As a startup, there are hundreds of different things you can focus your limited time and resources on. Early in a startup's life cycle, spending time on the right things can be the difference between success and failure. Paul Graham has said that startups are all about growth...so how do you decide what to spend time on? You could spend hours optimizing your frontpage to increase your conversion rates. Or you could launch an Android version of your app. The answer isn't clear. Today we're going to share how we ensure we are continuously delivering on the pillars of our virtuous cycle.
Pick the Right Metric
At Lob - we picked just one metric to focus our energy around: API order volume. When choosing where to spend your time, you want to pick a metric that is reflective for your business. For us, continuously growing the number of API orders we receive will determine whether we are successful. We can focus our energy not just on large customers who spend big, but also the long tail of developers who are using API as key components in their apps. Our success is measured by the number of developers on our platform and the number of app integrations. The number of API calls across all of our products gives us a good measure of success.
Your metric might be revenue if you are selling a product or if your product is free, your metric may be the # of active users. This should be the same metric you would want to highlight during board meetings and/or investor pitches.
Here are some examples of other companies and metrics that they should be paying most attention to:
Stripe - $ Amount of Payments Processed. You'll notice in their Press Releases that they closely track this number as it directly affects their bottom line as well as represents usage of their API.
Buffer - Active Users. In their blog they clearly call out active users every month in investor updates. In fact, they have even broken out active users by different segments to further analyze how to what is affecting or harming their users. This illustrates how they are making decisions around their product.
99Dresses - Transaction/Trade Volume. In Nikki's latest blog post she discusses how their pivot increased top line metrics, but the most important metric - transactions actually went down. This made it difficult for them to raise additional capital for their bridge round.
Snapchat - Views. It's no secret that tons and tons of people are using Snapchat as it has become one of the hottest and most intriguing apps of this generation. As of May 2014, users are sending 700 million photos and videos per day. This is a stunning number, but what is more impressive is the next number. Snapchat Stories, their least ephemeral product, is seeing 1 billion views per day. As Evan and team start exploring their advertising options, Views on photos, videos, and stories will be the most important number to gauge the power of their platform.
Optimize and Prioritize
Once you have identified your key lever for success, the next step is to frame your company's decision making strategy around that key metric. Essentially, this is an optimization problem - your allocation of time and focus must align with growth of your key metric. By considering this alignment, you create a decision making framework that will guide your company's customer and product development.
At Lob, when we evaluate and prioritize all potential opportunities, we ask ourselves a simple question:
Which opportunity will boost API orders the most in the long term?
By deliberately forcing us to think about which opportunities are going to increase API orders more - the answer becomes immediately more clear. Should we launch a new postcard size or create a new library to support another programming language? The former expands our product array, encouraging more API usage amongst our current users and attracts new users. The latter opens up our API to another world of developers, which leads to more sign ups and more integrations. Both seem like good paths to spend time on, but which one will lead to more volume through our API? This is why customer development is important, you must try and gauge how many people are lined up to use this new library or new postcard size.
Coincidentally this forces us to always be thinking about what our users want the most. This typically ends up being what is going to increase API orders the most. As a result, by using this framework and optimizing around just one single metric, we can save time focusing on the right things and making our product even better for our customers.