Ali Mese from Growth Supply published this article on Crew a couple of weeks ago. It might be the best post on sales funnels I have ever read. His point is simple. Why worry about the detail of your metrics when you could be creating more value for customers? And he cites plenty of great companies that share this philosophy.
Perhaps though he would not expect confirmation from the boss of Dior. In Lunch with the FT this week Sidney Toledano expressed his view of reliance on numbers:
“Some people try to find out what’s wrong through the numbers. But if you stay in the office, nothing will change.” and “…its better to have no explanation for success than a lot of explanations for failure."
This stands in nice contrast to the deluge of metrics matter material hitting startups. Some readers may know that I am not a big fan of this approach. But instead of digging further into why I think its wrong, let me ask a different question.
Why on earth do startups want to measure and manage everything they possibly can?
For a start, I seem to remember that being an entrepreneur is about freedom. Fire your boss. Get out while you can. Do more of what you love. And so on. Where is the fun in becoming a slave to numbers and data instead of wages?
And if you think that’s fine for founders but you need a system to control the rest of your business? Well I suggest you go back and reread Animal Farm.
So next time you feel the need to grab hold of another set of metrics. And manage the hell out of some abstract concept. Think about these three things.
Both management and leadership are about human behaviour. The task is to get people to do what you would like them to do. Or to inspire them to fulfil their potential. This applies to customers, investors and teams.
The best way to influence human behaviour is through incentives of all kinds. Measurement creates incentives. So metrics can be an effective agent of change. But they are not the only way. And they can have unintended consequences.
There is a famous example from India in the days of the Raj. Colonial officials were worried about the growing number of poisonous snakes, mainly cobras. They offered a reward for each dead cobra brought to officials. Locals soon started breeding snakes and then killing them for the reward. Before long there were more snakes than ever.
Your challenge is to change things. That is the point of a startup. So the right place to start is how you create a system of incentives that encourage the change you would like to see. Choose each with care and learn from the effects that result. Place any metrics you choose to use squarely in this context. Try to keep the reptile count down.
Startups make an impact when they understand real world problems and build solutions that make a difference. This does not happen in a bijou loft converted into a cool co-working space. You need to leave the startup bubble and go listen to customers.
After change, the next order task is to learn. Data can be an excellent way of learning about customers and markets. But just because you have data doesn’t mean you should use it. One of the greatest errors in management is relying on numbers just because they are there.
What about the things you can’t measure? Sometimes the stuff which can’t be reduced to numbers is the only stuff that matters. Don’t use your metrics as a crutch and miss the big picture.
It is rubbish to say that you can’t manage what you can’t measure. Good leaders do it all the time. They sense problems in the team. They interpret customer feedback. They listen to advice and weigh the options.
Don’t allow metrics to be a substitute for management or leadership skill.
Metrics eat time. There is the delay between measuring and reporting. Shorter than it used to be but longer than you think. Then there is the time taken to analyse. discuss and decide. Often productive but the more you do it the fuller your diary looks.
And there is a philosophical paradox. No matter how much someone tells you that their pet metric will predict the future, it is still based on the past. The growth. The change you would like to happen. The success of your business. All this lies in the future. The past speaks in a foreign tongue. How good are you at translating into the language of today?
Startups need speed. Almost the only advantage you have over incumbents is agility. The ability to respond faster and better to emerging market needs. Numbers can help. Or clog up your business thoughts and actions. Use the good stuff and don’t let too much data get in the way.
There is a place for numbers. Metrics can provide a valuable indicator of performance. And an early warning flag for problems. But the goal of business is to create wealth. Not to generate good numbers. Focus on the things that matter.
Use your numbers to help you. Aim for a balance. Good management and great leadership requires thinking and action that is both analogue and digital.
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.