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Matt Lerner | Metrics that Matter | BoS USA Online 2020

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Matt Lerner | Metrics that Matter | BoS USA Online 2020

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Matt Lerner | Metrics that Matter | BoS USA Online 2020

  1. 1. W W W . S T A R T U P C O R E S T R E N G T H S . C O M
  2. 2. W W W . S T A R T U P C O R E S T R E N G T H S . C O M M E T R I C S T H A T M A T T E R 22 September, 2020 You get what you measure. Choose carefully. Matt Lerner
  3. 3. W W W . S T A R T U P C O R E S T R E N G T H S . C O M J A N U A R Y, 2 0 0 9 S A N J O S E , C A L I F O R N I A
  4. 4. W W W . S T A R T U P C O R E S T R E N G T H S . C O M
  5. 5. W W W . S T A R T U P C O R E S T R E N G T H S . C O M
  6. 6. W W W . S T A R T U P C O R E S T R E N G T H S . C O M
  7. 7. W W W . S T A R T U P C O R E S T R E N G T H S . C O M
  8. 8. W W W . S T A R T U P C O R E S T R E N G T H S . C O M S Q U A R E : $ 3 6 B S T R I P E : $ 3 0 B
  9. 9. W W W . S T A R T U P C O R E S T R E N G T H S . C O M Y O U G E T W H A T Y O U M E A S U R E A L I G N A N D F O C U S T H E T E A M A D O U B L E - E D G E D S W O R D I F Y O U M E A S U R E T H E W R O N G T H I N G M E T R I C S
  10. 10. W W W . S T A R T U P C O R E S T R E N G T H S . C O M Silicon Valley veteran (4 startups: ! ,", #, and $) Growth team @ PayPal Partner @ 500 Startups VC Lectures at Stanford Business School, Imperial Founder of Startup Core Strengths – Coaching Program StartupCoreStrengths.com/playbook (it’s free) M A T T L E R N E R – F O U N D E R & C E O
  11. 11. W W W . S T A R T U P C O R E S T R E N G T H S . C O M H O W D O T A R G E T S C A U S E S U C C E S S ? G O O D M E T R I C S
  12. 12. W W W . S T A R T U P C O R E S T R E N G T H S . C O M 9 0 % O F Y O U R R E S U L T S C O M E F R O M 1 0 % O F Y O U R W O R K 0% 20% 40% 60% 80% 100% Results Work T H E C R I T I C A L I N S I G H T
  13. 13. W W W . S T A R T U P C O R E S T R E N G T H S . C O M G O O D M E T R I C S H E L P P E O P L E M A K E B E T T E R D E C I S I O N S A B O U T W H I C H W O R K T O D O
  14. 14. W W W . S T A R T U P C O R E S T R E N G T H S . C O M G O O D M E T R I C S Measure customer value in the first instance, not profit
  15. 15. W W W . S T A R T U P C O R E S T R E N G T H S . C O M D O N O T C H A S E R E V E N U E I N T H E F I R S T I N S T A N C E
  16. 16. W W W . S T A R T U P C O R E S T R E N G T H S . C O M D E L I V E R V A L U E A N D R E V E N U E W I L L C O M E
  17. 17. W W W . S T A R T U P C O R E S T R E N G T H S . C O M H O W D O Y O U M E A S S U R E V A L U E D E L I V E R E D ?
  18. 18. W W W . S T A R T U P C O R E S T R E N G T H S . C O M W H A T I S C U S T O M E R V A L U E D E L I V E R Y ? If customers absolutely loved your product or service, how would they naturally behave? You deliver value when you help customers make progress in their lives. What measurable customer behavior is the closest proxy for that “value delivery”? How many of them are behaving like this? (Track in cohorts, improve over time.)
  19. 19. W W W . S T A R T U P C O R E S T R E N G T H S . C O M Y O U R M E T R I C S
  20. 20. W W W . S T A R T U P C O R E S T R E N G T H S . C O M T H R E E K E Y T Y P E S O F M E T R I C S 1. North Star Metric – Customer behavior that encompasses the whole funnel or marketplace, and increments when value is delivered to both customer and the company. 2. Key Drivers – 1-3 Measured first-order impacts of the work you do each day to maximise the NSM. (One of these is your “rate limiting step”) 3. Nuance Metrics – Important numbers to watch, maintain in a range, but not maximise.
  21. 21. W W W . S T A R T U P C O R E S T R E N G T H S . C O M W H A T I S Y O U R N O R T H S T A R M E T R I C ? North Star Metric Increments when we deliver value to both customer and company in a natural way where customers and company behave as expected. 1. Simple & memorable for the whole company 2. Represents the full funnel including new, engaged and churned users. 3. Does not change often (e.g. every few years max) 4. Everyone can connect their work to this number
  22. 22. W W W . S T A R T U P C O R E S T R E N G T H S . C O M A S I M P L E E X A M P L E
  23. 23. W W W . S T A R T U P C O R E S T R E N G T H S . C O M Subscribers * Avg Plan Cost WAUs (Retained + New Actives) + Lapsed Make First Wireframe Trial Account Qualified Traffic Monthly Recurring Revenue (MRR) Y O U R N O R T H S T A R Make More Wireframes, Share, etc. Convert to Paid Plan
  24. 24. W W W . S T A R T U P C O R E S T R E N G T H S . C O M B2C AirBnB – Nights booked Facebook – DAUs Quora – Number of answered Medium – Minutes Read B2B Slack – Daily Active Users (DAUs) Amplitude – Weekly querying users PayPal – Total Payment Volume (TPV) Hubspot - # of weekly active teams If customers absolutely loved your product or service, how would they naturally behave? E X A M P L E N O R T H S T A R M E T R I C S MARKETPLACES Your NSM is typically a transaction where two sides come together.
  25. 25. W W W . S T A R T U P C O R E S T R E N G T H S . C O M W H A T I S Y O U R N O R T H S T A R M E T R I C ? North Star Metric Increments when we deliver value to both customer and company in a natural way where customers and company behave as expected. 1. Simple & memorable for the whole company 2. Represents the full funnel including new, engaged and churned users. 3. Does not change often (e.g. every few years max) 4. Everyone can connect their work to this number
  26. 26. W W W . S T A R T U P C O R E S T R E N G T H S . C O M K E Y D R I V E R S Key Drivers are the customer behavior “levers” you pull each day to maximize the North Star. They: 1. Are controllable customer behaviours. 2. Select only a few (1-3) 3. Often, it’s a ratio (e.g. activation rate, signup rate). 4. Revisit every 3 months. 5. Each one should have an owner and target.
  27. 27. W W W . S T A R T U P C O R E S T R E N G T H S . C O M “To give people the power to build community and bring the world closer together.” “Provide simple, affordable, secure and reliable digital payments to…millions of people around the world.” “To offer our customers the lowest possible prices, the best available selection, and the utmost convenience” Mission North Star E X A M P L E C U S T O M E R V A L U E K E Y D R I V E R S Total Payment Volume Repeat Purchases Daily Active Users Ubiquity (be available at every transaction point) Preference (be every consumer’s preferred payment method) Price Selection Convenience DAUs by product, number of products Registered users, user frequency Invites, follows, post count, post engagement, etc. Key Drivers
  28. 28. W W W . S T A R T U P C O R E S T R E N G T H S . C O M Which of these metrics, if improved, makes the whole system run better? Find it. Focus on it. Y O U R R A T E L I M I T I N G S T E P
  29. 29. W W W . S T A R T U P C O R E S T R E N G T H S . C O M Subscribers * Avg Plan Cost Make First Wireframe Trial Account Qualified Traffic Monthly Recurring Revenue (MRR) Y O U R K E Y D R I V E R S Make More Wireframes, Share, etc. Convert to Paid Plan WAUs (Retained + New Actives) + Lapsed
  30. 30. W W W . S T A R T U P C O R E S T R E N G T H S . C O M W H A T A R E Y O U R K E Y D R I V E R S ? Which main levers cause your “value delivery metric” to go up? Which customer behavior best tracks those levers?
  31. 31. W W W . S T A R T U P C O R E S T R E N G T H S . C O M R E T E N T I O N K E Y D R I V E R S Absolute numbers matter less than the shape of the curve Key Driver: How would people naturally behave if they loved your product? What early life behavior pattern predicts retention? That’s the habituation threshold What % of new signups cross that line? Starts with finding your habituation threshold How much of your revenue is coming from habituated customers? (Happy MRR) vs. New customers vs. At-Risk ones? CumulativeWAUs Monthly Cohorts CumulativeWAUs Monthly Cohorts
  32. 32. W W W . S T A R T U P C O R E S T R E N G T H S . C O M Subscribers * Avg Plan Cost Make First Wireframe Trial Account Qualified Traffic Monthly Recurring Revenue (MRR) Y O U R H A B I T U A T I O N T H R E S H O L D åMake More Wireframes, Share, etc. Convert to Paid Plan WAUs (Retained + New Actives) + Lapsed
  33. 33. W W W . S T A R T U P C O R E S T R E N G T H S . C O M W H A T A R E Y O U R K E Y D R I V E R S ? Which main levers cause your “value delivery metric” to go up? Which customer behavior best tracks those levers? Which one is your rate limiting step? Who “owns” each of these key metrics?
  34. 34. W W W . S T A R T U P C O R E S T R E N G T H S . C O M W H A T A R E Y O U R N U A N C E M E T R I C S ? Nuance Metrics are important “read only” numbers (watch but not maximise). Make sure they stay within an acceptable range. Many are drivers, but not “key” drivers Sometimes they are not directly controllable Helpful if they explain variations in the North Star Often a “check” number that should stay in a certain range
  35. 35. W W W . S T A R T U P C O R E S T R E N G T H S . C O M D O E S T H I S C H A N G E I F Y O U D O N O T H A V E P R O D U C T - M A R K E T F I T ?
  36. 36. W W W . S T A R T U P C O R E S T R E N G T H S . C O M “If your product is broken and people are still using it, if you have high retention with a broken product, that’s a clear sign you have PMF.” Elad Gil
  37. 37. W W W . S T A R T U P C O R E S T R E N G T H S . C O M 100% Find Product-Market Fit 60% Maximise Proven Vectors 40% Seek Adjacent Vectors 80% Optimise Core Business 20% Find New Business Lines Post-PMF Post-PMF SuperImportant Decision Yourtime,energyandresources B E H O N E S T W I T H Y O U R S E L F Pre-PMF “The Hunt” “The Sprint” “The Marathon”
  38. 38. W W W . S T A R T U P C O R E S T R E N G T H S . C O M Deepen fit through iterative learning loops. Key Drivers incent deepening fit + validated customer learning: 1. Strength of fit – e.g. conversion rates, activation rates, easy to sell, referral rates, retention 2. Pace of learning – experiments run per week Tips: First validate the need. Look for “language-market fit” F I N D I N G P M F K E Y D R I V E R S
  39. 39. W W W . S T A R T U P C O R E S T R E N G T H S . C O M B R I N G I N G Y O U R M E T R I C S T O L I F E
  40. 40. W W W . S T A R T U P C O R E S T R E N G T H S . C O M THE PROCESS The leverage is in which work you choose to do. Your goal is to get everyone doing the most impactful work, making good tradeoffs about how to spend their time and budgets. Each person must understand the North Star, and be able to connect their work to it. (OKRs) And that should empower them to make good “resource allocation” decisions for how to move that metric, as the expert in their domain. Keep asking “Which is the most important work, and how is it going?” H E R E I S T H E M A G I C
  41. 41. W W W . S T A R T U P C O R E S T R E N G T H S . C O M C O M M O N P I T F A L L S Data should help us focus, make good decisions quickly and keep executing. X Focusing on revenue, not value delivery X Chasing too many metrics X Analysis paralysis (e.g. attribution, retention) X Obsessed with a local maximum
  42. 42. W W W . S T A R T U P C O R E S T R E N G T H S . C O M North Star Metric of Value Delivery, endures over time Focus on 1-3 Key Drivers, including your rate limiting step, revisit focus every 3 months. If pre-PMF, key drivers focus you on fast learning and fit-deepening For retention, figure out your habituation threshold & work backwards Each key driver gets a single accountable person. Questions for each employee: Do they understand how their work affects the NSM? Do they understand their key driver? Can they make good tradeoffs re. investments of time and budget, and focus them on the most impactful work? R E C A P
  43. 43. W W W . S T A R T U P C O R E S T R E N G T H S . C O M Y O U R H O M E W O R K : 5 Q U E S T I O N S 1. A conversation with your CEO, Head of Product, Head of Marketing, Finance + Analytics. Figure out: 1. What’s your North Star Metric? 2. What are your 1-3 biggest drivers of that metric, company-wide? 3. What’s your “rate-limiting step”? 2. Ask each employee: “How does your work each day impact our North Star?” (Check for alignment & comprehension) 3. Regularly ask each employee or team: “What’s the most important work, and how’s it going?”
  44. 44. W W W . S T A R T U P C O R E S T R E N G T H S . C O M M E A S U R E T W I C E C U T O N C E @MattHLerner StartupCoreStrengths.com/subscribe matt@startupcorestrengths.com

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