At Asym we take a dedicated business view to prioritizing performance measurements. We focus on optimizing the elements that make most impact on the business.
This is the 5th post in our series on metrics. It ranks metrics according to direct impact on business success. This can be different for different companies: in many cases the metric that matters most comes down to the business model of the company.
The other posts in the series provide different perspectives on which metrics are most valuable. The first post looks at a Harvard Business Review perspective on how Tesla shows existing metrics are outdated. The second post helps make sense of metrics by grouping them into 4 broad categories. The third post presents the traditional view of metrics, with consumption metrics driving everything else. The fourth post considers the balanced view, with each metric contributing an equal measure to business success. The sixth post looks at the ‘what pays the bills’ view.
Some things matter more than others
The last article considered the ‘equal responsibility’ view, where each category of metric plays an equal role in eventual business success. The next perspective we present – the business view – argues some metrics are more valuable than others. There can be situations where the most valuable metrics are not the most top-of-mind.
The business view is the traditional view, inverted. Where the traditional view sees consumption metrics as the foundation to business success, the business view reverses the order.
Here is the traditional view, with consumption metrics driving the model and sales a distant consequence.
Here is the business view, with sales driving the model and consumption metrics a distant consequence.
The business model matters
Between the traditional and the business view, which is best depends on perspective.
Consumption metrics tend to rule when number of eyeballs is the only driver and quality of attention doesn’t matter.
Ad-driven business models often use consumption metrics, with good results.
Sales metrics tend to rule when quality of attention does matter.
E-Commerce and subscription-driven business models can be misled by consumption metrics – sales metrics are a far greater indicator of success for these business models.
Many companies monetize the web using an ad-driven business model. This model is driven by consumption, and so puts emphasis on consumption metrics. This has circular effects which lead to the metrics industry constantly publishing articles on consumption metrics, stressing the importance of consumption metrics, and generally giving air-time to all things consumption. Internet behemoths Google and Facebook depend on consumption, which again tilts attention towards the over-riding importance of consumption metrics.
This leaves ecommerce and subscription-based companies in a tight spot. While consumption metrics are a shoe that fits ad-driven business models perfectly, it’s a shoe that doesn’t come close to fitting any company that depends on people acting on a message.
While consumption metrics are a shoe that fits ad-driven business models perfectly, it’s a shoe that doesn’t come close to fitting any company that depends on people acting on a message.
What does this mean for you?
For ecommerce and subscription-based companies, the internet is more like a superbowl ad. Getting 40 million views sounds great (especially in terms of consumption metrics), but those views don’t pay the bills. The metric that matters is how many of those views converted to sales. Much as a company that has great superbowl ads but poor sales won’t last long, any company outside of the ad-driven model that has great consumption metrics on the internet but poor sales metrics will also fail. For these companies, improving the impact of the messaging and optimizing conversion rates is the key to profit.
The next article (and last one in this series) is about ranking metrics in priority based on how significantly they affect ultimate business success. The article leans on insights from other industry leaders to focus on the challenges of creating and interpreting metrics. It also surfaces the number one metric your company needs to use as a compass when navigating digital transformation, strategy, and analytics.