An Ode to Growth operation

Growth operation metrics are rarely tracked and studied. Profitability metrics and consumer behavior metrics are critical. Organizations do allocate commensurate resource and analytical rigor for these functions. Unfortunately, growth operation analytics does not get the resources it deserves.
This post argues that business operation metrics are the lead measure of business health. Product metrics or consumer behavior metrics comes after business operation metrics. Leveraging 4DX, we’ll argue that organizations should focus on lead measures rather than lag measures.

A Simple example

To promote the culture of experimentation, I have used the below tagline to talk about the value of experiments.

More experiments => faster rate of innovation => higher growth for the company

Recently, it struck me that the idea comes straight out of 4DX. It also relates to what this write-up postulates. The idea is that higher growth for the company follows when we are more agile in product pushes and hypothesis validation. Metrics that can give us a good idea of the efficiency of the growth machine of the organization are a lead measure to product growth metrics. If we can make product launches run like a well-oiled machine, the growth of the product is inevitable.

What is 4DX: The 4 discipline of execution

It is a methodology to help close the gap between strategy and execution. The four disciplines are:

Discipline 1: Focus On The Wildly Important
Discipline 2: Act-On The Lead Measures
Discipline 3: Keep A Compelling Scoreboard
Discipline 4: Create A Cadence Of Accountability

For this post, we’ll assume that the concepts discussed in 4DX are critical to close the gap between strategy and execution. Please read the book to learn more about it.

We’ll focus here on the Discipline 2 — Act on the lead measure. We’ll see how business operation metrics is one of the lead measures that we mustn’t take lightly.

The lead Measures — peeling the layer.

Here is how we can unpack the company growth:

Let’s break down the drivers of growth for a company. We start with a lag measure on the left and move right towards lead measures.

1. Profitability/Monetization metrics: Profit, Revenue, pricing, and Volume of the transaction are profitability metrics. We need to understand the drivers of these metrics. It is the profit that is feeding the shareholders and the employees. Rightly so, organizations have a good chunk of resources dedicated to these metrics. Unfortunately, while it is a critical metric, it is a lag metric. To be able to optimize the product and continue making money proactively, we need to find a lead measure.
2. Consumer behavior metrics: The data generated when customers interact with our product is consumer behavior data. In tech companies, analytics function is about getting deeper into these datasets to understand consumer behavior. Consumer behavior metrics are the lead measures to profitability metrics. So, it makes sense that organizations have a more significant chunk of resources assigned to understand it. You can have a pulse on the health of a business and its drivers earlier and better by mastering these metrics. It helps us develop product strategy as well.
3. Growth Operation: Depending on the context, we can call it growth operation, business operation, marketing operation, product operation, or experimentation operation. It looks to gauge the efficiency and quality of product pushes, marketing pushes, or hypothesis validation. Growth operation metrics is a lead measure. It comes before consumer behavior metrics. The quality and efficiency of idea execution determine the quality of the product. Unfortunately, rarely organization do a good job of business operation analytics. Organizations do track a couple of data and metrics, but there is vast room for improvement. There is a need for scientific rigor here. It will make teams more accountable. Teams will know which process and areas need optimization to hit the business target. Please read this article to learn more about growth operation metrics.
4. People: People metrics is a lead measure to even business operation metrics. Under this bucket, an organization can look at the skillset, experience, and education of the teams. We may also like to look at how the team work along with each other. In most cases, intra-team and inter-team dynamics play a more critical role in the success of the product than the skill set of the team members. The proliferation of people analytics function is a proof that organizations have realized the value of the nascent field. The truth is, it is not a new phenomenon. For smaller organizations, management had a good pulse on the culture of an organization. No one needed a dedicated function. As organizations are getting bigger and more complex, we need a dedicated function to generate insights.

Parting thoughts

We have established two ideas so far.

1. Focusing on the lead measure is a smarter way to go
2. The lag- lead measure order for understanding business health goes like below: People Metrics => Business operation => Product metrics or consumer behavior metrics => Profitability metrics

The second discipline for 4DX tells us that business operation analytics is a lead measure, so it must get the attention it deserves. The question that we can ask ourselves now is: Why not People metrics?

A look at an additional dimension — scientific validation — can help us understand it. As we move towards People metrics from Business operation metrics, we see that data becomes thinner, and a lot of subjectivity creeps in. We still don’t know how to track and measure culture — team dynamics.

The data for business operation is also thinner compared to consumer behavior metrics. This is one of the reasons organizations have not put enough resources around it. However, it is quite possible to creatively define and track metrics around an operation that can help us a lot. We may not need the rigor and resources of the consumer behavior analytics team, but even a fraction of rigor can do wonder for an organization.