What metrics matter to your business?
When I left my last startup I started thinking about what we achieved and if we had done our best for our clients. My philosophy is that the best businesses for me are those where I can provide the most value to the largest number of people. This kind of thinking advocates that competitors are a nuisance who cannot or will not take care of your target market as well as you can. To adopt this mindset, you have to be committed to providing nothing less than the best value to your clients. If you were the best surgeon in town, would you want your family to be treated by anyone else? The standard metrics used by other startups did not seem to please me. After reading both Titan and Peter Thiel’s Zero to One, I realized what we had missed. We were using the wrong metrics.
Competition versus monopoly metrics
Metrics an entrepreneur and his team to know if they are doing productive work and if they are getting closer to their goals or targets. This is on the assumption that the business has targets that matter. Depending on the kind od business you want to have in 5 years, you may either be using what I call competitive metrics or monopoly metrics. I am in favor of the latter. While reading John D. Rockefeller’s autobiography by Ron Chernow I realized what he set out to do. According to the author, Rockefeller had a sense of entitlement that drove him to think the oil business should be nurtured and preserved by him. He felt it was only right to protect consumers from all other competitors who would not give them the service they deserved. This mindset of course led him to control most of the oil production in much of the world for many years. On the other hand, he could have chosen to compete with others for customers. I’ll explain why I agree with this mindset after I explain what the difference is.
Competitive metrics versus Monopoly metrics
Competitive metrics is when you measure your success according to stuff like sales, number of registered users, foot traffic, visitors to your website, revenue per month or whatever targets your sales people have been assigned.
Monopoly metrics are when you measure your business’ success by what percentage of your market you are providing value. In contrast to purely competitive metrics, you are focusing of how big of the pie you are serving not just how many sales were made this quarter. For example, a restaurant can boast of $10,000 in monthly sales from 1000 customers but is that business a success if the gross monthly sales of their market is $100000 from 10,000 customers? This would mean that they only provided value to ten percent of the market. They allowed 90% of their family to be treated by another surgeon.
Not everyone agrees with me when I say this.
For some, this is being overly ambitious and I was told by one entrepreneur that too many customers would give you headaches. lol. Facebook decided to track active users when everyone else was tracking registered users. The latter is vanity while the former has made them the dominant force in social media globally. Focusing on registered users is like having a 100 vegetarians at your grilled pork soiree. The room may be packed but if no one is eating then it doesn’t really matter.