Advanced metrics matter
What really counts when it comes to running a company? The bottom line? Or maybe something that means much more in the long run? It’s time to ditch those dollar-focused spreadsheets – and start measuring the things that really matter.
Silicon Valley has a problem. Cheap money has created a culture that chases metrics which ultimately have very little to do with long-term success. Whether it’s the number of jobs created, registered users a startup acquires (if you can’t convert), or the number of dollars in its company valuation, the sums aren’t always adding up to a profitable or sustainable business.
If you think this mind shift only appeals to the sensibilities of young Millennials, you better think again. Larry Fink, the CEO of BlackRock, one of the world’s largest institutional investment firms, offered this piece of advice to Wall Street: companies must deliver financial performance, but also show how it makes a positive contribution to society. We think this will not only be a focus at Davos but also a big trend in 2018 and beyond.
Some are shifting to digital and innovation metrics. But here too, problems will arise. An overreliance on innovation metrics brings its own challenges: information overflow, delayed decisions, and burdensome admin. In fact, measuring the right thing when it comes to innovation is as much about asking the right questions as answering them. And let’s be honest, what are digital and innovation metrics.
The real changes will come from new data, which allows us to get answers to questions we didn’t even previously think of. Machine learning and artificial intelligence is making data-driven decision making more accessible to more and more businesses. Smart capabilities are already emerging in areas like data preparation, discovery, analysis, prediction, and prescriptive applications.
All industries will adapt to the need to use data in new ways. For example, we are now seeing professional sports expose next-gen metrics such as bat speed or ball velocity. We are seeing tools that quantify our hydration levels or new indexes that better describe our relative performance in life.
Moreover, as consumers get ever more wised up to the consequences of their consumption, the need to take a new look at the environmental impacts of their consumption. As a new generation of experience seekers search for something more than material or financial gain, sustainability, transparency, and social responsibility will become the watchwords of successful offerings.
Young, upstart businesses are already upending incumbent markets by using modern ethics as a unique selling proposition (USP). TOMS and Tesla, for example, put sustainability at the core of their business models. Everlane uses radical transparency to reassure consumers about the provenance of its products. And companies like clothing manufacturer Patagonia are focused on reducing the environmental impact of how they do business.
In this environment, measuring corporate culture takes on much greater meaning. And not in a vague or vapid sense either. Assessing a company culture can now be as accurate as quantifying sales or ROI. Employee net promotor scores (eNPS) are an objective measure of a workplace culture, for example.
Companies will shift to a new-era metrics, including ones that focus on the things that matter most: sustainability and purposeful objectives with the intent to solve the world’s challenges. Do that, and the profits will top what they are now.