- State the Business Goal of your Project or Product
Be clear on what the business goal your product serves or how does the company benefits from your product, or why the company actually invests in it.
2. Make Goals Measureable
To effectively apply the indicators, analyse the resulting data, and take the right actions, the goals must be measurable. The challenge is to establish measurable goals that are also realistic, particularly for brand-new and young products.
3. Use Ratio and Ranges
Work with ratios and ranges to quantify your goals, say that the product should increase the company’s revenue by five to 10% within one year after its launch. If it turns out that the goal is too ambitious, then you should recognise this: move the line and adjust your target.
4. Avoid Vanity Metrics
Stay clear of vanity metrics, measures that make your product look good but don’t add value. Instead of measuring downloads, you should choose a relevant and helpful metric, such as daily active usage or referral rate.
5. Don’t Measure everything that can be Measured
Don’t measure everything that can be measured and don’t blindly trust an analytics tool to collect the right data. Instead, use the business goals to choose a small amount of metrics that truly help you understand how your product performs. Otherwise you take the risk of wasting time and effort analysing data that creates little or no insights. In the worst case, you action irrelevant data and make the wrong decisions.
6. Use Quantitative and Qualitative KPIs
Quantitative indicators, such as daily active users or revenue, measure the quantity of something rather than its quality. This has the benefit of collecting “hard” and statistically representative data. Qualitative indicators, such as user feedback, help you understand why something has happened, for instance, why users aren’t as satisfied with the product as expected. Combining the two types gives you a balanced outlook on how your product is doing. It reduces the risk of loosing sight of the most important success factor: The people behind the numbers, the individuals who buy and use the product.
7. Employ Lagging and Leading Indicators
Lagging indicators, such as revenue, profit, and cost, are backward-focused and tell you about the outcome of past actions. Leading indicators help you understand how likely it is that your product will meet a goal in the future.
8. Look beyond Financial and Customer Indicators
Financial indicators, such as revenue and profit, and customer metrics, including engagement and referral rate, are the two most common indicator types in my experience and that is great. You should also look beyond financial and customer indicators and complement them with the relevant product, process, and people indicators.
9. Leverage Trends
Compare the data you report to other time periods, user groups, or competitors, such as revenue growth over the last six weeks or cancellation rates from quarter to quarter. This helps you spot trends, for instance, if revenue is increasing, staying flat, or declining.
10. Use a Product Scorecard
Once you have selected the right key performance indicators for your product, you should collect the relevant data and regularly analyse it. A product scorecard is a great tool for this job. A good scorecard uses the right indicators and helps you spot trends.