This article is based on a talk I gave at Microsoft Ventures under the topic “Metrics that Matter”.
People track metrics for multiple reasons. Most use it to keep a tab on the business. I use it for a related, but slightly different reason.
As founders, we are primarily story-tellers. We are constantly selling our story to investors, partners, employees, press, and who not. For me, Metrics is nothing but a story, told in numbers. This story is much more interesting and credible to investors and business stakeholders and so totally worth it.
It is important to understand the story that metrics are telling you – every day, every week, every month. Yes, this is the best way to keep a close tab on your business. But, it is even more important to practice how you will convey that story to outside world — every day, every week, every month. We should be picking the interesting stories and should be planting seeds for better stories.
There should be one metric that defines your company. This is the one metric why the investor is interested in you. This is the one metric around which the entire organization rallies around.
Lets say, your metrics A, B and C are on par with industry. D and E are below par. F is above par. Which one would you focus on?
Well, what’s the use in putting all the hard work, just to become on par with industry? Pick a metric should make you stand out from the crowd.
Remember that Keystone metric might not be in the metrics that you are currently tracking. Look deeper. Look everywhere. Also remember that Keystone metrics change over time. My company, Voonik, had different keystone metrics across stages: MVP stage, Building Block stage, and Scaling Stage. Keystone Metric could also change in the same stage, based on new information and changing priorities.
And your keystone metric should grow. As Paul Graham says, “ Pick a growth rate and then just try to hit it every week. If you hit that number, you’re successful for that week. But if you don’t hit it, you’ve failed in the only thing that mattered.”
You might have best-in-class conversion rate, multiple-x growth rate but those are meaningless, without scale. You can grow from 1 to 2 orders and claim 100% growth rate. So, pick stories / metrics that makes sense for your stage. Percentage of positive reviews or repeat usage is better story than growth rate for a startup without scale.
In addition to keystone metric, you should be tracking a lot more metrics. You might not know all the metrics you would need in future. So better enable tracking for all possible metrics you could think of. Send events for every action.
If possible, try creating a single repository. At Voonik, we dumped all the data from Google Analytics (GA) and FreshDesk into our database so that we can combine them with Voonik data to create meaningful reports that are not possible in GA.
Remember, a sub-par metric is not bad, as long as you planned it that way. A phenomenal metric is not good, if you don’t understand why is it that way. Don’t miss human metrics such as Productivity metrics, Effort Burn rate etc. And don’t miss metrics outside your product such as Metrics for the platforms and services you use
Sometimes, you need to invent a metric. At Voonik, we have a custom metric to measure the effectiveness of our algorithms. At Amazon as well, we had a number of invented metrics.
Before creating a project roadmap, create a metrics roadmap. Assign a owner for every important metric. Have them report the story every day. Assign projects / tasks to the person whose metrics will be affected by the project. Make sure every metric owner understands their part of story and the goals.
Don’t go by industry benchmarks. Different companies measure the same metric differently. For example, How do you measure conversion rate? And don’t believe the analyst reports. Go by what is needed for your business model.
Metrics that are under your circle of influence are input metrics, such as Number of products added, Number of steps in checkout, design of the website.
Metrics that are outside your circle of influence are output metrics. They are influenced by input metrics, such as Number of orders, Sales Volume, Contracts.
Assign only Input metrics to subordinates. They will be frustrated if their efforts don’t impact the output metrics and will start making excuses for not meeting goals.
And that’s it for today. Will update the article as I learn more on this topic.