Generally, no matter what business I look at, I think of five principles. First, is it meaningful? If I hit a KPI, does it drive more consumer value or profit or revenue? Second, is it simple to understand? I’ve come across times in my career where the KPI definition itself is so difficult, it takes a very sophisticated analyst or data scientist to decipher how you even think of measuring it. The moment you get to the point where you’re not able to explain the KPI in a simple way, I think you have lost maybe 80% of the battle.
Then the next one actually flows into it nicely—is it tangible and is it actionable?—followed by the fourth principle that I try to follow: It has to be measurable—something you can track on a daily basis.
The last [principle] I actually haven’t seen in too many places, but it’s important for a portfolio company like us: Is it flexible? You can define success, but there can be various ways of getting there. So when you define KPIs, you need to think about that because when you mature and have grown, and within a year you have to pivot your strategy to hit that goal, you want to make sure that your KPIs are flexible enough to allow you to do that.
I’ve seen where people become so constrained by the KPI that the behaviors do not reflect the changes they have to make because the KPI itself was driving the behavior in terms of hitting the number versus it being more flexible and meaningful. If you just focus on getting more eyeballs versus quality or engaged eyeballs, you may end up with an empty-calories audience that doesn’t drive profitability.