In this day and age, there is a lot of chatter about transformation: how incumbent companies can protect themselves against the ascension of nimble startups. Obviously, there is no one-size fits all approach. However, there is a small change you can do as an executive that can cause a seismic shift in how you run your business.
It’s not a new mission statement.
It’s not a vision for the next 5 years.
It’s not a fancy strategy.
It’s about changing the way you view and measure your business.
It’s about shifting your focus from Financial Performance Metrics to Customer Benefit Metrics.
This article will give you examples and steps that you can take to drive this change. Measuring Customer Benefit Metrics will cause you to be more competitive and create better experiences for your customers.
“What gets measured gets done“ — Tom Peters
The power of metrics
Metrics transcend everything. Every part of an organization adheres to metrics. Designers, marketers, sales, HR, engineering — everyone has a set of metrics they focus on.
Since metrics are overarching, they also affect everything you do. This can be detrimental if you have defined a poor set of metrics. Bluntly put: if you’re measuring the wrong things, you get the wrong results. The flip-side: if you measure the right things, you get the right results.
The problem with metrics
Typically in business, you focus on measuring Financial Performance Metrics such as:
These variables indicate the lifeblood of a business. However, they’re flawed. Such KPIs only focus on what’s important to your company, rather than what’s important to your customers. Conversion, for instance, doesn’t give a nuanced picture. It’s a blunt instrument indicating that a customer has purchased a product or a service. Sure, the customer has converted, but is he or she happy, and will they come back?
Enter Customer Benefit Metrics
In Clayton Christensen’s latest book Competing Against Luck, he touches upon the idea of Customer Benefit Metrics. They are a stark contrast to traditional metrics since they focus first and foremost on the benefit the customer will receive. To illustrate the concept, he uses Amazon as an example.
Amazon is governed by a set of three metrics:
Everything that Amazon does relate to these measurements. Fundamentally, they all connect to the customer.
Orders delivered, not orders shipped
For instance, Amazon doesn’t measure orders shipped, they measure orders delivered. Orders shipped is perhaps a metric that many eCommerce companies use, since it’s the end of their responsibility. They have shipped the good and now the logistics company takes over. Amazon, on the other hand, takes responsibility for the end-to-end experience, measuring that the product has been delivered in a timely manner. By measuring orders delivered, Amazon will not just optimize their internal systems and processes to ship products, they will remove friction and constraints in how orders are delivered, regardless of what’s in their realm of responsibility. The result: a better customer experience.
Metrics influence innovation
As we mentioned earlier, metrics transcend everything in an organization, even innovation. Amazon’s most notable innovations during the last few years can be connected to their metric “fast delivery”: the Dash button, the Prime Air drones and the recent Key.
How to get started with Customer Benefit Metrics
“These are great concepts, but I have no political clout to change the way we measure our business”, you might say after reading this article. We challenge you on that. You don’t need to be a CEO to change how you measure value for your customers. Start small and trickle up.
By following the steps below, you can make the shift from Financial Performance Metrics to Customer Benefit Metrics. By doing so, you will not only create better services and products for your customers, it will drive a cultural change, with empathy for customers as a core tenet.
Step 1: Start by talking to your customers
It might sound banal, and blatantly obvious, but sadly this is not often the case for a majority of companies. To define Customer Benefit Metrics, you need to understand your customers. You need to get know how, why and when they use your products and services. You need to uncover the result they want by investing their time, money and effort.
The essence is about discovering the job to be done. What do your customers want to get done in their daily lives? How do they want to improve? The job to be done is greater than your specific product and service, it’s an ecosystem. As from Slack eloquently exemplified, it’s not about selling saddles, it’s about selling horseback riding — that’s the job to be done.
To find your customers’ jobs to be done, you start by interviewing them centered around understanding how, when and why. If you want to learn more about this frame of research, we have added some useful resources below.
2. Map your customer jobs to metrics
After you’ve isolated insights around your customers’ jobs, it’s now time to map them to how they can be measured.
To make it a bit more tangible, here’s a hypothetical example of how Netflix defined a Customer Benefit Metric.
Hypothetical example: Netflix
Netflix conducted a series of customer interviews to uncover underlying jobs to be done. After synthesizing the research, they came across one job that was most pertinent, “Help me unwind from a long stressful day at work”. They discovered that this is the core job of Netflix for a majority of customers. So the question was: how could they translate this job to a metric?
They formed a hypothesis: when you come home from a long stressful day at work, you want to relax and not make too many choices. You want to sit down on your comfortable couch and be entertained. What’s important in that situation is that the customer A) doesn’t waste time finding a relevant show, and that B) the show is something that fits with their current mood.
They broke this down into two metrics:
Job: Don’t waste too much time finding a relevant show
Metric: Least amount of interactions necessary
Job: Find a show that perfectly fits with the customer’s mood
Metric: High rating after viewing
Low amount of interactions + high rating of a show = Customer Benefit Metric
The above example indicates that combining a set of metrics can form a more extended view of what your customers really want to achieve. However, it doesn’t necessarily need to be a combination, it could be as straight-forward as shifting from a pure Financial Performance Metric to a Customer Benefit Metric.
Metrics are powerful tools to drive transformational change in a business, a change to become more empathetic with your customers. As businesses, we need to move away from only measuring what’s important for the business and instead measure what’s also valuable for our customers. The change is measuring Customer Benefit Metrics.
The essence is about uncovering what your customers want to achieve, how they want to improve, and tying those insights back to how you measure success. What’s good for the customer will also be what’s good for your business.
Applying Customer Benefits Metrics will make your more competitive, and at the same time make your customers more satisfied, a win-win situation.