There are a million metrics you can use to track the health of a subscription software business like ours. Customer life-time value, cost of acquisition, cohort retention, revenue churn, net promoter score, funnel conversion rates, to name but a few. All useful calculations, but I can't tell you what bliss it's been to steer 37signals without them for twenty years.
That's not to say that we never run these numbers, but it is to say that these numbers never run us. Because in the end, even the most sophisticated KPIs all inevitably serve the simplest calculations: Are we making money? Is it enough? You don't need a degree in statistics to determine that.
Where this is most evident for us is in the product. I remember reading a story about how Google once tested 127 different shades of blue for some button to see which one did the best. That's the logical, extreme conclusion of being a data-obsessed business, and it sounds beyond dreadful.
Half the charm of making something to me is in letting your fingers drive the direction. Without articulation. I've always loved the German word fingerspitzengefühl for this concept. Making decisions without needing to rationalize every call with a depth of data.
I fully realize what a luxury this is. If you're not yet profitable, it can be instructive to use some of these metrics to pinpoint why (do you have a leaky bucket or is there just not enough flow in the hose?). And if you are profitable, but have investors, many of them will want to know how you might squeeze out even more. Objective metrics help those without insight into the belly of the business benchmark it against others.
But where I find folly is in believing that if you don't stress the numbers, you can't expect to see them rise. The greatest myth in management is that you can't manage what you don't measure. It's hot or cold outside regardless of how many digits of precision your thermometer is showing.
That is to say all these metrics are downstream from simply making something people want to buy. And keeping your costs below the price you can sell it for. That's the hard part, even if it's a simple calculation.
And worse still, if you steer your company according to a constellation of derivative metrics, it's really easy to end up in a swamp. A place where eking out another percentage point or five, to make the next quarter look right, trumps everything else. That's an environment for questionable decisions and short-term thinking.
Ultimately, you have to believe that if you're giving it your best, putting bright minds to work on meaningful problems, it's either going to work or it isn't. Rare is the dull business you can turn into a sparkle by obsessing about the derivatives. Common is the dread that's born from trying to do so.
Wu wei.
That's not to say that we never run these numbers, but it is to say that these numbers never run us. Because in the end, even the most sophisticated KPIs all inevitably serve the simplest calculations: Are we making money? Is it enough? You don't need a degree in statistics to determine that.
Where this is most evident for us is in the product. I remember reading a story about how Google once tested 127 different shades of blue for some button to see which one did the best. That's the logical, extreme conclusion of being a data-obsessed business, and it sounds beyond dreadful.
Half the charm of making something to me is in letting your fingers drive the direction. Without articulation. I've always loved the German word fingerspitzengefühl for this concept. Making decisions without needing to rationalize every call with a depth of data.
I fully realize what a luxury this is. If you're not yet profitable, it can be instructive to use some of these metrics to pinpoint why (do you have a leaky bucket or is there just not enough flow in the hose?). And if you are profitable, but have investors, many of them will want to know how you might squeeze out even more. Objective metrics help those without insight into the belly of the business benchmark it against others.
But where I find folly is in believing that if you don't stress the numbers, you can't expect to see them rise. The greatest myth in management is that you can't manage what you don't measure. It's hot or cold outside regardless of how many digits of precision your thermometer is showing.
That is to say all these metrics are downstream from simply making something people want to buy. And keeping your costs below the price you can sell it for. That's the hard part, even if it's a simple calculation.
And worse still, if you steer your company according to a constellation of derivative metrics, it's really easy to end up in a swamp. A place where eking out another percentage point or five, to make the next quarter look right, trumps everything else. That's an environment for questionable decisions and short-term thinking.
Ultimately, you have to believe that if you're giving it your best, putting bright minds to work on meaningful problems, it's either going to work or it isn't. Rare is the dull business you can turn into a sparkle by obsessing about the derivatives. Common is the dread that's born from trying to do so.
Wu wei.