All KPIs Are Metrics: The 3Ms of Scaling

All KPIs Are Metrics: The 3Ms of Scaling
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“You can’t manage what you can’t measure.” Management guru Peter Drucker often gets the credit for this quote, and it’s a truth that every organization will face. From true startups to internal launches, we need numbers to help us know if we’ve made our mark and reached a milestone. Investors expect it. Customer expect it. You should expect it, too.

In The Startup Equation, we refer to this process as the 3Ms of Scaling: Milestones, Metrics, and Measurements. The 3Ms will look different for each company. That’s not a huge surprise -- every startup is different. Using the 3M process, you can pick and choose from a range of options to build a dashboard that best reflects what you want to accomplish.

Identify Your Milestone

Your milestones represent an action or event that marks a significant change or stage in development. The question of milestones comes up most often when you’re seeking investments for your organization. Some milestones that might be a good fit include:

  • Customer: Clicks, Views, Conversion, Happiness, Loyalty, Referrals
  • Product: Activation, Engagement, Functionality, Channels, Platforms
  • Team: Salaries, Culture, Turnover
  • Financials: Revenue, Cash Flow, Burn Rate, Receivables, Run Rate
  • Business Model: Channels, Markets

Again, pick options that fit your industry and give you the most insight into whether you’re making real progress.

All KPIs are Metrics

Now you know milestones to watch, but how do you figure out what’s most critical? It starts with picking metrics that are Key Performance Indicators (KPI). Think of KPIs as yardsticks you use to measure success and progress. They’re linked directly to your success or failure as a startup.

One thing to remember: all KPIs are metrics, but not all metrics are KPIs. KPIs are associated with action because they’re about helping you achieve a goal. Metrics that qualify as a KPI must be:

  • Outcome-oriented and tied to an objective
  • Target-based with at least one define, time-sensitive target value
  • Rated or graded based on an explicit threshold where you can measure the gap between the target value and the actual result

These three criteria will help you separate KPIs from other metrics and ensure you and your team stay focused on the measures that really matter to your organization. They will also help you investigate assumptions (e.g., “I think that landing page will drive a lot of business.) and measure progress (e.g., “Landing page A shows a higher conversion rate that option B.). Of course, early-stage startups often have very little data to work with, making it difficult to avoid skewing the results. If you fall into this group, make sure you weigh your KPIs carefully, make sure they can be explained, and pick options that support your milestones.

Measure the Results

Now that you’ve got all this information, how do you measure the results? You’ll build a dashboard. To create your 3M Dashboard, you start with pulling together a list of things you’re tracking. For example:

  1. List of milestones for the next 18 months. You can include build dates, testing, launches, team members hired, funding received, etc.
  2. List of metrics. What will you track in relationship to your milestones? Make sure your metrics help you see if you’re staying on track.
  3. List of measurement thresholds. You need to see if metrics are being met, exceeded (in a bad way, like doubling your burn rate) or totally blown out of the water (in a good way, think doubling your customer sign ups).
  4. Using these lists, you can dump your information into one of the many dashboard tools available online. I found one great list on Quora.

Alistair Croll said, “Your dashboard should shame you as much as it motivates.” That’s why the milestones, metrics, and measurements you choose matter so much. Pick the right ones, and you’ll build a powerful tool that helps you build a sustainable company.

This post originally appeared at LinkedIn on April 15, 2016. Want to learn more about how to scale your startup? Check out The Startup Equation by Ja-Nae Duane & Steve Fisher.

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