Metrics Don’t Matter
Why the CFO should never, ever be the CEO.
Why do successful companies fail?
Truthfully, there are as many answers to this question as there are long-gone companies. Changes in the market, abandonment of core competencies, new technologies… The list goes on, and many are beyond the realm of control.
But Elon Musk has a great quote that explains more than a few company failures:
The moment the person leading a company thinks numbers have value in themselves, the company’s done. The moment the CFO becomes CEO — it’s done. Game over.
Think really carefully about that for a second. 🤔
In the business world, we use numbers – metrics – to measure the success of companies and products. Revenue, profit, EBITDA, user growth, user growth acceleration, market penetration… There are endless frameworks for quantifying, measuring, and explaining success. 📈
But it’s very easy to lose sight of the fact that, at the end of the day, the numbers don’t actually matter in and of themselves. They’re only important insofar as they tell a story about something lying underneath. Their job is to give clues about something that, ultimately, is impossible to measure directly.
And just what is that?
Beyond Metrics
It has many names: value, benefit, utility, joy, convenience, comfort, enjoyment, ease. It takes subtly different forms for every company and every product, and it affects the lives of consumers differently from case to case.
But at core, it’s the idea that a product or a service helps someone — it makes their life easier, or more enjoyable, or better in some way than it was before they had the product. It’s an improvement in the quality of life of customers.
For simplicity’s sake, I’ll use the term value.
Ultimately, companies don’t actually exist to create products or even to create wealth — they exist to create value in the lives of customers. A product might save someone time or money, might make them more comfortable as they go to sleep, or might just give them something pretty to look at when they’re bored. But in all these cases, the product exists to create value.
We use metrics to try to measure the level of value that companies and products create in the lives of customers. At the end of the day, the metrics exist to tell us “this is a good product. This product creates value.”
If a product creates enough value and lifts a company’s metrics high enough, it can drive that company to staggering levels of success. The problem is that often, we mistake the metrics themselves for the underlying thing they’re trying to measure.
Why Success is Dangerous
If a company’s metrics look good enough, it’s tempting to believe that the company is successful because of those metrics. But that line of thinking is dangerous.
If we think a company is successful because of its metrics, and particularly if the company itself believes that, it loses focus on the one thing keeping it afloat: the value it delivers to customers. And as soon as that isn’t the central focus of the company’s decisions, things start to go south. 📉
When a company thinks that its metrics are what makes it successful, it’s easy to justify cutting corners on quality of product. It doesn’t seem so bad to substitute one material for another to save money, even if that means the product is a little worse off. It feels alright to pare down customer support staff, even if that means the phone service is almost unusable.
And here’s the thing — as soon as a company starts sacrificing value for profits, they’re on a slippery slope. The titans may feel high up, but it doesn’t take a lot to send them tumbling down.
Even a company with great metrics — a company that’s on top of the world — is never too far away from failure. If they lose sight of what’s important, of what all those metrics actually stand for, then all the numbers in the world can’t save them. As much as they’re worshipped, metrics can’t keep you safe.
It doesn’t matter if you’re making millions or just getting started. No matter what level of success, the lesson is the same.
Focus on delivering value to the customer — in every vertical, in every industry, in every company, that’s what’s important. Lose sight of that and you’re a goner.
Make it your central focus, and nothing can stop you.
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