Musing on Marketing, Metrics and InnovationHow come there often seems to be no directconnection between the things we choose tomeasure and the goals we are hoping to achieve?There are a few examples on the following slides.
Musing on Marketing, Metrics and Innovation• If a company managements goal is a sustainable long-termgrowth, why do they measure their decisions based on IRR(Internal Rate of Return)? The metric is useful for measuring atransaction, but it can likely lead to an ultimate distraction ofan enterprise vitality if applied to strategic decision making.
Musing on Marketing, Metrics and Innovation• If a Customer Service organizations goal is CustomerSatisfaction, why do we measure performance of theemployees based on how quickly they complete a call with acustomer? Driving down the cost of customer interaction is ameaningful operational metric, but there is no profitability ifcustomers abandon your operation.
Musing on Marketing, Metrics and Innovation• If an ultimate goal for Product Marketing is demandgeneration, wouldnt it be critical to measure why customersbuy your product? "The customer rarely buys what thecompany thinks it is selling him," as Peter Drucker said.
According to Clayton Christensen, aprofessor in Harvard Business Schooland brilliant scholar of Innovation, theroot of this problem is the quality ofeducation offered in our businessschools. He makes a great pointillustrating how wrong choice of keymetrics leads to deconstruction ofenterprises and entire industries.Clayton is famous for his efforts to re-focus marketing "a job customers hireproducts to do" as opposed toproducts specs.
As consumers, we all know that our experience with"products" depends on many factors that are not connectedto or even correlated with its specifications, functions andfeatures. Quite often customers are more influenced by howeasy it is to deal with the supplier or how reliably a productperforms, or how simply and consistently it delivers theoutcome we require. Yet when we try to measure customersatisfaction, we ask them to score their opinions aboutcharacteristics of the product itself. I do appreciate the elegantsimplicity of NPS (Net Promoter Score) methodology and itswell-documented correlation with profitability, but whatspecific action can it suggest to a product manager whoseproduct earns a low score?
Steve Blank, Silicon Valley entrepreneurial marketing geniusand the author of The Four Steps to the Epiphanybook, seconds Christensens opinion about the quality of ourbusiness schools and is working on the development of analternative curriculum that is focused on customerdevelopment as opposed to financial engineering. Blank ispreaching the importance of customer involvement into aproduct development that appears to be a no-brainer tome, but apparently is a relatively challenging concept to mostmarketing professionals according to Kristin Zhivago.
The choice of measurements we make has a dramaticinfluence on the probability of a startup success, according toEric Ries—a creator of the Lean Startup movement—who hasvery interesting thoughts on creativity and innovation. Ericthinks that we prefer to use "vanity" metrics that make us feelgood instead of helping us to make quality decisions.
So it appears that according to the experts, institutionalindoctrination and lack of intellectual honesty are two majorreasons for the gap between organizational goals andperformance measurements that negatively affect ourprobability to succeed in business.
I would like to suggest that our compensation system is thethird leg of this proverbial stool. Since a majority of theworkforce is not compensated for producing results alignedwith a long term goals of organizations they work for, weinstead end up measuring what is easy to measure and makesus look good.