The next article in my series on entrepreneurship for Harvard Business
Review is live today. Once again, we revisit the topic of Actionable
metrics and their nemesis: Vanity metrics. Any entrepreneur with a
decent reality distortion field can find metrics that make it look like
they're being successful. This "success theater" is occasionally useful
for PR or getting through a tough board meeting. But it's lethal when
we start to run the company using vanity metrics as a guide. But how do
we know which metrics to look at? How do we know how much energy to
invest in analytics vs. doing real work? And how do we get the whole
team to take action that benefits real people when all they're looking
at is abstract numbers on a screen? Remember "metrics are people, too."
For more, read on...
Entrepreneurs: Beware of Vanity Metrics - The Conversation - Harvard Business Review:
The idea is simple. Establish baseline metrics by building the minimum
viable product — the minimum required to measure the response of early
adopters. Then, in each development cycle, use the insights gained by
studying customers to make improvements. This is the source of
validated learning — proof that the customer insights translate into
tangible metrics improvements.
But this leaves a very difficult problem still to be solved: How do we
know that these changes are what actually effect change in the metrics
that we're observing?
This is the curse of vanity metrics, numbers which look good on paper
but aren't action oriented: website hits, message volume, or 'billions
and billions served.' They look great in a press release, but what do
they accomplish?
Consider
a scenario where a team makes a product change, and the very next month
page views go up. As humans, we're hard-wired to infer causality from
correlation: when the numbers go up, we tend to take credit. But when
the numbers go down, we tend to blame someone or something else. Worse
yet, different team members tend to attribute positive changes to
whatever project they were working on at the time (but not negative
changes, of course). As a result, different parts of the team are
constantly "learning" in their own private reality. When those teams
face difficult choices, it's incredibly hard for them to come together
and make an informed, fact-based decision.
To avoid falling into this trap, I recommend you follow the three A's of metrics. All metrics should be actionable, accessible, and auditable...
(Image source: completeinnovator.files)
