Expert Guest: Ash Maurya (LeanStack.com)
Key Learning Point: In this session, you will learn how to define and measure what really matters for the growth of your product.
Free Resource: Results Analysis
We live in a world where access to huge amounts of data about our businesses is just a click away. In fact, these days, there is so information that it can be difficult to know what to focus on. We can get caught up trying to measure too many things at once and this can lead to paralysis by analysis. We could also be focusing on the wrong information and be flattering ourselves with numbers that look great, but don’t accurately reflect our performance.
Ash Maurya joins us to explain how to define and measure what really matters for the growth of your business. When starting out, we need to know what to measure to determine whether or not we are on track and making progress. Very often there is just one specific key performance indicator, or KPI, that can be used to determine if your business is on the right track or not.
When determining which KPI this should be, we need to be careful not to choose vanity metrics. These are the metrics that make your business look good, but do not tell the whole story. They could be web hits or number of downloads. Perhaps in your case you measure the amount of cumulative sign-ups to your website. If people sign up every month, you will see that the cumulative total increases every month. This feels good, but it is not the best way to measure success.
To make this an actionable metric, you could look more closely at the weekly or monthly sign-up rate. Or you could investigate how many people visit the site and how many sign up. Perhaps of every 100 people who visit the site, 30% sign up. This is a great actionable metric that you can use to increase sign-ups. These figures can help you devise strategies to get to 40%.
Using the wrong KPIs to measure the performance of your business is like taking a road trip without using a map or any other navigational equipment. As the miles pass by, you have no idea if you are heading the right direction.
We need to start at a macro level. Zone in on the one KPI that can tell you about your business’s performance. This is the one actionable metric that you would take to stakeholders or investors to give them an indication of how things were going. What this is metric is depends on your business.
For many small businesses, this would be transactional in nature. We would make a sale to a customer. This is the single actor business model. Digging down deeper in the data, we could see our customer retention rate, referral rate, product return rate and so on. But, the one overarching KPI would be transactions.
For a multi-sided business such as Twitter or Facebook, things would be slightly different. Users do not pay to use the services, so the companies want to monetize their active users, usually by selling advertising space targeted towards specific groups. A key KPI for this type of business would be daily or monthly active users. User sign-ups would be a vanity metric in this case, as advertisers want to know how many people their ads are reaching, not how many people are signed up to the service. A marketplace type business such as Airbnb or Uber, which brings providers and customers together, would see how many rooms rented or journeys completed as their key KPI.
Vanity metrics do have a place, perhaps when looking for investment or to celebrate certain milestones, but for the day-to-day operations of small businesses, actionable KPIs are far more important.
Focus in on your one key performance measurement and ensure that your business is heading in the right direction.
- LeanStack (https://leanstack.com/)
- “It’s not about can we measure things, but what we should be measuring. Rather than clarity, we drown in a sea of numbers.”
- “There is a fine line between actionable metrics and vanity metrics.”
- “The danger we run in to is when we fall into the trap of thinking that these vanity metrics are indeed what we should use internally to pat ourselves on the back.”
- “Trying something else without understanding why there is failure is a see-what-sticks strategy.”
- “Love the problem, not your solution.”
Don't forget, the more you expect from yourself, the more you WILL excel!
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