At the recent Highline Beta event in New York, we hosted innovation teams and leaders from Citi, Credit Suisse, Fitch Ratings and Mitsui & Co., for a session focused on metrics and KPIs, led by Ben Yoskovitz, founding partner of Highline Beta and co-author of Lean Analytics. This is Part 1. You can also read Part 2 here.
How do you find the True North metrics you should be focusing on?
Setting the right framework and benchmarks helps measure progress towards business goals, both in startups and in large organisations. For large companies that are executing against a portfolio of projects, ventures or startups, there are three main areas of focus that each require a different set of metrics.
- Performance metrics: Are people doing what they’re supposed to be? With new ways of working focused on Lean experimentation and learning, the metrics used to track the work people do have to change. There are less “task lists” and well defined targets, and much more “measurement of what’s being learned.” Speed matters here–are people able to experiment and learn quickly enough? Volume matters too (number of experiments, number of assumptions tested, etc.) but only if the insights gained are real, and true progress is being made.
- Venture metrics: How is a specific project or venture performing? Ventures go through a few stages as they grow, and the metrics change as well. These metrics are different from what the core would track because the projects or ventures are at a much earlier stage. This is where most of Lean Analytics focuses–figuring out what to measure when, based on the type of business and its stage. Venture metrics live on dashboards (on computer screens or TVs) focusing on the key metrics that are measuring momentum.
- Portfolio metrics: How are all ventures performing as a portfolio? In the end, the portfolio is what matters, because you have to take a bunch of shots in order to win. When looking at a portfolio, companies need to understand the overall value of the portfolio and how that’s measured, assess the stage of all ventures or projects, and look to connect value back to the core ‘mothership’.
Ultimately, you need to understand all three types of metrics, both what they are and what they’re useful for. The more aligned you can get on these metrics, the more likely you’ll have a systematic way of comparing ventures and determining true progress and value overall.
Once you have a better sense of what to track and when, you can explore how to properly fund innovation projects or ventures. Large organisations budget top-down, usually in a yearly cycle, which isn’t ideal for most innovation initiatives because they’re early stage and rife with uncertainty. How can you know what you’ll need in 9 months when you don’t even know what problem you’re solving? Ideally as you build out an innovation function within your organisation you can separate it from the core, creating ‘mini-pods’ of cross-functional team members that are not only able to work differently, but measure progress and get funded differently as well. I always like to suggest the “start small” approach first: start with 3 people and 100 days to prove the model and secure more funding into a venture.
To learn more about the good and the bad, when it comes to measuring your innovation projects, please read Part 2: Good metrics, bad metrics: How to measure your ventures and innovation projects here.