Monday Metric: Why Metrics?
A Deep Dive into Why They Matter
In the fast-paced world of startups, "moving quickly and breaking things" often dominates the conversation. However, it's crucial not to overlook the role of metrics in this equation. Today, we'll delve into the three primary reasons why metrics should occupy a key position in your startup toolkit. We'll draw insights from two of my favorite startup books: Bill Aulet's "Disciplined Entrepreneurship" and Alistair Croll and Benjamin Yoskovitz's "Lean Analytics" to cement our understanding.
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1) Your Startup Instincts are Experiments; Your Data Proves or Disproves Those Experiments
Imagine you're sailing on an uncharted sea. Your intuition is the initial breeze guiding you, but metrics are the navigational tools that confirm whether you're heading in the right direction. Without looking at your wake, you won’t know if you’re going in a straight line. Entrepreneurship is creativity + discipline. You need both for innovation.
In the startup world, everything you do is, at its core, an experiment. You hypothesize that a particular feature will engage users, or that a specific marketing strategy will capture a new audience segment. Metrics are the tools that allow you to turn these hypotheses into data-driven results.
As Alistair Croll and Benjamin Yoskovitz put it in "Lean Analytics," "If you have a piece of a business model—a way to acquire customers for less than they'll generate in value while you hang on to them—then you've found a 'sustainable, scalable, repeatable business.' Your metrics prove this."
By quantitatively measuring the outcome of your instincts, metrics provide invaluable data that can either validate your direction or serve as a catalyst for pivot.
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2) It Teaches You What Business You're In
Your startup may start as an idea, but as it grows, it often morphs into something more complex, perhaps even something completely different than what you initially envisioned. "You need to understand what business you're really in, which isn't necessarily what you put on your business card," say Croll and Yoskovitz.
Metrics offer the lens to see through your assumptions and understand your actual position in the market. Perhaps you thought you were in the business of social networking, but the metrics might reveal that you're actually excelling in data analytics. Bill Aulet supports this perspective: "Focus on your customers and fully understand the market through their eyes. This understanding will provide you a unique view that drives your competitive advantage." Notice the humility required to fully adopt this focus. You may have the seed of a startup, but your customers will tell you if there’s enough problem soil to plant it in.
Identifying what business you're genuinely in helps to allocate resources effectively and sharpen your market focus.
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3) Most Importantly, Metrics Help You Ask the Right Questions
Perhaps the most crucial aspect of metrics is their capacity to provoke essential questions. In the chaotic environment of startups, it's easy to get lost in a myriad of "what-ifs" and "maybes." However, well-chosen metrics cut through the fog, highlighting the questions that truly matter.
"Having a single metric to optimize, and the discipline to optimize it, is what separates many failed startups from successful ones," note Croll and Yoskovitz. Likewise, Aulet adds, "Innovation is not about money; it is about value creation. Metrics let you measure that value, thereby letting you ask the right questions about how to create more of it."
An exhaustive but effective way of driving to clarity in metrics is The Five Whys Method, a problem-solving technique originally developed by Sakichi Toyoda for the Toyota Production System, designed to get to the root cause of an issue by asking "why" five times in succession. The process begins with a problem statement, and by repeatedly asking "why" in response to each answer, it aims to peel back the layers of symptoms to uncover the underlying cause. The idea is that once you've identified the root cause, you can implement a solution that addresses the problem at its source rather than merely treating its symptoms.
Let's consider a scenario where a Software-as-a-Service (SaaS) company is concerned about its long user onboarding time. They would apply the Five Whys Method as follows:
1. Why is the onboarding time for new users too long?
- Answer: Users have difficulty navigating through the initial setup process.
Note, this answer must be driven by at least qualitative data gathering, but ideally quantitative as well. Jumping to conclusions quells experimentation.
2. Why do users have difficulty navigating through the initial setup process?
- Answer: The setup involves multiple steps that are not intuitively laid out.
Again, how do we know this? Did the users tell you? Did their actual actions corroborate their statements?
3. Why are the setup steps not intuitively laid out?
- Answer: The User Experience (UX) design did not adequately consider the user journey during onboarding.
How would you prove this with data? Perhaps with notes or memos making explicit the tradeoffs or implementation the UX design made as they worked through the user journeys?
4. Why did the UX design not consider the user journey during onboarding?
- Answer: The design team prioritized feature development over usability during the design phase.
This could have totally been the correct call at the time they made it, but without data and without that traceability, we’d never know.
5. Why did the design team prioritize feature development over usability?
- Answer: There was no formal process to integrate user feedback into the design cycle.
Here, the root cause is the lack of a formal process for integrating user feedback into the design cycle. Addressing this could involve setting up regular user testing sessions, incorporating more UX research in the design process, or creating feedback loops between the design and customer support teams. By tackling the issue at its root, the company can improve the onboarding experience, which could subsequently improve user retention and satisfaction.
Your metrics drive better questions, helping you get to root causes more quickly, allowing you to iterate and ideate at true startup speed.