and locations.
hardware & software - Companies that sell information technology.
software engineer - Someone responsible for the application of engineering
to the design, development, and maintenance of software.
traditional strategic consulting - Companies that sell business advice.
Week 2 - The Business Analyst
area under the ROC curve - A metric used to evaluate the effectiveness
of a binary classification model.
binary classification - Separating items into two exclusive groups. For
example, defining all credit card customers as "in default" or "not in default."
horizontal metrics - Business metrics that are useful for many types of
industry.
local knowledge - Ability to identify the most important and relevant business
metrics in a particular market sector or niche.
models - Simplified mathematical representations of complex real-world situations.
operationalize - What specific steps need to be taken, by whom, in what
order, in order to solve the problem.
vertical metrics - Business metrics that are specific to a particular industry
or market sector.
13
Week 2 - Distinguishing the Business Data Analyst and
Business Analyst Roles
SQL - Structured Query Language. A standard for communicating with
databases.
Week 2 - The Data Scientist
Bayesian Learning - Algorithms that interpret new information using
Bayes’ theorem in order in order to reduce the uncertainty of a probabilistic
outcome.
just-in-time data - When all relevant historical information about a customer,
including prior sales, support, and complaint contacts, is available at
the time a customer interacts with a company employee, whether in sales,
product support, etc.
Populating (databases) - Importing data into a database structure for
later retrieval and analysis.
preference engine - A computer system that makes customized recommendations
to users based on their prior purchase history, demographics, or
expressed preferences.
real-time data - Data that is provided with an almost immediate response
(typically in less than 1 second).
sentiment analysis - The algorithmic study of large amounts of web-based
text to evaluate public opinion - and any changes in public opinion - about
a product or company.
14
Week 2 - The Senior Software Engineer
layers - Distinct functional parts of an information technology system. For
example applications and operating systems can be thought of as two layers
of software. This course uses a simple three-layer model for the IT "stack" -
hardware and communications, enterprise software systems, business desktop
software.
natural-language processing - Algorithms for computer study of written
texts or spoken voice.
retrieval - The process of recovering relevant information from an index
or database, in response to a query.
Week 2 - Overview of the 5 Types of Companies
"Big Box" stores - Large retailers such as Walmart, Costco, etc.
machine learning - The process by which computers improve their models
when they take in new information.
Week 2 - Traditional Strategic Business Consulting
Argus Information & Advisory Services -
Credit Bureau - A company that evaluates individuals and companies’
likelihood of default and ability to manage additional indebtedness.
15
Week 2 - Bricks-and-Mortar
AB testing - Trying two versions of something to determine which is more
effective.
conversion - When a web visitor becomes a paying customer. Also used
to refer to a lesser step when a visitor registers and provides identity information.
Google Ad Rank - Google’s system for rating a company’s desirability
as bidder on a sponsored link. It combines the bid expected click-through
rate, ad quality and landing page experience.
IP address - The unique numerical ID for devices connected to the internet.
Membership programs - Programs where companies offer additional benefits
to customers who agree to register and provide identifying information,
or to pay an annual fee.
Price per click-through (CPC) - Cost per Click-through - for ads where
the advertiser pays only when a potential customer clicks through to the
advertiser’s landing page.
whales - Slang for repeat customers individuals who tend to gamble large
amounts at casinos.
Week 2 - Strategic Business Consulting: Focus on Software/
IT Systems Integration
early adopter - A group of customers who are motivated to try new products
or services before they are established as mainstream.
16
Week 2 - Hardware & Software Companies
cloud - Data storage with redundancy, and processing capacity, offered as a
service with access from anywhere.
routers - Hardware for communicating using Internet protocols.
semiconductor chip - The technology that allows computers to be very
small and inexpensive.
stack - The combined "layers" of an information technology system.
terabyte - 1,000 billion, or 1 trillion, bytes of information. A byte is 8
bits - and a bit is simply a binary indicator, 0 or 1.
Week 2 - Digital Companies
hosting services - Companies that are paid to offer web sites or applications
for public, or private, corporate access.
Week 3 - Web Marketing
AdWords - Words purchased by auction to show sponsored links on Google
search results.
customer loyalty - The fact that repeat customers are typically motivated
by more than only lowest price alone - they have positive associations with
the brand.
17
demographic categories - Common ways to classify people, such as by
income, age, employment, education, nation and region, etc.
home page - The main web page of a company, linked to its primary URL
address.
landing page - The web page URL, not necessarily a home page, that a
sponsored link or marketing campaign link points to.
market differentiation - The ways in which a product or service is described
as being different than competitive offerings.
marketing - The systematic process of creating and increasing positive
awareness about a brand, product, or service with a target audience.
switching costs - The costs in time, money and inconvenience in leaving
one’s old supplier of a product or service and moving to a new one.
target demographic - A group with common characteristics, such as nationality,
age range, or participating in a Facebook interest group, that permits
a focused marketing effort.
Week 3 - Web Marketing: AdWords Metrics
actual CPC - Because winning an AdWords auction only requires paying
$0.01 more than the next highest bidder, Actual CPC will be lower than Max
CPC - especially when an advertiser has a high "quality score."
ad relevance - A metric developed by Google that is based on how closely
advertisement text relates to the viewers original search terms.
CPC - "Cost per Click-through" - for ads where the advertiser pays only
when a potential customer clicks through o the advertiser’s landing page.
18
expected click-through rate - When used to generate a "Quality Score" -
Google’s estimate, based on historical data or mathematical models, of the
percentage of viewers who will click-through a particular sponsored link.
key words - On Google, the words bid in AdWords auctions.
landing page experience - A metric developed by Google that is based
on how focused, factual, current, and informative the landing page text is,
relative to key word and sponsored link text.
max CPC - The maximum cost per click-through that a Google AdWords
bidder is theoretically willing to pay.
quality score - A metric developed by Google that combines expected clickthrough
rates, "ad relevance" and "landing page experience."
Week 3 - Web Marketing: Segmentation
bounce - When a visitor to a home page or landing page leaves the site
immediately, without clicking on any internal links.
click-stream - The exact path a visitor follows through a web site - what
do they view, where do they spend the most time, etc.
conversion rate (to registration) - The percentage of not previously registered
visitors in a website who register and provide identity information -
typically an e-mail address, phone number, etc.
conversion rate (to revenues) - The percentage of visitors not previously
customers who become customers.
device (when tracking origin of web site visitor) - A metric that considers
whether the visitor viewed the site from a PC or Mac, or a mobile
device.
19
direct - A metric for website visitors meaning the visitor typed the Company
URL directly into their browser themselves.
duration - The time interval that a visitor spends on some part of a company’s
site.
LTV - various measures - Life Time Value - a metric intended to estimate
the discounted present value of all future revenues from a new customer. It is
calculated a number of different ways depending on context. What method
to use is a matter of individual preference and judgment.
organic link - Search results that are not paid for.
retweet - A tweet that originates with one author and is reposted by another
- the format is RT@username. Retweets indicate that the retweeting party
(a holder of a Twitter account) thinks your tweet will be of interest to his or
her audience as well as your own.
segmentation - The process of classifying one’s current customers or target
customers by recognizable, traceable attributes such as how much on average
they purchase in a year.
social link (when tracking origin of web site visitor) - A URL to
a company landing page that is embedded in a Facebook post, tweet, Instagram,
or other social media.
social signal - The fact that search engine rankings are influenced by a
company’s activity and success on social media, including Facebook likes,
retweets, etc. The stronger the "social signal", the higher the ranking.
sponsored link - An advertisement shown along with organic search results.
third-party web site - Any web site that is not part of a company or
its paid advertising network - blogs, review sites, news sites, etc.
tweet - A 140-character message in response to Twitter’s "What are you
doing?"
20
Week 3 - Financial Services Metrics: Money Management
& Investing
annualized discrete return - (p1
p0 )(1n
)≠1
Where,
p1 = Price at time t1
p0 = Price at time t0
n = Number of years
annualized continuously compounded return - ln ( p1
p0 )
n
Where,
p1 = Price at time t1
p0 = Price at time t0
n = Number of years
continuously compounded return - ln (p1
p0 )
Where,
p1 = Price at time t1
p0 = Price at time t0
discrete return - p1
p0 ≠ 1
Where,
p1 = Price at time t1
p0 = Price at time t0
geometric mean return - For a series of various returns r1, r2, ..., rn, the
geometric mean return is defined below: n
Ò
(1 + r1)(1 + r2)...(1 + rn) ≠ 1
ri = rate of returni
n = number of periods
21
internal rate of return (IRR) - Rate on which the present values for
the cash inflows equalize to the present value of the cash outflow(s) as defined
below:
Payment 1
(1+r)t1≠1 + Payment 2
(1+r)t2≠t ...Payment n
(1+r)tn≠t = Payment out
(1+r)tout≠t
money manager - Someone who seeks to generate profits (returns) on someone
else’s money, either through dividends, interest, or through buying assets
that are expected to increase in price.
root mean square - For a set of n numbers or values of a discrete distribution
xi, ..., xn, the root-mean-square (abbreviated "RMS" and sometimes
called the quadratic mean), is the square root of mean of the values x2i,
namely:
x(RMS) =
Ò
(x21
+ x22
+ ... + x2
n)/n
=
Òqn
i=1(x2i
)/n
The RMS difference between each value in a set x1, x1, ..., xn and the mean
of all values N equals the standard deviation for the set.
standard deviation - The standard deviation, commonly represented by
the greek letter sigma, ‡, is a measure that is used to quantify the amount of
variation or dispersion of a set of data values. For a set of N discrete values,
the standard deviation is given by:
‡=
Ò
1
N
qN
i=1(xi ≠ μ)2
Where,
μ = Mean of the set
Week 3 - Equivalence of Different Returns: The Sharpe
Ratio
annualized volatility of return - The standard deviation increases as the
square root of time; for example, if the standard deviation is 5.77% per
month, than it can be estimated that it is 5.77
Ò
(12)% = 20% per year. If
the the daily volatility is 1.26% per trading day, then we can estimate the
22
monthly volatility to be 1.26
Ò
(252)% = 20% per year.
risk-free rate of return - An investment return minus the return offered
by stable governments for bonds in their own currency - this return is considered
to have no default risk and so have zero volatility of return.
leverage - Using borrowed money to buy an asset.
manager skill - Manager skill is usually defined as the ability to consistently
generate an excess return over the manager’s benchmark, without excessive
additional volatility - the risk-adjusted return should be better than
the benchmark index.
sharpe ratio - the ratio of a manager’s excess return over the risk-free
rate (the manager return minus the risk-free return) divided by the volatility
of the manager’s return.
Week 3 - Passive and Active Equity Managers
GSPC - The stock ticker symbol for the S&P 500 index.
active investment - Investment in a fraction of all possible investments
in a universe, chosen because they are expected to generate a better return
than the benchmark index.
benchmark return - The return of an index or other metric based on
the "universe" combining all possible investments a manager could make.
BRIC - Brazil, Russia, India, China.
efficient market - A market, such as the U.S. public equities market, where
active investors rarely outperform a passive index of the market assets. The
efficient markets theory states that this failure is because the information
that moves prices is available to everyone and stocks already reflect this information
in their market prices - they are priced "efficiently."
23
excess return (over benchmark) - The manager’s return minus the return
of their designated benchmark, usually an index of the stocks from which
they chose - their "universe."
excess return (over risk-free rate) - An investment return minus the
return offered by stable governments for bonds in their own currency - this
return is considered to have no default risk and so have zero volatility of
return.
Exchange Traded Fund (ETF) - A fund that holds all the stocks in
an index or market, passively, and simply tries to maintain the ratios used
in the index.
expense ratio - The costs of running an investment fund each year, including
fees paid to the fund’s managers, divided by the total value of assets
under management.
index (market-capitalization weighted) - An index in which the contribution
to the overall index return is weighted according to the market
capitalization of each company with stock in the index. An example of a
market-capitalization weighted index is the S&P 500.
index (equal weighted) - An index in which the contribution to the overall
index return has equal weights among the stocks. For example, EWI is an
index tracking the same stocks as in the S&P 500 but with equal weights.
index fund - A fund, usually but not always structured as an Exchange
Traded Fund, that is intended to mimic as closely as possible the performance
of an index.
information ratio - The ratio of annualized excess returns over a manager’s
benchmark, divided by the standard deviation of the time series of
excess returns.
long-only" funds - Funds, such as U.S. equity mutual funds, that are forbidden
by rule from investing in options, or in selling shares "short" in order
to make money if their price goes down.
24
market-capitalization - Market-capitalization of a company equals the
most recent market price per share, multiplied by the number of shares of
stock of that company not held by the company itself (shares "outstanding").
passive investment - Investment in a basket of all the stocks in a market,
either in equal-weighted portions, or based on their market-capitalization.
SPY - The stock ticker symbol for the State Street S&P 500 Exchange
Traded Fund.
tracking error - The standard deviation of excess returns (difference in
returns) between a fund manager’s performance and their designated benchmark.
universe (for a fund manager) - The pool of permissible assets from
which an active manager chooses when trying to generate an excess riskadjusted
return.
Week 3 - Venture Capital Investors and Hedge Funds
"call" or "draw" - When a fund manager makes a contractually obligatory
request for cash from fund investors.
commitments - The contractual obligation to provide cash to a venture
or private equity fund when called upon to do so by the fund managers.
correlation with equity markets - What is the linear correlation of returns
between an investment and its appropriate stock market benchmark
over time.
derivatives - Financial instruments such as puts and calls that derive their
value from the market price of some other asset, such as a stock, which is
known as the "underlying" asset.
25
fund life - The pre-agreed number of years that a temporary investment
vehicle, such as a venture fund, will be in operation. At the end of the "fund
life" any remaining liquid assets, such as shares of stock, are distributed to
investors.
linearity of log wealth - Describes how linear is the return when evaluated
on a log wealth scale. A continuously compounded rate of return that
never varies (volatility of 0) will have a linear correlation of 1.
maximum drawdown from high water mark - A peak-to-valley measure:
If you entered in the investment at the unluckiest possible moment,
what would your maximum % losses be? Sometimes it is referred as maximum
draw down from water mark.
options - Options give the contractual right, but not the obligation, for
a certain fixed period of time, to buy a stock at a pre-determined price (a
"call") or sell a stock at a pre-determined price (a "put").
short, also known as "short selling" or "shorting" - Practice of selling
securities or other financial instruments that are not currently owned, but
are merely borrowed, subsequently repurchasing them and returning them to
their owners.
tranches - One of a series of payments spread out over time.
years to breakeven - How many years, at average return, it would take
to get back to breakeven from the maximum draw-down. Calculated as
|maxdraw ≠ downpeak ≠ to ≠ valley|/annualizedrateofreturn.
26

Metrics Help Us Ask the Right Questions


Distinguishing Revenue, Profitability, and Risk Metrics

0:03
All business metrics can be classified into three broad categories. Revenue metrics, profitability metrics, and risk metrics. 
0:15
One way to help distinguish for a particular metric, which of these three categories it falls into, is to think about what people in
the company depend on this information and will ask for it. 
0:28
Revenue metrics relate to sales and marketing. Profitability metrics to efficiency and logistics, production, and operations. And
risk metrics to risk management, and are widely used by a company's creditors, and outside investors. 
0:47
So, revenue metrics are outward facing. They tell us something about how well or badly the company is marketing and selling its
products. The company sales force, typically led by a vice resident of sales, will want to know how many units of each product
were sold over a given time interval and how this compares to the same time interval last year and the year before. They will
want to look at sales by region, by product and by new versus repeat customers. And they will want to know about the sales
funnel, the potential future customers who have been identified, and where they are in the step by step process of moving towards
making a purchase. Much more on the sales funnel later. 
1:33
Meanwhile, the marketing team, typically led by a VP of marketing, will want to know how effective any marketing campaigns
may be. How many people have seen a particular advertisement or email marketing piece or mail offer? What percentage have
responded, etc? 
1:54
Everything that relates directly or indirectly to selling is a revenue metric. 
2:02
Profitability metrics have to do with the efficiency of the processes by which the company creates and delivers its products and
services to customers. These are operational metrics, sought after by those people in the company responsible for
production. Typically led in a large company by the chief operating officer. Anything that relates to how much cash is tied up in
the form of unsold inventory, how much production is unsaleable due to spoilage or wastage, we didn't sell those mangoes in
time, and now they're rotten, like that. Or at the other extreme, how often the company is unable to meet urgent customer requests
and loses sales because of insufficient production or inventory. What portion of products off a production line are rejected as
defective, how much is spent on variable costs, raw materials and labor, per unit product, etc., etc., etc. These are all efficiency
metrics. 
3:08
Note that even a company with large and rapidly increasing revenues will fail to be profitable if it cannot deliver its offerings
efficiently. 
3:18
Large established companies with relatively little room to increase revenues can often achieve significant increases in
profitability by focusing on improving operational efficiencies. 
3:33
Finally, risk metrics have to do with tracking and where possible reducing the many potential dangers a company faces. For
example, if a company is spending a large portion of its net cash flow every month on interest on its debts, then even a small drop
in revenues caused by some external shock, like a recession, could cause the company to become insolvent and collapse. Secured
creditors have the right to seize a company's assets if they're not paid on time and that would close down the business. 
4:10
Net cash out is always the most important metric to track. How many months can the company survive at the present burn rate? 
4:22
Another example of risk metric is churn, a company with a subscription based revenue model that has a very high churn rate, the
rate at which new subscribers drop off within a year, runs the risk that over time, there are fewer targets who have never been
customers and it becomes impossible to maintain revenue growth or even hold steady. 
4:47
The greater the reliance on long term recurring revenue customers, 
4:53
the less dependent a company is on constantly successfully converting new prospects into clients and that's a lot less risky. 
5:02
Other examples of risk metrics are specific to the financial industry. Banks that issue credit cards are in the business of tracking
how much exposure they have to potential customer defaults at any time and what percentage of their customers are expected to
default in the next six months or are in default now. 
5:24
Money managers use volatility of returns and something called the maximum historical drawn down from high water
mark, which we'll explain later, as a proxy for their portfolio's risk exposure. 
5:39
I've noticed in general that most risk metrics are related in one way or another to leverage. 
5:45
Anyone whose survival depends on their ability to pay back a large amount of borrowed money faces a magnified risk from any
misfortune. 
5:56
Maybe this will help you to remember the categories. Revenue metrics are for optimistic extroverts, profitability metrics
for fastidious perfectionists, and risk metrics for informed skeptics. 
6:10
A great company will harness all three types of temperaments and track all three types of metrics. 
Distinguishing Traditional and Dynamic Metrics

0:04
Traditional business metrics include standard financial and managerial accounting categories, such as quarterly statements of net
cash flow, profits and losses, and changes to balance sheet items such as shareholder's equity. 
0:22
Traditional business metrics have their origins primarily in paper and pencil after the fact reporting. Some of these metrics were
once innovative too, like 500 years ago, when bankers in Florence, Italy invented double entry book keeping. Business decisions,
that might be made based on these metrics, will happen usually after long deliberation, sometimes on a scale of months to
years. They remain extremely important and worth of our study, but we just don't have time for that. 
0:59
We want Dynamic Business Metrics that are defined and can be communicated in a manner that conveys urgency. 
1:09
Metrics that address the right question, 
1:13
what change in our business processes can we make right now to increase revenues, maximize profitability, or reduce risk? 
1:24
Two attributes make a business metric dynamic. First, will the metric change significantly over intervals of a month or less? If
not, it's not very dynamic. For example, the monthly rent a stand alone retail store in a mall pays on its three-year real estate lease
is of course a business metric related to its efficiency and profitability, but it is not a dynamic business metric. There's no point in
tracking it because it won't change anytime soon. 
2:00
On the other hand, if a national retail chain with 1,000 mall-based stores is individually negotiating and signing an average of
about seven new three-year leases each week, it can and should track average monthly rent per square foot on new real estate
leases as an important dynamic metric, against which to set goals and track progress. Second, are their specific actions the
company can take that can visibly or significantly impact the metric in the short term? 
2:35
If not, then the metric doesn't lend itself to dynamic tracking. 
2:40
Whether the metric is dynamic, may also depend on the business context. For example, if the 1,000 store retail chain we just
mentioned is neither adding nor closing stores and is simply renewing leases on current space, where the old leases had pre-
negotiated terms to be extended, It will be difficult to make much impact on the average monthly rent per square foot. On the
other hand, if that retail chain publicly announces that it is going to close 25% of its US retail stores, as the GAP chain did in
June of 2015, it may be able to go back to landlords with the proposition, either we leave at the end of the current lease and you'll
need to find a new tenant, if you can, who may not pay as much per square foot as we do. Or let's renegotiate our lease terms
now. In this case, the average monthly rent per square foot for newly renegotiated leases would be a dynamic metric for the
GAP. It's a place they could save money. This is why announcing all your bad news at once is often a good business strategy. 
3:51
How much impact a business change can have on the metric, is another important thing that we need to observe. If the metric is
noisy, then lots of things are affecting it. If its twitchy, that means it's very specifically offended by what we're doing. 
4:09
Traditional metrics, like quarterly revenues, are impacted by dozen of different factors, many of which are completely outside the
control of our business. 
4:19
The great new advertising campaign that we launched may not even show up in quarterly revenue metrics if, in fact, most of our
customers are government agencies on long-term contracts with a very long sales cycle. 
4:32
Total revenues is always an aggregate number, and as they say on the Kissmetrics website, aggregate data is kind of
worthless. Dynamic metrics are twitchy. Small changes in process, in our process, can lead to big impact. For example the
percentage of people who will fill an online shopping cart and take their shopping cart all the way to purchase is extremely
sensitive to average page load times. Studies have shown that pages that load in three or more seconds are much less likely to
lead to sales than pages that load in less than three seconds. 40% of web users will abandon completely, a web page that does not
load in three seconds. This is why there's an entire industry devoted to what's called edge caching. Content delivery networks,
like Akamai, that retail stores pay to store copies of their websites locally, physically near their customers around the world,
saving a precious second or two in load times. 
5:40
By the way, through a recent project my students at Duke did for a website performance monitoring company, we learned that on
mobile devices many retails companies' web pages are taking 20 seconds or more to load. It appears that many global retail
companies do not yet test their mobile based loading times from remote locations around the world. If your company does not
already do load time performance testing for mobile devices in all global markets where it is active, It should start immediately. 
Revenue Metrics – Traditional Enterprise Sales Funnel
0:04
We'll talk now about the Traditional Enterprise Sales Funnel. 
0:08
As you recall, revenue metrics are outward facing. They have to do with a customers outreach to customers. They measure how
well or badly a company is identifying potential customers. Communicating to them about its offerings and value proposition to
them and ultimately, selling to them. 
0:31
After watching this video you will be able to identify, and track, the most important business metrics that define success in
traditional enterprise sales. 
0:43
In this course, we use the term enterprise sales a bit loosely, to refer to any sale that requires involvement by full time sales
people in your company. Enterprise sales historically refer to big sales of complex products or services, an elaborate piece of
capital equipment, like a wind turbine or something like a bidding process to win the right to act as a general contractor on
construction of an office building. 
1:12
Enterprise sales, at a minimum, require talking to potential customers on the phone, getting to know them, and more importantly,
giving them a chance to get to know you. So they almost always involve sending your people or yourself to travel out to the
customer site and hold in person meetings, sometimes many meetings before a sale is made. 
1:37
Enterprise sales are expensive to do and therefore the payoff for each enterprise sale must be large. Companies that attempt
enterprise sales for low-priced to medium-priced items typically lose money on average on every sale and either change their
sales model or go out of business. Different companies in different industries have different numbers for what would qualify as a
minimum size enterprise sale, but I'll give you a general rule based on the cost of operating in the United States. I would say you
would want to have a minimum of $250,000 for a one-time sale, or $100,000 per year on a recurring sale to justify an enterprise
sales effort. 
2:23
Imagine your product is an electric delivery van that's non-polluting and has low operating costs but needs to be operated within a
75 mile radius of its charger station. 
2:36
One of your vans costs $50,000. It would make no sense to target a small business that might buy one van with your enterprise
sales campaign. Even if they buy it, you would end up spending more money than the marginal profit. Instead, you need to target
companies that replace a minimum of two to three delivery trucks every year as the old ones wear out and ideally far more. 
3:04
The sales funnel metrics are as follows. You start with a lead. 
3:10
A lead is a person whose name and contact information you have, who you know works at a company that owns delivery trucks,
so they might be buying more sometime. 
3:23
The first step is to qualify the lead. 
3:27
While definitions differ, I would say that to be a qualified lead your sales team needs to establish two things. First, that the target
company your lead works for wants to buy at least two or three delivery vans from someone in the next year. And second, that
they could afford to buy your vans if they wanted to. In other words, they have a plan to buy, and a budget to buy, vans in your
price range. 
3:58
Hey, as an aside, I can't tell you how many people are happy to talk to you on the phone for hours about how their company
wants very much to buy the thing you're making. Or, if you're still doing pre-launch market research, or considering making, and
you only find out months or years later that they have no money in their budget to buy any such thing. Such people, also, often
like to invite you to travel out and demonstrate your product in person at your own expense without informing you that no one
with any buying authority will be at the demo. Apparently many people are quite bored sitting at their desks, and are happy to
talk at length with and hold follow up meetings with anyone friendly, even if they will never buy anything from them. 
4:49
Note that you have established that the lead is qualified by reference to the target company's plans and budget. Now, you need to
identify the person, within the target company organization, who has the budget, and authority to decide on the purchase. They
need to be able to sign a purchase order. They are the correct decision maker. 
5:10
The person you originally contacted may be able to tell you who the correct decision maker in their organization is, but they may
not choose to identify them.  Because doing so may mean you'll stop calling them. Really, not kidding. Not surprisingly, often
your original contract won't tell you that they have no power to decide anything, and that their opinions don't even matter,
and certainly don't matter to the actual decision maker. 
5:38
When the correct decision maker tells you that they want to engage with you about the possibility of buying your product, yes we
might buy vans from you, that is an expression of interest. The next big step will be to meet directly with the correct decision
maker. This may require, particularly in large complex organizations, many meetings with other people first. Various gatekeepers
and lower level functionary's and lots of requests for documentation. 
6:07
You can literally spend forever holding seemingly necessary and productive meetings in the intermediate levels of any large
company. The work product of many people is meetings apparently, so the more meetings they hold the better in their
view. Great sales people seem to have a knack for getting directly to the top guy or gal and short circuiting the potentially
limitless meeting process. If you have such a sales person cherish them. Keep them happy. 
6:38
Once the decision maker is persuaded, you've overcome all their objections and addressed all their concerns and you've
negotiated terms and a price and they tell you directly that their company will buy x amount of vans from you for y dollars, you
have what I call a soft circle sale. 
6:58
Why do we call it a soft circle? The number of things that can still go wrong before you actually close the deal with a legal
contract, nevermind getting paid, is incredible. Here are a few examples that I have come across in my business. 
7:15
After getting a definite and unambiguous yes from the correct decision maker, here's some things that can happen. The decision
maker never takes another call from you, stops answering your email, and pretends you don't exist. 
7:27
Or, you eventually learn from someone else that the decision maker has quit or been fired, or has transferred to a different office,
and you will need to start the sales process all over again, with a new person, who has never heard of you or your product. 
7:42
Or, the target company is suddenly acquired, or it is in acquisition talks, and all pending contracts are suspended indefinitely. 
7:51
Or, the target company goes bankrupt. 
7:54
Or, your own company decides to stop making the product or offering the service that you just sold, but only tells you about that
decision after you get a yes from the customer. 
8:05
So, to review, the key enterprise sales metrics are new leads. New qualified leads. 
8:18
Expressions of interest. Meetings with the correct decision maker. 
8:23
Getting the decision making to say yes, that's a soft circle sale. And then the number of actual official binding contract sales. And
that's when you book the revenue for financial accounting purposes. 

0:04
We'll talk now about the Traditional Enterprise Sales Funnel. 
0:08
As you recall, revenue metrics are outward facing. They have to do with a customers outreach to customers. They measure how
well or badly a company is identifying potential customers. Communicating to them about its offerings and value proposition to
them and ultimately, selling to them. 
0:31
After watching this video you will be able to identify, and track, the most important business metrics that define success in
traditional enterprise sales. 
0:43
In this course, we use the term enterprise sales a bit loosely, to refer to any sale that requires involvement by full time sales
people in your company. Enterprise sales historically refer to big sales of complex products or services, an elaborate piece of
capital equipment, like a wind turbine or something like a bidding process to win the right to act as a general contractor on
construction of an office building. 
1:12
Enterprise sales, at a minimum, require talking to potential customers on the phone, getting to know them, and more importantly,
giving them a chance to get to know you. So they almost always involve sending your people or yourself to travel out to the
customer site and hold in person meetings, sometimes many meetings before a sale is made. 
1:37
Enterprise sales are expensive to do and therefore the payoff for each enterprise sale must be large. Companies that attempt
enterprise sales for low-priced to medium-priced items typically lose money on average on every sale and either change their
sales model or go out of business. Different companies in different industries have different numbers for what would qualify as a
minimum size enterprise sale, but I'll give you a general rule based on the cost of operating in the United States. I would say you
would want to have a minimum of $250,000 for a one-time sale, or $100,000 per year on a recurring sale to justify an enterprise
sales effort. 
2:23
Imagine your product is an electric delivery van that's non-polluting and has low operating costs but needs to be operated within a
75 mile radius of its charger station. 
2:36
One of your vans costs $50,000. It would make no sense to target a small business that might buy one van with your enterprise
sales campaign. Even if they buy it, you would end up spending more money than the marginal profit. Instead, you need to target
companies that replace a minimum of two to three delivery trucks every year as the old ones wear out and ideally far more. 
3:04
The sales funnel metrics are as follows. You start with a lead. 
3:10
A lead is a person whose name and contact information you have, who you know works at a company that owns delivery trucks,
so they might be buying more sometime. 
3:23
The first step is to qualify the lead. 
3:27
While definitions differ, I would say that to be a qualified lead your sales team needs to establish two things. First, that the target
company your lead works for wants to buy at least two or three delivery vans from someone in the next year. And second, that
they could afford to buy your vans if they wanted to. In other words, they have a plan to buy, and a budget to buy, vans in your
price range. 
3:58
Hey, as an aside, I can't tell you how many people are happy to talk to you on the phone for hours about how their company
wants very much to buy the thing you're making. Or, if you're still doing pre-launch market research, or considering making, and
you only find out months or years later that they have no money in their budget to buy any such thing. Such people, also, often
like to invite you to travel out and demonstrate your product in person at your own expense without informing you that no one
with any buying authority will be at the demo. Apparently many people are quite bored sitting at their desks, and are happy to
talk at length with and hold follow up meetings with anyone friendly, even if they will never buy anything from them. 
4:49
Note that you have established that the lead is qualified by reference to the target company's plans and budget. Now, you need to
identify the person, within the target company organization, who has the budget, and authority to decide on the purchase. They
need to be able to sign a purchase order. They are the correct decision maker. 
5:10
The person you originally contacted may be able to tell you who the correct decision maker in their organization is, but they may
not choose to identify them.  Because doing so may mean you'll stop calling them. Really, not kidding. Not surprisingly, often
your original contract won't tell you that they have no power to decide anything, and that their opinions don't even matter,
and certainly don't matter to the actual decision maker. 
5:38
When the correct decision maker tells you that they want to engage with you about the possibility of buying your product, yes we
might buy vans from you, that is an expression of interest. The next big step will be to meet directly with the correct decision
maker. This may require, particularly in large complex organizations, many meetings with other people first. Various gatekeepers
and lower level functionary's and lots of requests for documentation. 
6:07
You can literally spend forever holding seemingly necessary and productive meetings in the intermediate levels of any large
company. The work product of many people is meetings apparently, so the more meetings they hold the better in their
view. Great sales people seem to have a knack for getting directly to the top guy or gal and short circuiting the potentially
limitless meeting process. If you have such a sales person cherish them. Keep them happy. 
6:38
Once the decision maker is persuaded, you've overcome all their objections and addressed all their concerns and you've
negotiated terms and a price and they tell you directly that their company will buy x amount of vans from you for y dollars, you
have what I call a soft circle sale. 
6:58
Why do we call it a soft circle? The number of things that can still go wrong before you actually close the deal with a legal
contract, nevermind getting paid, is incredible. Here are a few examples that I have come across in my business. 
7:15
After getting a definite and unambiguous yes from the correct decision maker, here's some things that can happen. The decision
maker never takes another call from you, stops answering your email, and pretends you don't exist. 
7:27
Or, you eventually learn from someone else that the decision maker has quit or been fired, or has transferred to a different office,
and you will need to start the sales process all over again, with a new person, who has never heard of you or your product. 
7:42
Or, the target company is suddenly acquired, or it is in acquisition talks, and all pending contracts are suspended indefinitely. 
7:51
Or, the target company goes bankrupt. 
7:54
Or, your own company decides to stop making the product or offering the service that you just sold, but only tells you about that
decision after you get a yes from the customer. 
8:05
So, to review, the key enterprise sales metrics are new leads. New qualified leads. 
8:18
Expressions of interest. Meetings with the correct decision maker. 
8:23
Getting the decision making to say yes, that's a soft circle sale. And then the number of actual official binding contract sales. And
that's when you book the revenue for financial accounting purposes. 

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