Good Measurement and Bad Mimicry

Apple and Oreanges by Petr Kratochvil

Theodore Roosevelt captured of fundamental truth about the human condition when he shared the following:

Comparison is the thief of joy.

But comparison isn’t the problem, of course. Envy is the problem. The act of comparison is just an information-gathering exercise. Our response to that information (envy) is where the joy-stealing really happens.

This effect is heightened when comparison is facilitated through the precision of metrics. When people can compare numbers, be it their GPA or net worth or friend count, it’s like comparing Win-Loss records in a sports league. Lower numbers, relative to the competition, are just that. Lower numbers. The numbers themselves say nothing.

It’s us who decide if higher numbers = winners and lower numbers = losers. We decide this based on the game we want to play.

Case in point: a few months ago, I examined my relationship with LinkedIn. I realized I didn’t like the game it wanted me to play. Engaging with that platform led me to an infatuation with followers, connections, “likes”, and all manner of ugly insecurity brought on by the bad kind of comparative thinking.

Worst still, I started to adopt the language and mimic some of the behavior. This is really embarrassing in hindsight. I started writing in that sort of empty careerist patois that is more half-hearted and hollow than the small talk at a convention booth. Lots of exclamation points! And shallow positivity!

I decided to stay on the platform but only so that I could play a different game. For example, I decided to maintain no more than 499 “connections” at any given time. It felt like a cute retaliation against the platform’s implied validation of having “500+” next to your name.

#Forever499 sounds weird. And trite. But I’m sticking to it.

The idea here is that metrics fuel comparison. This comparison usually sparks envy. That envy usually leads to mimicry. That mimicry typically causes you to behave in ways that reinforce the game that everyone is playing. That reinforcement often leads to all sorts of additional behaviors, like paying for premium services (be a LinkedInsider!) and peer recruitment via network effects (Norm Wright invited you to join LinkedIn).

As the game continues, the only people who win are the ones who designed it in the first place. You can see this with MLM over the long run.

It all begins with a single metric that suggests a certain game based on a bad kind of comparative thinking.

Which means there is a good kind of comparative thinking. These metrics, these comparative tools, can bolster your identity. They can make you an outlier of your own choosing. They can clarify the strategy you want to hold.

The One Metric That Matters

The authors of Lean Analytics are champions of the idea that you should find the One Metric That Matters (OMTM) and use it as your proverbial North Star for every decision. This is a fantastic way to practice strategy. It is also the way we can really practice what Stephen Covey advised so many years ago when he said:

The main thing is to keep the main thing the main thing.

It feels so tautologically tautological!

The OMTM differs for every endeavor. But in the business world, certain fundamental measures can be used across all manner of industries. As the authors write:

There are few metrics — like growth rate, visitor engagement, pricing targets, customer acquisition, virality, mailing list effectiveness, uptime, and time on site — that apply to most (if not all) business models.

I enjoy thinking about the cross-disciplinary value of these metrics. It fuels comparison in a good way. What is a proper customer acquisition metric in business consulting versus SAAS? What is the proper growth rate for a technology company versus an industrial manufacturer?

Maybe it’s all academic but the difference in each numerical value amplifies the differences and trade-offs in each business model. Amazon’s profit margin sounds horrible if you compare it to Boeing but that’s because they are fundamentally different companies operating different models. The metric explains how.

But when you compare the same companies in the same models, you get draw fun, alluring conclusions. So Amazon’s margins compared to, say, Target and WalMart, show the deep underpinnings of each retailer’s strategy and helps explain their comparable performance at any given time. We read too much into these things but, again, such analysis of Target’s margins helps us tell stories about today’s winners (Amazon and Wal-Mart), losers (Target), and tomorrow’s forecast (Amazon wins).

The Other Metrics That Don’t Matter (as much)

The question at the heart of that particular comparisons is the following: does Target care?

Maybe Target fully accepts its shrinking profit margin because it’s playing a different game. Or maybe it can’t fix the shrinking margin so it has no choice but to play a different game. In either case, if the metric matters most, they will pin their strategy on it. If that metric doesn’t matter most, then something else does. And that something else, that OMTM for Target, is the game their playing. It is their identity. It is their strategy.

The folks at Harvard Business Review have written many, many times on how the critical aspect of strategy is not what you will do. Great strategy is about the other half of that coin: what you won’t do. A willful use of the word “no” helps you maintain coherence.

The authors of Lean Analytics know this well. So when it comes to all the various measures that any business can use, they wisely advise that the OMTM be something so perfectly-designed as to naturally lead you to embrace it. Even when people cast worries about your profit margins or some other metric.

The OMTM needs to be so good, so pure to your mission and identity, that it practically creates an existential dependency.

For example, consider this story of Facebook’s early OMTM: growth. At that point in time, nothing else mattered. Was it infatuation? Maybe. Should other things have mattered more? I don’t know. All I know is that a business can’t be coherent and sensible until something is the focus. Growth was Facebook’s.

And what makes for a proper OMTM that really deserves that focus? The authors identify five traits of such a measure. An OMTM must be:

  1. Simple.
  2. Immediate.
  3. Actionable.
  4. Comparable.
  5. Fundamental.

Here’s an illustration of this OMTM framework in the restaurant business. The authors spoke with the owner of the high-end Michelin-starred Solare Ristorante where the OMTM for their business is the ratio between per-diner revenues and staffing costs. (emphasis added):

[The owner] explained when staffing costs exceed 30% of gross revenues, that’s bad, because it means that you’re either spending too much on staff or not deriving enough revenue per customer.
The ratio works because it’s:
Simple: it’s a single number.
Immediate: you can generate it every night.
Actionable: you can change staffing, or encourage upselling.
Comparable: You can track it over time and compare to other restaurants in your category.
Fundamental: it reflects two basic facets of the restaurant business model.

Strategically, the tactics used to keep that number down and keep the business strong all cascade from this one beautiful, sensible OMTM. What works for Solare Ristorante is unique to that specific restaurant. They maintain a balance that suits their vision of what a great restaurant, to them, needs to be. The only comparison here is with themselves. They’re running their own race.

The owner didn’t go look at Applebees’ ratio. He didn’t first scope out McDonald’s either. And even if he examined a true competitor’s ratio, he didn’t try to copy it. Because he’s playing his own game.

Mimicry Can Lead To Individuality

There is mimicry in some of this, for sure. After all, I doubt Solare Ristorante invented their specific OMTM. They copied it from elsewhere. And Facebook isn’t the first or last company to be maniacal about growth. But what matters here is that each individual (you and I) can use these metrics as an initial comparison in productive ways.

Comparison doesn’t have to steal our joy. It can spark it.

When we see other people’s numbers, be it follower counts or “likes” or profit margins or revenue-staffing ratios, we can make a choice. We can decide to attach value to those numbers or we can decide to value some other number instead.

The choice doesn’t matter so long as you make the deliberate decision yourself. What you choose to value is just that: your choice. For your social media, your business strategy, your identity. Until you are capable of making that choice, you’re probably just going to mimic what others do. That’s okay for a time. Mimicry helps you get started. It helps you find what matters.

Just don’t get lost there. Be a willful participant in the game. Whichever one you choose. Then make your own.