Have you ever sat in a meeting, staring at a line chart while the meeting's attendees quarrel over what caused a dip in the line chart here, and a peak over there?
Does the whole meeting seem pointless? Wasteful? Does the "consensus" happen to agree with the loudest or most well paid person in the room? If so, you've had a run in with a vanity metric.
In this post, you'll learn what a vanity metric is, how to spot one in the wild, and why it's toxic to a company. You'll then be ready to learn what an actionable metric is and how these will make you more productive (with less time wasted in pointless meetings).
Vanity metrics - what are they?
A vanity metric is calculated to sound impressive. Your first impression upon hearing a vanity metric will be that the number is large, difficult to achieve, or is otherwise remarkable. Normally, vanity metrics fit the narrative that the creator needs to tell - about why to invest in X, why our department is doing better than last year, or simply to have something to say when there's nothing of real value to share.
"Revenue has grown 12% year-over year!"
"We sold 24 million tons of rambutans."
"Our landing page receives over 30,000 views per week."
"Calls to the call center are down 3.5 percent compared to last quarter."
All of these statements contain vanity metrics whose purpose is to impress - but the fatal flaw of all of these statements can be summed up by one follow-up question...
"What caused it?"
Queue the reading-of-the-tea-leaves of the corporate world: biases built from opinions derived from a four-year-old report that no one in your department has actually read.
The issue with vanity metrics is the façade of authenticity - these metrics may be chosen based on precedence or a voice of authority that savvy career-minded employees won't want to question for fear of challenging the status quo.
However as soon as a vanity metric is made "true north" for a company's reporting, it is very difficult to make decisions rationally. Attribution of what caused a vanity metric to increase or decrease is nearly impossible - and even if you benefit from a bench of talented data scientists who know how to determine true causality, the number-crunching will be slow and expensive, and the decision-makers will have moved on to the next thing. Vanity metrics are expedient to share in the short-term, but in the long-term they undermine the organization.
Actionable metrics as the antidote
Adding actionable metrics to a pointless business meeting is like magic. While there may initally be pushback and discomfort to using a new metric over the old metric that everyone was used to, ultimately decisions will be made faster and with more confidence and buy-in.
Why does this happen? Actionable metrics eliminate the unnecessary information and directly report on the only reason your company exists - your customers!
All the vanity metrics we listed above assume that revenue just gets generated, or rambutans just get shipped into a vacuum, or landing page visits come from some act of god, or call center calls are made by robots. The only way a metric can be meaningful to your company is if it measures in some way the relationship you have with your customers.
Why are actionable metrics better than vanity metrics? Consider the problem with vanity metrics: you could never tell what truly caused them to go up or down. However, because actionable metrics are at the customer-level, you unlock an incredible new power: cohort analysis.
No more need for a bench of data scientists or to close your eyes to the questionable assumptions in your data analyst's model (that we all know is just comparing the average of an average over time).
Cohort analysis means that you get fresh view of what is working and what isn't every single quarter (or month, or week...) in a way that is directly comparable to the previous periods! Adding A/B testing to cohort analysis only make it more powerful; you can not only show that a change had an impact compared to last quarter, but that the customers who weren't impacted didn't show any change. Your company can now make smarter decisions faster.
Here's the best news - cohort-level customer metrics lead you straight to the most actionable, most important metric any company can know: Customer Lifetime Value!
In other posts we'll describe in more detail how to use actionable metrics to improve your business. For now, you've taken the most important step - you will now be aware when you see a vanity metric, and can feel empowered to explore alternatives that will save you and your company a lot of time, money and frustration.
コメント