In a post for HBR, Eric Ries (startup and VC advisor) warns entrepreneurs of the dangers of vanity metrics.
Ries cites a situation where a company changes their product and then sees an increase in website views. It would be very easy to assume that the product change caused the upswing… but correlation never implies causation.
To avoid making business decisions based on incorrect assumptions, Ries suggests following three guidelines (the three A’s) that will help ensure your metrics really reflect reality and tell you the information you need to know.
Actionable: When an employee sees a report about a specific metric, it’s essential that they have some idea how to replicate the result in the report. Techniques like split-testing, where discrete groups of customers see different versions of the product, are the gold-standard here. Following the scientific method gives confidence that the observed behaviour was, in fact, caused by the change being tested.
Accessible: … In order for reports to be worthwhile, it’s essential that:
– Everyone in the company understand how to read them
– Everyone in the company has easy access to the latest data
Additionally, to keep accessibility high, the feedback loop between taking an action and seeing the results should be as short as possible. … Key data should be available to any employee, anytime, in a matter of minutes. In order to achieve that goal, the reports themselves have to be extremely simple.
Auditable: … Metrics have to be credible to the people who drive the product vision, including company founders….
Thus, it’s important that sceptics can audit a report. When possible, this should mean that report generation is simple.
NOW WATCH: Ideas videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.