As more companies strive to be data-driven, you might have heard of the quasi-mythical idea of guiding your business with just one metric. Without more context, “one metric that matters” might seem like blasphemous, idiotic business suicide…
However, Alistair Croll and Ben Yoskovitz, authors of Lean Analytics, are confident it’s the secret to successful startup analytics. In fact, they say that focusing on just one key metric allows business leaders to strip away unnecessary distractions and dramatically accelerate growth—to “build a better startup faster.” That’s the dream, right?
According to Croll and Yoskovitz, it can be a reality. By targeting the right key metric, you can maximize its power, and identify problem areas and opportunities for growth.
It sounds simple, but there is one catch (or four):
Given these caveats, is a “one-metric-that-matters” approach still worth pursuing? Absolutely—if you do it right. So here’s how to address these four issues so you do OMTM correctly and get the most out of your metrics:
As nice as it would be, there isn’t one metric that every company should focus directly on. Even something as universal as revenue won’t be the key standard that drives success for every business.
According to Croll, all online businesses boil down to one of six archetypal models: ecommerce, two-sided marketplace (ex. Craigslist), Software-as-a-Service (SaaS), mobile app, user-generated content (ex. Reddit), and media.
For on or offline businesses, Neil Cabage of SmarterStartup.org argues that there are 7 Business Model Archetypes, shown in a Venn diagram of trade, service, and product:
Each of these archetypes follows a general pattern and uses certain metrics to define and drive success. When you can identify which archetype fits your company, you can apply and follow its pattern … Just make sure not to follow that pattern blindly and disregard your unique business needs.
Your OMTM should be helping you progress to a specific goal, and if your goals don’t change between hiring Employee #4 and Employee #152, something’s probably off.
To help with this, Croll and Yoskovitz identified five growth stages that every company has to pass through, from idea to IPO:
The OMTM you choose should measure your progress toward the next goal. But take care: overestimating progress can be detrimental to a startup. Each stage builds on the growth attained in the previous stage, and skipping a step means you’ve left a dangerous hole in your foundation.
The Lean Analytics team created a basic matrix of metrics that matter for each business type at each stage of growth. You can also check out Dave McClure’s 2008 presentation, Startup Metrics for Pirates, or Eric Ries’ Three Engines of Growth to help you choose your OMTM.
It would be nice to pick a solid metric, throw it on a dashboard, and instantly start seeing results. But it takes a little more work than that.
Thankfully, Croll and Yoskovitz have a few tips. These rules will help ensure that the metric you choose will have the most power to help you grow your business:
Once you’ve selected your OMTM, you should consistently re-evaluate it. Is it changing the way you and your team work? Is it helping you make progress? If not, it’s time to pick a new metric.
One appealing aspect of the OMTM is its apparent minimalism. After all, trying to track hundreds of points of data is overwhelming, and it’s easy to be enticed by a clean, one-number mentality.
However, your data doesn’t function in a vacuum. It’s connected in a thousand different ways, with lots of buttons, levers, and moving needles. You need visibility into other metrics to understand the context of your OMTM. When it changes, you have to be able to analyze what caused the change, and that can be difficult if you aren’t tracking a variety of other metrics.
So while the OMTM allows you to target your focus in one place, it doesn’t mean you should turn a blind eye to everything else.
The OMTM may take some work, but the payoff is huge.
With the OMTM, your focus is streamlined so that you’re able to target what matters most in your business. It allows you to make clear and distinct goals so you can prioritize and align your efforts. It also makes it easy for the entire team to come together for a common purpose.
Because of this, your OMTM can change your company culture by uniting your team and encouraging them to experiment. When everyone is working together to achieve a goal, each individual is inspired to try new things. While some experiments may fail, those failures become valuable learning experience that inspire further innovation. Your team becomes an engine that continuously drives success.
And if that isn’t worth the effort of teasing out the right OMTM and keeping tabs on it, what is?
If you want to focus on your OMTM, nothing makes it easier than putting it on a sales, marketing, or executive dashboard. With Grow, you have powerful and beautiful visibility into your metrics, and you can easily expand your OMTM to highlight it.
Just imagine having your most important metric displayed on big screen TVs throughout your office so that your whole team remembers what you’re trying to achieve together…