Market metrics and internal metrics

May 10th, 2007

I left this post as a comment on the Personal MBA blog. Seth and Josh were calling for questions on Seth Godin’s new book, The Dip, so here goes:

Hi Seth,

I will argue that choosing the right metric is not always possible.

I find the aspect of meticulously measuring your progress controversial, the problem being in the choice of the right metric. Assuming you want to achieve economic success with your project, metrics of this are numbers of (repeat) customers, revenue, etc. I will call them “market metrics” as they measure things external to your organization. I argue that measuring these, while they certainly capture your success, does not help you in achieving success. Contrast them to what I will call “internal metrics”, such as the number of product revisions you make for your vacuum cleaner or the number of man-hours you put into learning how to sing (26 and a half and counting), that have everything to do with your organization and nothing with your customers. I will also argue, that measuring these “internal metrics” does not help you much in achieving success either.

Isn’t measuring “market metrics”, in some sense, like pleasing Wall Street, just with customers instead of investors? If you focus yourself on your number of customers, your product development will inevitably look very different than if you focus on your vision. It could encourage you to take shortcuts that are lucrative in the near term, but that make you unable to keep a strong position in the long term. A great example for this is mentioned in an interview with Joel Spolsky (six minute podcast) where adding a new feature would have most probably brought his sales up, but then developers would have started to work their way around his system, a gloomy prospect in the long term for any ISV.

Measuring “internal metrics” has caveats in it as well, precisely for what it is: It enables you to focus on your product or service without listening to the outside world. While that may enable you to come up with something extraordinary, it is just as well possible that you will come up with something nobody wants – for those of us who don’t have a Phaedrus-like sense of QUALITY, our own direction might just be something very different from what the market is willing to embrace. I’m not arguing for more focus groups here – they might bury your revolutionary idea in committee-land – but I still think that working in isolation (where isolation can also mean a whole organization, not just a single person) is something that can cause you to hit a dead end while all your metrics are shouting “go”.

I think the problem boils down to going after your head vs. seeking mass appeal. And here’s my question: Do you think this can be tackled effectively by paying attention to “internal metrics” as well as to “market metrics”? Don’t you think that dilutes your focus so much that you won’t be able to accomplish anything? If it does, is the entrepreneur’s only choice to bet on the roulette of either one or the other?

Regards,
Zoltan

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