In digital, there is one decision that makes more difference than every other: what you choose to measure at a given time. It doesn’t sound very ‘sexy’, but if you get it right, your results will be. This post explains why, how to go about doing it, and some tools we’ve developed to help select the right metrics for the moment – including metrics for synergies, an important and complex type of measure for digital businesses operating within an existing core business.
Becoming ‘digital’ is a fundamental drive for all businesses today. It means embracing mobile and online ways of doing business, transforming existing businesses and building new ones. It sounds straightforward, but it’s a lot harder than it seems.
Some of the intrinsic and defining characteristics of digital business are:
- Digital business models are often very different from their non-digital counterparts (if they exist at all)
- You can change pretty much everything you do relatively swiftly
- You can count pretty much everything all the time, real-time, if you want to
- Where there is an existing businesses, some of the key metrics for new initiatives relate to ‘synergy’ – impacts on and within the core business
These characteristics mean that what you choose to measure, and thus what you base your decisions on, both defines what you see as success and impacts your ability to achieve it. OK, but so what, and how should you choose the right measures?
So what that the business models are different?
Digital businesses often employ very different ways of making money (aka ‘business models’) than non-digital businesses. The obvious differences can be comprehensive, including different propositions, different pricing models, different delivery mechanisms, etc.
However one of the biggest differences is that digital businesses models do not always start out making money – they need to achieve scale or credibility in some other factor first.
Google is a classic example of this: it initially needed to build significant scale in the number of people searching, and to drive that optimise the perceived quality of its search results, before it could become the massive and hugely effective paid search matchmaker it is today. Google’s success was not measured by income for many years after its launch.
So what that you can change everything quickly?
Digital businesses are, or at least should be, relatively agile. This is in theory a good thing – you can do new things and respond to new learnings quickly.
But it’s not necessarily good if you are doing the wrong new things or responding to misleading stimuli or learnings. So being able to change quickly can be an opportunity to jump off a cliff quickly too.
Now of course, in theory, you should be able to change back quickly too. But if you are measuring and hence watching the wrong things, you may not get the right signals. And a cliff is a cliff, after all.
So what that you can count pretty much everything?
It’s easy to get swamped with information in digital. Just a glance at Google Analytics shows visitors, page views, users, minutes, new users, existing users … you name it and with a bit of guile you can generally get to it, and that’s just a web analytics tool. Add to that financial reports, CRM, billing systems, big data… and in no time at all you can suffer information overload.
But what actually matters? A key concept in the LEAN approach, often used by innovative and start up business, is ‘One Measure that Matters’ (OMTM) – a single key metric used to measure success. There may be subordinate or supporting measures, but there should be one that is the lead indicator.
Right Moment Metrics
What we’ve added to this is the idea that the OMTM will change depending on the stage of evolution of the business. Our shorthand for getting the right measure at the right time is ‘Right Moment Metrics’.
To make this a bit more pragmatic, we’ve also established a database of 150 key metrics used in digital businesses, including a method for selecting what is the right metric for the moment for a different types of digital businesses.
Of course another related success factor is ensuring that your stakeholders understand and buy in to the metrics you choose. If they don’t, then however much you are on the right track won’t matter as the money usually follows the measures.
Synergy Metrics: A Double-Edged Sword?
The prospect of synergies created by new initiatives can be both an advantage and a problem. They are an advantage because they help to stack up additional benefits in the case for early stage activities. But synergies can also present a number of problems. For example:
- ‘Double-bubble’ benefit counting. For example, churn can only be reduced by a certain amount and may be impacted by many different factors. It cannot be logical for every initiative to claim the benefit.
- Complicating the decision-making process. When activities have potential knock-on effects with other parts of the business, or require support from existing resources, conflicts of interests and authorities can occur. This can mire the innovation in unproductive activities and unhelpful cultures, and thereby derail it.
We’ve looked at this in some depth in our analysis, and our database includes methodologies to help select the most useful Synergy Metrics.