You don’t ask a school kid “how much money you are making”. If you did, that would guide them to skip school and get the odd job they are qualified for without education. And that would be the end of their development – they would be stuck with that for the rest of their lives.
What people normally do is ask about how kids are doing at school and what new did you learn today. If they keep learning every day, by the time they are adults they are ready to be working and then “how much you are making” will be a reasonable question to ask.
For grown up companies, revenue growth, EBITDA, quick ratio etc KPIs the traditional (and dominant) business literature (not to mention former corporate executives) is full of, are perfectly valid metrics. But what about companies who are still at school, i.e. startups?
By definition, a startup enters uncharted territories and its job is to do exploration so that it can draw a map. The success criteria for exploration is – learning. Finding the answers to the unknown.
The results of learning do not translate to revenue, profit, growth etc then and there. So what happens if success is measured as revenue growth, profit etc? You get what you measure. Startups skip learning and are trying to get the odd jobs they can, to get the instant results. Forgetting what their reason to exist is. Eventually, this may result in premature scaling – the #1 reason startups die. Pretending to be an adult when one is not.
In startup world everything is extremely context dependant. The context being your position on the learning curve – the “Startup J Curve”. Like a kid growing from child to adulthood, a startup is growing from a set of hypothesis to real business. How its success is measured should reflect their place on that journey. A conceptual illustration of that below.
As you get what you measure, knowing what is the measurement that matters at each stage on the way is crucial. You should understand what is the indicator that guides you best given where you are and where you want to go next. You first need to validate that your plan works before you start tracking your performance against it.
What your to-do-list consists of, and what your metrics for measuring progress should be, depend greatly on the stage (see article on stages) you are at. If you spend energy on a task that should not be on your priorities, it is counterproductive. It can be even lethal. No matter how good or hard working you are.
Very few
activities done in startups are inherently wrong. They might be exactly right –
for someone in a specific situation. But are they right for you, right now is
the question.
A common
example of this is premature scaling -
the #1 cause of startup death. The activities being performed can be exactly
the right ones – for someone who is ready to scale. But if you are not, you may
commit a suicide as a result.
A related topic is, what should be the key indicators of your progress. If you are in PMF stage trying to measure Customer Love, think what is a good proxy for that? You get what you measure, so picking the right indicators for each stage is important.
Identify the stage where you are at and what should be on your to do list accordingly
Identify the right indicator to measure your progress towards your next milestone
Shortage of time is your biggest obstacle - spend it wisely
Time is the biggest shortage startup has. So you need to spend your time doing right things at right time - otherwise you hours will be wasted on doing something that could have been done on later date.
One of the lessons I learned while entrepreneur was: You can spend your time doing things right (corporation) or right things (startup) !
Most modern literature refers to just OKRs (https://www.perdoo.com/the-ultimate-okr-guide/) but I prefer adding Goals to it as well – as Microsoft did back in the 90´s. You need to have defined a clear Goal first before Objectives makes sense. Anyway, the operational stuff is captured in the OKRs (without the G) so no need to split hair on semantics, both work.
The power of the OKR driven operation is explained well in (https://www.amazon.com/Measure-What-Matters-Google-Foundation/dp/0525536221). If you google “measure what matters” you find a lot of material, Youtube videos etc to give you a crash course. Though the examples in the book are very big companies, the method works well for startups as well. Actually they may be even more critical for a startup, as “what matters” is dependant on the stage of the J Curve you are at. As you make progress, “what matters” should change. The thing to drive your everyday activity is the Key Result. The name is a bit misleading, it should rather be “Key Activity”, but this is the standard term so we stick with it.
Scaling is a startup mantra and obsession. Financiers and investors - public and private alike - push startups to scale.
Newborn startups talk about scaling and measure themselves on scale stage quantitative metrics, like growth, MRR etc.
But doing things in a big scale is not scaling. Trying to force business by spending money, hiring more salespeople and increasing number both inbound and outbound actions is not scaling.
Scaling means cloning a concept that has been proven to work, both technically and commercially, in volume.
If your company does not have a concept that can be cloned, ignore this at your peril.
