19/30: Embracing Business Metrics
There you were, having established a continuous product discovery practice with your team, finally managed to get engineers to join customer calls, validated assumptions before you started to build. You were building, shipping, and your product metrics were buzzing upward. Life was a song.
And then 6 months later somebody came to talk to you about business metrics. They were failing.
What happened here? Well, to tell you the truth, the product manager probably just — forgot. We’re so easily seduced by vanity metrics and our practice, especially if we’re seeing users adopting features, that we can sometimes forget that our work serves not only the users, but also our business.
Product metrics are sometimes referred to as leading indicators. They are metrics whose development it’s easy to track as they change quickly. For example, Feature Adoption Rate (FAR) is a leading indicator for many product growth teams. Calculating the ratio of new users of a feature over the total number of users of a product is a future predictor of business success. We can hypothesize that the higher the FAR, the higher our Annual Recurring Revenue (ARR) would be. ARR is a lagging metric, as the name implies. It takes at least 12 months to validate any forecast for ARR.
While product management is a business function, the reality is most product folks don’t come from business backgrounds or have much education in finance or business metrics.
This is compounded by the misleading idea that product managers need to be former software engineers.
But just like we must become technical enough to hold our own in conversations, it’s the responsibility of the product manager to become business-literate. And that includes finance, business data, and business metrics.
How do you become literate in finance and business metrics?
My advice is to turn to your coworkers in Finance and BI first. Let them guide you through the metrics and data they are monitoring and collecting.
Read online resources like Investopedia. And find writing about products similar to yours. Try to understand how your product metrics feed into the business metrics relevant for your company.
Experiment. Keep in mind that it may take months before you understand whether your product work is affecting business metrics. But it's important to keep trying and not give up!
Product outcomes are tied to business outcomes, and may very well be meaningless unless you can establish impact on business results.
Because remember, product management only works if by delivering value to your users you also capture value for the business.