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Bursts of Color - In Search of a God Metric

Bursts of Color - In Search of a God Metric
By Geoff Donaker • Issue #28 • View online
I was fascinated by this recent FT article on Anders Tegnell and the Swedish Covid Experiment. Regardless of how we each feel about varying virus responses around the world, hopefully we can agree that it’s a complex, multi-variate equation in which no one metric tells the story. In the simplest example: where we increase testing, reported case counts go up, but case fatality rates go down.

Which rectangle is bigger? (credit: Ev Williams on Medium)
Which rectangle is bigger? (credit: Ev Williams on Medium)
There is No God Metric
The Swedish article reminded me of an Ev Williams post from a few years back that discourages measuring a business based on any singular “God metric,” since there are so often trade-offs right below the surface. Want fast customer growth? Just drop pricing and increase CAC (which makes each customer less valuable). Want each customer to engage more often? Just start texting them every day (which may reduce customer count over time).
If what you care about — or are trying to report on — is impact on the world, it all gets very slippery. You’re not measuring a rectangle, you’re measuring a multi-dimensional space. You have to accept that things are very imperfectly measured and just try to learn as much as you can from multiple metrics and anecdotes.
Boiling the Ocean is Not Great Either
For those of us who like numbers, the complexity noted above can quickly lead down a rabbit hole of trying to track and influence dozens of different metrics. At eBay we called this the obsession of trying to understand our own business. It’s also often called analysis paralysis. Common symptoms to watch out for include:
  • Founders losing themselves for days in SQL
  • 10 person startups with 1-2 dedicated analysts
  • Board decks with dozens of tables in 8-point font
A Natural Compromise: Focus on 3-5 Key Metrics
So if you’re not supposed to prioritize one number, but also shouldn’t track dozens, what’s a founder supposed to do? IMO, the natural compromise for most start-ups is to pick 3-5 key metrics and focus on driving those the best you can. Preferably each group and person feels accountable for one of these metrics. Revisit the chosen metrics at least annually – quarterly for younger companies – to add new ones and remove those that no longer seem relevant.
Back to Ev Williams:
Numbers are important. Number of users is important. So are lots of other things. Different services create value in different ways. Trust your gut as much (or more) than the numbers. Figure out what matters and build something good.
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Geoff Donaker

Bursts of Color is a newsletter for start-up leaders who work with Burst Capital. It's meant to include products, people and ideas that I think are interesting and maybe relevant for you.

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