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Screwy Metrics

January 16, 2013

Less like this

And more like this:

In retrospect, creating a company looks like instantiating an idea.  So it’s easy and seductive to imagine that a “metrics based” approach to startups involves breaking the business down into components and measuring the creation of each component.

Unfortunately, though, you can’t build retrospect. Instead, you need to identify gaps (needs, holes, problems, etc.) in the existing economic and psychological world, and in the process, discover what your company needs to be to fit into those gaps.  This has to happen simultaneously in lots of dimensions:  the dimension of what you can provide, the dimension of how customers become aware of you, the dimensions of who you need to work with, what you need to outsource vs doing it yourself, how customers want to relate to you, etcetera.  Each dimension impacts the others, so it’s common, for example, that a new thing you learn with respect to a way you have to be with a customer invalidates something you thought you knew about the way you could work with a partner.

As a consequence, metrics that track what you’ve built can lead you into a false sense of security. Because tomorrow, you may discover that that thing you built (a prototype, a relationship with one type of customer, a plugin for one platform) is no longer relevant to the business model that can work as a whole.

The trick is to track velocity of learning.


From → Lessons, Metrics

  1. Pedro Bandeira permalink

    Do you think “dataism” could become a trap if we look more to the metrics than to the customer? Metrics vs. “design thinking/customer insight” is a very tough discussion. Perhaps the balanced methodology win the debate.

  2. Thanks for the question. I sort of addressed this in the post today. I’m hardly against data; what I’m against is a cargo cult mentality that abstracts data from theory. I was speaking with another company today, where they’d asked for feedback on a business plan. They’d heard from several people who read their plan hat they came off as “rookies” and had decided to create an advisory board of industry veterans to counteract that impression – asked if I thought that was a good idea. (They’d already discounted my advice about the uselessness of business plans, but never mind.)

    My reaction was that people telling them the plan made them look like rookies was a data point (or a series of points). Without a theory, there’s no way to find a right course of action. The data just says that some people looked at the plan and thought the word “rookie.” Maybe they were responding to the writing style, or to a particular section that betrayed inexperience with some aspect of their business, or a comment that showed how recently they’d been in school. If that data point had been gathered as the result of a thought-through process of coming up with a theory, and then a hypothesis to test it, then you might be able to meaningfully decide what to do next. Since it wasn’t, t’s impossible to tell if “forming an advisory board” is a good course of action.

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