Most businesses rely heavily (if not, exclusively) on traditional business metrics such as those which arise from the accounting records and financial statements: profit and loss (income, costs and profits), balance sheet movements (assets, liabilities and shareholders’ funds), and cash flow. These financials provide a robust view of the company’s performance in a given period, and changes over time show important trends which need to be heeded. But, they suffer from being historical and after-the-fact and, as a result, can lead to slow and ponderous decision-making which is less effective in our highly disrupted, competitive, tech-driven economy.
The alternative is make greater use of dynamic metrics, numbers which are rapidly available (if not available in real-time) and which allow for faster decision-making and taking advantage of more immediate threats and opportunities.
What defines a dynamic metric?
1. It is likely to change significantly in a short timeframe (within one month or less).
2. There are actions the company can take now (or in the very short term) which will significantly impact the metric in the short term.
Other factors to take into account are:
The level of urgency of the decision-making;
How ‘noisy’ the metric is vs. how ‘twitchy’ it is (the more twitchy the metric, the more dynamic it is). Noisy metrics are those affected by many variables combining together (e.g. total annual sales is made up of sales from a number of campaigns, each performing to its own level). Twitchy metrics, on the other hand, are affected by just a small number of short-term events which are in our control (e.g. sales within one campaign being impacted by number and effectiveness of email reminders sent).
An example of a modern-day dynamic metric is website load time across different platforms (both desktop and mobile), particularly loading times for online shopping carts. Small improvements to shopping cart load times (and other process improvements which reduce friction for the online shopper) can lead to considerable increases in conversions and sales. Therefore these metrics are clear candidates for rapid and regular monitoring and improvement.