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You’re probably familiar with the term ‘KPI’ or Key Performance Indicator. These are measures organizations use to evaluate the success of a process, business outcome or other important activity. A good KPI will help companies elevate performance and achieve strategic goals. Unfortunately, there are also plenty of bad KPIs as well – you may know them by another name: vanity metrics.
Tableau defines vanity metrics as those which “make you look good to others but do not help you understand your own performance in a way that informs future strategies.” That is a great definition, though perhaps a bit polite. At their worst, vanity metrics harm organizations by encouraging the wrong behaviours.
In our current digital age, we have seen countless businesses use less-than-ideal metrics to evaluate corporate performance. Measures like ‘active daily users’ may speak to engagement, but can still be highly misleading – particularly if usage does not directly correlate to revenue.
Last year, for example, Canadian music star Drake received a great deal of coverage for breaking streaming records on both Spotify and Apple Music. Some pundits even heralded this event not just as Drake’s success, but as validation that streaming has fully arrived to save the music industry.
How so? Subscribers pay a monthly fee for unlimited listening – so how does an increase in the ‘daily streaming count’ help Spotify? How much additional subscription revenue did this generate?
Spoiler Alert: Zero dollars.
If I were an investor at one these services, I would be asking some pointed questions about the metrics they have prioritized.
To be fair, bad measures are not at all unique to tech companies or start-ups. I recently had a conversation with an IT Leader tasked with creating KPIs around her team’s support services to retail operations. The primary metric she settled on was ‘website uptime’, expressed as a percentage. Fine so far – but their 99 percent target threshold was a problem. This IT team had averaged a 99.7 percent uptime over the previous three years.
You’d be better off having your analytics team clean windows in that scenario. Why? Because clean windows might help business performance, while vanity metrics will probably not.
Tomorrow’s technology is shaping business today. To learn more about how MNP can help you can make Business Analytics work for you, contact Brian Foster at 204.336.6131 or [email protected]
Related Topics:Technology; Business Performance
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