📕 Finding your North Star Metric; Why Product-market fit is broken; Restoring the soul of business…
It’s been a crazy couple weeks here, to say the least – we hope everyone is continuing to stay safe and healthy as we come down the homestretch of 2020. Maybe we can slightly avert your attention with this week’s playbook, which focuses on ways to avoid founder bias, the importance of RevOps, and your customer adoption spectrum.
Have a great weekend!
📊 As SaaS operators, we have become obsessed with the idea of being “data-driven companies,” measuring every metric imaginable to better understand our business. The Tyranny of Metrics does a great job explaining the downsides to this sort of over measuring, but it’s a bit light on real solutions. We always try to look back to The North Star Metric, which is defined as the measurement most predictive of your company’s long-term success. To truly qualify as North Star Metric, the metric must lead to revenue, reflect customer value, and measure progress. So if you run a billings company, that metric could be total billings per month, or if your CEO file uploads API, it might be total files uploaded.
🤑 When we look back at 2020 it will undoubtedly be known as the year of COVID. Our early guess for 2021 (for the SaaS world at least): the year of RevOps. The goal of a RevOps team is to drive growth through operational efficiency in all areas of a company – by being accountable for revenue, they enable departments like sales, marketing, and success to focus on the customer. That sounds great, but you’re probably wondering what allowing those departments to focus on the customer actually means in dollars. A recent survey from Sirius showed that companies who implemented RevOps departments showed 36% more growth than those who didn’t.
🥕 Product-market fit (PMF) is the golden carrot all companies chase, but some argue it’s an outdated concept because of how constrictive it can be. Finding PMF is usually answered by a yes or no question: “Are people willing to pay for this product?” but products shouldn’t standstill because customer needs are always changing. A more effective way to determine your company's longevity and growth potential is to evaluate your customer adoption spectrum to determine your stickiness. This spectrum allows you to apply ranges for success and removes the arbitrary yes or no question of “will people pay for this?” It’s also better suited for customer segmentation because you’re able to hyper-focus on segments your product is doing well in and discover ways to reach previously untapped parts of your market.
✅ Founders pour their blood, sweat, and tears into building a great product, which often makes them biased toward believing it will be perceived positively by others. It’s unavoidable human nature, which is why it’s important to set realistic expectations and validate product pre-launch. Setting up a simple landing page to gauge sentiment and demand is one of the easiest ways to gain valuable insights on your value propositions and viability of a product before it’s even in the hands of your customers. Another bonus is you’re able to test which channels and pathways resonate best with your target audience.
🤖 We are reading Rishad Tobaccowala’s latest, Restoring the Soul of Business, in which he cautions that businesses are becoming too automated and lean too heavily on data, leading them to while ignoring the human connection. Similar to The Tyranny of Metrics mentioned earlier, he dives into the impact becoming too data-driven has on a company, from killing culture to harming the customer experience. Leveraging examples from some of the world's most forward-thinking companies like Netflix, the book focuses on how companies can blend all the benefits of having a strong data infrastructure without losing that human connection.