Translate your strategy into execution by focusing on the right metrics
The sheer size and scale of data produced by modern business is staggering. Data tracking billions of business activities are generated each day, much of which is never reviewed or analyzed. And yet, insights from business data have never been more critical to success. So how can companies separate the signal from the noise and focus on the most important metrics for their business? KPI Mapping.
KPI mapping is the process by which you distill your broader strategic objectives into actionable and specific goals, allowing for resource allocation, goal/target setting, and ultimately tactical execution.
Inputs vs. Outputs
To understand KPI mapping, it’s a helpful exercise to break down business KPIs into two groups – inputs and outputs. Measures like revenue growth, user growth, engagement, market share, brand awareness and profitability are outputs – they are not the direct result of a business action, but a byproduct of a variety of actions across the business.
Contrast this with metrics like sales calls made, projects completed, and articles posted – these are inputs – the direct result of a controllable action. Understanding how your actions (inputs) roll up into broader organizational KPIs (outputs) is critical for successful execution.
An Example: SaaS Software Growth
Let’s walk through an example. Say you’re a SaaS company with a goal of 100% ARR growth for this upcoming year. There are several components that need to go right for you to reach your goal. Your ARR is a function of your client base and the average contract value for those customers. But there are many activities from across the business that will contribute to the success (or failure) of these two metrics. Let’s drill down a level deeper:
If you’re trying to double ARR in the next year, you’re likely going to need to bring in some new customers. In order to execute against your acquisition strategy, you’ll need to dig into even more detail:
- Marketing Qualified Lead (MQL) per Period – how many opportunities do I need to generate? (Marketing)
- Sales Activity Rate – How many calls/contacts can my sales reps do in a day? (Sales)
- Conversion/Win Rate – What is my conversion rate on leads from different sources? (Marketing/Sales)
- New Contract Value – how much are my new customers paying for my service after discounts? Is this trending up or down relative to older cohorts? (Sales)
- Sales Cycle Length – How long does it take for a lead to become a customer? (Sales)
- Team Size – How many reps do I need to hire? (Sales)
But new customer acquisition is only part of the story – you also need to consider the existing customer base:
- Customer Churn – how many of my existing customers are leaving? And why? (Product/Customer Success)
- Net Dollar Retention
- Dollar Upsell Rate – how can I drive greater usage from the existing base? (Customer Success)
- Cross-sell by Product Line – are there adjacent areas I should expand/emphasize to increase ACV? (Product)
As you can see from this simplified breakout, there are numerous underlying drivers embedded in that 100% topline growth goal – many of which can be linked to different resources within the company. The KPI Mapping process helps to ensure that each piece of your organization is adequately equipped to support your growth expectations.
Clarity+Alignment=Conviction
KPI Mapping allows you to set relevant operational targets (leads, conversion rate) that directly roll up to the high level goals (growth). This math allows for an understanding of the relationship between inputs to achieve a desired output. By adopting this approach, you provide clarity for your teams on what’s expected from them, instant accountability for performance, and consistent alignment with organizational goals.
KPI Mapping allows for an understanding of the relationship between inputs to achieve a desired output. With these frameworks in place, you can set relevant individual operational targets (e.g. leads, conversion rate) that directly roll up to the high level goals (new customer growth).
Once KPI mapping is completed, you’ll have an excellent foundation to develop a bottoms-up forecast for the roadmap and resources needed to meet your goals both today and in the future. This advanced forecasting helps you plan for capital needs, hiring, set departmental budgets and more. But for that, you’ll have to wait for our next installment on strategic finance.
At Blueprint Analytics, we’ve conducted countless KPI Mapping exercises across a variety of industries and stages of growth. Want to learn more? Drop us a line at info@blueprintanalytics.co, and we’d be happy to hop on a call to discuss.
Blueprint Analytics is an analytics and strategic finance advisory firm focused on early and growth stage companies.
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