Wednesday, December 19, 2012

Popular Social Media Metrics - A Waste of Time?

I came across an interesting post in HBR today titled "Why Your Social Media Metrics Are a Waste of Time" by Ivory Madison. Popular social media metrics such as page views, unique visitors, registered members, conversion rates, number of Twitter followers, or Facebook likes are "interesting" at best. They're what Eric Ries, author of The Lean Startup, calls "vanity metrics." Vanity metrics look good but fail the "So what?" test. That is, vanity metrics are accurate, but irrelevant. Does it really matter if you have a million Twitter followers (an accurate number), if at the end of the day you cannot trace any product sales back to that metric (no relevance)?

So, Ms. Madison recommends the following four metrics as more useful alternatives:
  1. Relevant revenue. Note the word "relevant," which refers to recurring sales in your core business. Don't count revenue from one-time or stagnant sources.
  2. Sales volume. This can be a number like units sold or active subscriptions, something that shows whether or not enough people want to buy what you're selling.
  3. Customer retention. Metrics like "new customers" can hide the fact that although you may attract 1,000 new users a month, you're losing 900, which means you're not going to scale.
  4. Relevant growth. Too often, companies compound the stupidity of their choice of metrics by creating a metric tracking the growth of vanity metrics. You should be looking for a traceable pattern in which the actions of your existing customers create new customers. That's what Ries calls an "engine of growth."
My 2 cents - The above four metrics are "motherhood and apple pie." They are the holy grail of measuring the effectiveness of any activity; social media or not. The challenge is not that no one recognizes that these are the best metrics but that no one has figured out (or publicly announced) how to capture these metrics for Twitter or Facebook or any of the other popular social media sites.

The Bottom Line
As I said, an interesting post but unfortunately it falls short of presenting any new information. Most experts would agree that the current, popular social media metrics are less than optimal. The question is how do you measure the "right" stuff? And is this another example of not letting perfect be the enemy of good enough? 

Thursday, December 6, 2012

Want to Innovate? Abandon Best Practices.

"Status quo is the enemy of innovation" is a concept I discuss extensively in my recent book, Living in the Innovation Age. In fact, that conviction is the basis of Principle #3 in my book - Innovation is "Where No Man Has Gone Before."

So, what have "status quo" and "innovation" got to do with best practices? Aren't best practices supposed to be a good thing? After all, best practices are the distilled essence of the learning of many individuals from years of experience, successes, and failures. Best practices are supposed to help ensure success and avoid past mistakes. Conventional thinking would agree. There are, however, two main problems with such conventional thinking and therefore with these so called "best practices."  

The first problem is that many best practices are rooted in past constraints and/or fallacies.  Freek Vermeulen explains this nicely in his recent blog posting titled "Which Best Practice Is Ruining Your Business?" in HBR. He starts the discussion with an excellent example of the best practice of printing newspapers on broadsheet format even though such a practice raised printing costs substantially. Despite the higher costs and inconvenience, newspapers were terrified of going against the established "best practice" assuming that customers equate quality newspapers with broadsheet. When finally, in 2004, the United Kingdom's Independent switched to the denounced tabloid size, it actually saw its circulation surge!

One reason why a best practice's inefficiency may be difficult to spot is because when it came into existence, it was beneficial. Decades ago broadsheet newspapers made sense since newspapers were taxed based on the number of pages. By using broadsheets newspapers were able to cut down taxes, lower costs, and make more money overall. But even when the tax per page was abolished, newspapers stuck to broadsheet printing as a best practice for quality newspapers and forgot that the real reason for broadsheets had nothing to do with editorial or content quality or even user convenience.

The second problem builds on the first problem and serves to reduce a company's differentiation and hence competitive advantage. By default, best practices are well documented, accepted ways of doing things. Also, by default, it then follows that everyone is adopting these best practices, sometimes without even realizing that they are doing so. For example, software packages such as Enterprise Resource Planning (ERP) systems and Customer Relationship Management (CRM) systems that make up the backbone of many company's core operations come with best practices codified in their business logic and database tables. So, when a company implements one of these ERP or CRM systems and leverages the built in capabilities they are in fact adopting the same "best practices" that everyone else is using. Therein lies the issue - best practices only serve to solidify the status quo not challenge it. In an era when customers demand creativity and innovation, that's just not going to cut it. In the long run, relying on best practices will doom you to mediocrity. Instead of getting bogged down trying to reverse-engineer the strategies of others, your time will be much better spent finding your own path. 

The Bottom Line
Innovation requires challenging the status quo and going "where no man has gone before." That cannot be achieved by following best practices since such practices at best solidify the current state of knowledge. Innovation requires breaking away from best practices and creating "next practices" that can enhance differentiation and provide sustainable competitive advantage.