Metrics inspire action.
Did you know that simply defining your Digital Teams’ objectives and KPIs is not enough? Without properly defined objectives and KPIs for each of your digital products, your teams won’t have the direction they need to succeed.
As Mike Smart, from Pragmatic Marketing said “If you can’t measure your team’s effectiveness, or if you are focused on the wrong metrics, your headcount and budget allocation could be at risk.” In fact, we know that over 60% of features provide little to no value for customers. This can be attributed to building features without an true understanding of the value they bring the customer.
You may be well along in the digital journey. Maybe you have defined your digital strategy, and KPIs for your digital team. If you have not, here is a step by step guide: http://www.digitalacumen.net/2016/11/27/setting-digital-teams-kpis-like-pro/. This is critical before trying to define your KPIs and metrics at the digital product level.
However, if you haven’t defined the relevant KPIs and metrics for your individual digital product areas, now is the time.
We will guide you step by step in setting up KPIs and metrics for each of your digital products. The output of the process will be strong KPIs and associated metrics for each of the product areas that are tied to your digital goals.
With a set of well defined KPIs, your product managers will achieve the following:
- Clear strategy for each of your digital products, built on the objectives and KPIs of your overall digital program.
- Optimized roadmaps with those features that have the most positive impact each KPI first. Each backlog will be organized to deliver high value features fast. As noted on Accelare, having a optimized roadmap “facilitates investment decisions”.
- Accountability for digital program and digital products KPIs. Product owners will strive to exceed targets. They will know how they are measured, and thus act accordingly. When KPIs / metrics shift up or down, they will be accountable to diagnose and find proposed solutions to address.
We will guide you through the 6 steps to put KPIs and metrics in place for each of your product managers.
We have put together a sample workbook to aid you in defining your KPIs and metrics. This workbook puts the theory into practice. See the workbook here: KPI and metric template
1. Understand your Digital Strategy, Goals, and KPIs / Metrics
Your digital team may be ahead of the curve with a clear strategy, goals, and associated KPIs. If not, read more about defining a clear strategy, goals, and KPIs here: http://www.digitalacumen.net/2016/11/27/setting-digital-teams-kpis-like-pro/
A known problem at many organizations who have set KPIs is that “the impacts of actually achieving the KPIs are not connected to the organisation strategy and the original intent of the KPI is not achieved”, noted by Peoplestreme.
If you follow the suggested process linked above, your individual product area KPIs will also be aligned with your company’s KPIs.
In a later step, you will note how your chosen KPIs relate to the overall digital strategy.
Write the main objectives for your digital program on sheet 2 (digital strategy) in the KPI and metric template.
2. Review your specific digital product strategy, vision, and roadmap
Now that you are clear on your digital team’s strategy, goals, and KPIs / metrics, you need to think about your team’s vision, strategy, and roadmap. Check out this resource to help you create your product strategy and vision: http://www.romanpichler.com/blog/product-strategy-defined/
There needs to be a direct correlation between your roadmap / features and your KPIs. In other words, your features should be supporting your KPIs and your KPIs should be impacted by your features.
In a later step, you will show how the specific features in your roadmap correlate to your chosen KPIs.
3. Let us agree on having 3 KPIs
We recommend choosing 3 KPIs for each of your digital product teams for a few reasons:
A. Checks and Balances – You want to target exactly the behavior you are looking for from your team. With only 1 KPI you may incentivize unintended behavior. You need to create other KPIs to balance out and narrow in on the expected behaviors.
Case Study – Major retailer chose too few KPIs
I’ve seen this done poorly at a major retailer. They chose just one KPI for their pick / pack staff in store. They chose accuracy of the basket selected. This led to lost sales, and a big increase in time from when the customer came into store until they had paid and were leaving the store.
See more examples of this type of behavior by Bernard Marr, titled “Caution when KPIs turn to poison”.
A better approach would have been to add additional KPIs such as: time to pick, % of orders placed that were fulfilled, etc. If the retailer had done this, they would not have seen the negative behaviors mentioned.
B. Memorable – Any more than 3 KPIs and your team will have difficulty. They will have difficulty remembering what the KPIs and target values are, making them all but useless. There would also be a lack of clarity on what you are really trying to measure. As shown by Peoplestreme, a major cause of KPI failure comes from “Key Performance Indicators never adequately understood by the workforce”. With too many KPIs “At worst, your staff, not being tied up in the intellectualisation of KPIs, will see them for what they are, a mish-mash of wishful thinking divorced from reality and will ignore them”, according to an editor at changefactory.
Case Study – Large manufacturer chose too many KPIs
I witnessed a large manufacturer post a large poster with over 30 “KPIs” (really they were metrics) for their staff to read and react to every day.
It was very clear through discussions with the staff that they did not understand this information; and as a result, their behaviour was not meaningfully impacted by this information.
The root cause was clear: KPI overload.
I hope we are now all aligned to choose 3 KPIs! Let’s move on and start defining what they will be.
4. Choose your 3 KPIs
You should ask these questions as you are determining if the KPI makes sense for your digital product:
- Is the KPI measurable? It needs to be quantifiable to be a KPI. Mike Smart from Pragmatic Marketing reinforces this point by saying “If you can’t measure it you can’t manage it”.
- Does your roadmap impact the KPI?
- Do you directly influence the results of that KPI? Will the features you work on make a dent in the KPI value?
- How do these KPIs align with the overall digital team’s KPIs / objectives? How about your company’s overall direction / KPIs?
If necessary, you can include additional metrics underneath your top KPIs. We will go over this later.
Open up the template we created for you: KPI and metric template.
- Write down your ideas for your KPIs into the spreadsheet provided, in column A. Note that it is a KPI in column B.
- Digital Objectives – Show how your KPIs tie back to your Digital objectives / strategy. Your goal is to clearly show how your KPIs relate back to your digital strategy, and KPIs. You will see that in column D in the example spreadsheet, we mention the digital objective and KPI that ours relate to.
- Roadmap – Show how your roadmap supports your KPIs and your KPIs are impacted by your roadmap Note the roadmap items that support each KPI in column H. If you don’t have any roadmap items that support this KPI, re-think if this is the right KPI for you.
- Measure – Can you currently measure the KPI? If yes, just note Yes. If not, note no. If you note no, then you will want to reach out to your analytics team to help get the measurement in place.
- Set targets for your KPIs – Set the target impact you expect to have on each of your KPIs. You want to think about:
- What the total impacts are of your features on your KPIs?
- What other factors could influence your KPIs?
- What is the baseline for your KPIs? What were they last year? What are they today?
- Higher spending on digital?
- Macro economic factors in your market?
- How is your industry changing?
It is critical to take a hard look at expected investment in digital, before defining your KPI targets. Research shows that high performing companies invest substantially to hit their KPIs and set realistic targets.
The KPI portion of this exercise is complete!
Remember when we talked about deciding which metrics to include? Let’s move on to that.
5. Choose the metrics that support each of your 3 KPIs
When choosing your 3 KPIs, you were probably thinking, there is no way I can just measure 3 things!
Defining metrics solves that problem.
Your metrics should correlate back to your KPIs. In other words, each metric you create should be related to and underneath a chosen KPI.
The chosen metrics will act as leading indicators to your KPIs success. They should be closely aligned with the levers you can pull to influence an improvement to your KPIs.
- You will want to determine what metrics tie to each of the KPIs you have selected. To do this ask these questions for each KPI:
- What other things do you want to track that relate to the KPI chosen?
- What metrics could act as leading indicators to your KPIs success?
- What levers can you pull to influence your KPIs?
- Add these metrics under each KPI, per the example in the spreadsheet
- Measure – Can you currently measure the KPI? If yes, just note Yes. If not, note no. If you notes no, then you will want to reach out to your analytics team to help get the measurement in place.
- Set targets – You will want to set the target values for each metric. You should follow the same process outlined above for KPIs.
But, what about other things I want to track?
6. Decide which metrics to only track
There are probably things you want to track that aren’t suited to be KPIs or metrics. However, you may find value in tracking them. We call these tracking only metrics.
Let’s say you are the product manager of cart/checkout at a medium sized eCommerce site. One of your KPIs might be Bottom of Funnel conversion. For this KPI you may have a few metrics: cart to checkout login rate, checkout login to 1st page in checkout, etc.
Another product manager is in charge of your company’s loyalty program. She wants to push people towards signing in during the checkout flow. However, you don’t want this to decrease your bottom of funnel conversion. Thus, you put in place a tracking metric for the % of logged in (loyalty) orders. You aren’t responsible for this, but her features impact your conversion so you want to track it.
Alright, take a deep breath. We are done for now!
However, don’t sit down and relax for too long.
You will want to go through this process each time a new product is introduced or any time a significant investment is made.
For most companies, this is every 6 months to a year.