Six Common KPI Mistakes to Avoid
Key performance indicators (KPIs) are metrics that measure how well your product is doing. As useful as they are to proactively manage a product, they are not always effectively applied. In this article, I discuss six common KPI mistakes. I explain how you can overcome them and fully leverage key performance indicators to maximise the value your product creates.
🎧 You can listen to this article here: https://www.romanpichler.com/podcast/six-common-kpi-mistakes/
1 No Product KPIs
Imagine that you have trained hard to run a half-marathon. Shortly after the start of the race, your smart watch stops working, and you discover that you didn’t bring your phone. Consequently, you don’t know for sure how fast you are running and if you are on track to achieve your target finish time. The same is true when you don’t use any key performance indicators. You’ll end up guessing how well the product is doing and if it is creating the desired value.
While common sense suggests that managing a product without the right measurements is not a sensible approach, I’ve seen product teams who did not use any KPIs. This can be caused by an intense focus on execution and delivery — being so concerned with adding features and running sprints that tracking the product’s overall performance is neglected. Consequently, these teams relied on:
- Anecdotal feedback: “Customers love our product, they told me so.”
- Gut feeling: “Trust me, I’ve seen this before, and I’m sure we’re on the right track.”
- Solution-centric data: “We’re making great progress; we’ve implemented 50 more user stories, and velocity is up by eight points!”
Sadly, the data above is not helpful to see clearly how much value the product is creating. Instead, it can lead to making wrong product decisions and ultimately mismanaging the product.
2 Wrong Product KPIs
When you reflect on the key performance indicators you use, how confident are you that you have chosen the right metrics and that you collect the right data? My experience suggests that it’s rather common that not all indicators used are helpful. There are four common reasons for this:
- The analytics tool decides: The measurements are largely determined by the analytics tool employed — you trust the tool to collect the right data for you. This often leads to too much data being gathered. You consequently spend too much time analysing the data, and you may struggle to determine the relevant data. This, in turn, can cause you to draw the wrong conclusions and make the wrong decisions.
- The value the product should create is not clearly understood: A validated product strategy and an actionable product roadmap are missing. You therefore end up guessing which indicators you should use rather than being able to systematically derive the right ones.
- A powerful stakeholder or line manager determines the KPIs — not the person in charge of the product. This usually leads to using metrics that are valuable for the individual but not necessarily for the product. In the worst case, you collect irrelevant data that unduly influences product decisions.
- Vanity metrics are used. These are indicators that make the product look good rather than paint a realistic picture of its performance, as I’ll discuss in more detail in one of the following sections.
Using wrong or unhelpful indicators means that you will collect wrong or irrelevant data. If this data is actioned, bad product decisions will be made. Therefore, ensure that all measurements you use are truly helpful. To achieve this, refer to the needs and business goals stated in the product strategy and the product goals on the product roadmap. Then ask yourself how you can tell that these goals have been met. Additionally, include health indicators, metrics that measure how healthy your product and team are, as I explain in more detail in the article How to Choose the Right KPIs for Your Product. Don’t forget to regularly review and adjust your KPIs. Do this at least once per quarter, as a rule of thumb, ideally as part of the product strategy reviews.
3 Stakeholder or Big Boss Dictates KPIs
In theory, the key performance indicators should be systematically derived along the lines just mentioned. But in practice, that’s not always the case. I have worked with product people who were told to use certain KPIs by a powerful stakeholder or their boss.
If that’s the case for you, then you may not be fully empowered. As the person in charge of the product, you should have full-stack ownership of the product. You should possess the authority to ultimately determine which KPIs are used, and which ones aren’t — even though I recommend involving key stakeholders and development team members in the decision-making process. If you feel that you lack empowerment, consider how you can increase your authority. My article Boost Your Product Leadership Power will help you with this.
Additionally, have the courage to take ownership of the KPIs. Learn to effectively say no to stakeholders and line managers without losing their support, as I explain in the article 5 Tips for Saying No to Stakeholders. It would be a mistake to use KPIs only to please powerful individuals. Your job as the person in charge of the product is not to make the stakeholders happy but to maximise the value your product creates for the user, the customers, and the entire business.
Read On …
To read the rest of this article and access the remaining tips, please head over to my website: https://www.romanpichler.com/blog/avoid-these-common-kpi-mistakes/
Learn More
You can learn more about key performance indicators by attending my product strategy and roadmap training course and by reading my book Strategize.
Source: https://www.romanpichler.com/blog/avoid-these-common-kpi-mistakes/
