Imagine stepping into the vibrant chaos of a new company, where your mission is to review and refine the Key Results set for your team. If you excel, you’ll earn the leadership’s admiration. Fail, and it might signal that you don’t grasp your leadership role.
The Challenge for Product Management
When joining a new company, product leads and executives face a common challenge. At junior levels, metrics and key results are dictated by leadership. However, in senior roles, you’re expected to offer insights on key focus areas.
If you’re adept at your job, you likely understand the broad array of metrics. The true challenge lies in selecting the right metrics for your product. These are the Strategic Performance Indicators (SPI).
Understanding Strategic Performance Indicators (SPI)
SPIs are not a single metric but a collection that provides a comprehensive view of the product. Mastering these metrics is difficult due to several reasons:
Context Dependency: A metric beneficial for one product might be detrimental for another. For instance, time spent is valuable for an engagement-focused product like Facebook but counterproductive for a productivity tool like Superhuman.
Temporal Relevance: A great metric one year might be irrelevant the next. What was crucial in 2022, like growth rates, might be replaced by profitability and cost savings in 2024.
Key Variables for Useful Metrics
To master SPIs, consider four key variables that determine a metric’s relevance:
Applying the Framework
To apply this framework, start with understanding the product and end users to define key metrics. Then, incorporate company priorities and industry context to refine these metrics into a handful of SPIs.
Case Study: Netflix
Netflix, a leader in the streaming industry, provides a wealth of pre-published metrics that illustrate the application of Strategic Performance Indicators in product management. Here are some key metrics used by Netflix, as reported in their quarterly earnings and various industry analyses.
Company and Industry Perspective:
Company Focus: Is the goal expanding the subscriber base, increasing engagement, or improving profitability?
Industry Benchmarks: Compare Netflix’s metrics with industry standards from competitors like Disney+, Amazon Prime Video, and HBO Max.
For example, Netflix focuses heavily on user engagement metrics, such as content hours watched and user satisfaction scores, to reduce churn and increase customer lifetime value. By comparing these metrics with industry benchmarks, Netflix continuously refines its strategy to maintain its leadership position.
Summing it all up
In a real job, mastering SPIs can present itself when evaluating OKRs or launching a new product. In interviews, it might appear as questions about north star metrics or defining success metrics for a product or feature.
The framework for mastering SPIs can be summarized by the following:
The Product: Stage, goal, model.
The Industry: Relevant metrics, benchmarks.
Your Organization: Strategic priorities.
The Users: Value created.
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