The four types of metrics

Building fit-for-purpose products and services

People love metrics! I love metrics! We all love metrics!

That is an old conversation in software delivery, and you can easily find heaps of content out there telling you which metrics [they believe] you should be using. The discussion today is about classifying the metrics (the metadata of the data).

The Fitness for Purpose Framework, unveiled by David Anderson and Alexei Zheglov in their recent book Fit For Purpose — How modern businesses find, satisfy & keep customers (which I highly recommend), classify metrics into four groups:

1. Fitness criteria (KPIs) with thresholds → Indicate selection (by customers)
2. Health indicators with a healthy range → Used to monitor capabilities or aspects of the business. Should be monitored because they may give you early warning of problems that will eventually manifest in a failure to be fit-for-purpose.
3. Improvement drivers with a target → Used to motivate change and are generally linked causally to fitness criteria.
4. Vanity metrics → Make us feel good, where more is always better.

Let’s explore them!

Fitness criteria

When buying products or services, we all have a purpose we are trying to fulfil — our “why”. Customers understand their “why” and their selection criteria intuitively when they choose among the available offerings.

The same person can have different “whys” in different situations — and different criteria will drive them to different purchasing decisions.

Different purposes → different selection criteria → different purchasing decisions → different vendors

To understand what your customers expect and what keeps them coming back again and again, you need to understand why they choose your product or service. You need to understand their purpose — the customer’s “why.”

Those selection criteria — what makes a customer selects you, are your Fitness Criteria and they should be your KPIs — Key Performance Indicators.

Fitness criteria must have thresholds:

• Minimum thresholds below which the product or service is unfit-for-[the customer]-purpose.
• Exceptional performance threshold that would be differentiating and perhaps an enabler of market disruption.

General health indicators

General health indicators don’t indicate selection but are something that you need to monitor.

• They have a guide range but no ideal value, threshold, or target
• Can vary within a defined healthy range without intervention

You don’t necessarily have a target pulse rate or blood pressure, although you might have a defined range within which you’d be considered healthy. Dramatic changes in a general health indicator may indicate something significant, however.

Many of the metrics you’re already tracking are more likely to be general health indicators than KPIs.

Improvement drivers

Improvement drivers are important, but they don’t indicate selection, nor do they have a direct relationship with customer satisfaction.

They have a target value to be achieved over time. When the target is reached, improvement drivers are usually deprecated or changed into a health indicator with a healthy range.

Vanity metrics

Vanity metrics make us feel good, where more is always better, but they do not correlate to improved business performance or stronger customer satisfaction.

They are often mistakenly categorised into one of the other three categories, but their main — or even sole — purpose is to make an individual, a team, a department, or a business unit feel good.

We know they are vanity metrics because they have no meaningful impact on decision making, don’t predict desirable outcomes or customer satisfaction, don’t drive improvement, don’t have a target, and don’t indicate general health.

Metaphorically, vanity metrics are the corporate equivalent of measuring waistline or bicep size.

Homework

Look at your metrics:

• How would you classify them based on the options above?
• Can you identify thresholds for your fitness criteria?
• Can you identify targets for your improvement drivers?
• Can you identify ranges for your general health indicators?
• Can you align your improvement drivers with your fitness criteria?

Till the next time!

Marcio Sete