Conferences, thought leaders, and business service providers are always advising against numbers to collect. “Big data”, “analytics”, “metrics”, “running by the numbers”… these are all the latest buzzwords for running a modern, successful business.
But numbers, like any information, can easily be misinterpreted, poorly collected or just plain wrong in telling you past performance, much less what path you should take. So before you spend the time and money to collect a new metric, ask the following questions:
1. Will this move your BIG IMPORTANT NUMBER? Every business has no more than 3-5 (closer to 3) numbers that are truly watched / obsessed over. For businesses with investors, it may be revenue, earnings, or MRR (monthly recurring revenue). If your goal is to create a high growth business that will be a desirable acquisition for a bigger player, perhaps it is number of members, or market share in a niche area. If you are a non-profit, it may be number of program graduates who gain employment. If you are a sole proprietor, it may be end of month cash flow to pay bills. The point here is that there are only a very few numbers that REALLY matter. For this new metric, how will it critically impact that BIG IMPORTANT NUMBER? If the answer is “not much”, you can skip all the other questions and move on.
2. Can you collect the right data that will really measure this metric? The wrong data can actually give you a false sense of performance, or worse yet, get you to take actions that are counter-productive. Make sure you are not collecting vanity metrics.
3. How much time and money will it take to collect, synthesize and report this metric? Does it require customized programming of your system? Does it require manual extraction and calculation? How much time and money will it take? Metrics requiring customized reporting to a legacy system or direct customer surveys can be more costly than you think. Or a new service may make it cheap and easy. Understand the costs up front.
4. Can you take action on this number? Ask yourself, if this number is “bad”, what will be the response? Data can give information and even insights, but if you cannot take action, it is nothing more than nice to know.
Nothing comes for free so before you adopt that next KPI, make sure it is worth the effort.