We are all too often focused (fixated) on the end goal and forget about the necessary individual steps that lead us there. Since we don’t know exactly how to reach our goals, we don’t make progress and get increasingly frustrated.
The problem is that most individuals, leaders and businesses focus on output metrics and try to improve them. At Amazon I’ve learned to focus on improving input metrics instead. It’s a powerful shift in mindset if you want to have true impact.
Focus on the things you can manage. Measure inputs and real-time metrics rather than outputs. Design your metrics to support your long-term plan, not short-term gains.
The problem with output metrics
Output metrics (e.g. profit, user base, user retention, downloads) are the outcomes that a business wants to achieve and the ultimate goal is to improve them as much as possible.
The only issue with that is, that output metrics or business outcomes are the result of many right or wrong actions that have already been taken and many right or wrong decisions that have already been made in the past. It’s very hard to look at a lagging profit or user metric and figure out what to do specifically. And by the time the output metric is lagging, it’s in most cases also too late to course correct anyway.
Input metrics help shape outcomes
The better metrics to look at are input metrics. Input metrics are measurements of the things that need to go right in order to generate great outcomes. At Amazon we focus on input metrics first and foremost.
For example, if you build a new app and want to grow your user base quickly and sustainably, you should not spend all your energy looking at the number of users. Probably you shouldn’t look at that at all for the first few months. Instead you need to get your inputs in shape. For instance, is your product what users want (what’s your app’s rating in the store, what are the negative feedbacks from users)? Are your marketing campaigns effective (what are click-through rates, how is your conversion rate for downloads and sign-ups)?
Focus on inputs more than on the outputs when you look at the funnel. Input metrics are early warnings. They are also much more actionable than output metrics. It’s much easier to react on leading click-through rates or customer feedback about insufficient UX, than to look at low usage numbers and guess what might be wrong.
Focusing on inputs sets you up for the long run
Too much focus on output metrics can also incentivize you to make bad long-term decisions in order to gain short-term benefits (just look at Wall Street to get an abundance of examples). Focusing on input metrics will guide you to build the right systems and set the right priorities for long-term growth.
I saw an example for that conflict just recently during MBA interviews. I asked candidates how they would decide which of two prices (same product, different suppliers, different pricing) they would offer to a customer. Most candidates will provide the standard answer: “the price that offers the best margin and thus the best profit for the company as long as it’s within the constraints (buying power) of the customer”. That answer maximizes the output metric (profit).
If you focus on input metrics, the above is the wrong answer (and btw, don’t give that answer in an Amazon interview). Your input metric is to have lots of happy returning customers who trust you. If customers are happy, return often and trust you, they will make great business with you over time. The right answer is to “always offer the best price to the customer”. It’s the better long-term strategy and it will drive the right outcomes. That’s why at Amazon customer obsession always comes first.
Closing with a non-business example
To drive home the point, I want to close with a non-business example.
As you know by now, I care a lot about living a healthy life. And I believe in measuring progress.
“You can’t manage what you don’t measure.” – Peter Drucker
In the past I did track my progress on outcomes like my weight, my overall fitness (how do you even define that?) my energy levels and so on. You get the idea. The problem is that those ‘metrics’ change slowly and are pretty hard to influence directly since they are the result of many things playing together.
In recent years I changed my focus to a small set of input metrics: (1) exercise every single day, (2) sleep 8 hours a day and (3) drink 2 liters of water every day. Those metrics are simple, they are accurate on a daily basis and I know exactly what to do if I miss any of them. They are also very easy to track on my Fitbit or Apple watch.
You might guess it already, but since having that focus I saw great improvements on my fitness, weight, energy and general feeling of wellbeing without actually focusing on any of those outcome metrics specifically.