Measuring the Best Metrics in Product Management

In product management, the best unit of measurement depends on the context, the project goal, and the level of detail required. Generally, you can choose between business value metrics, development delivery metrics, or a combination of both. Below, we explore the most common types of metrics and their applications.

1. Business Value Metrics (Product Impact)

These metrics measure the product's impact on customers or the business, focusing more on results rather than effort.

Options for Measurement Units:

1. OKRs (Objectives and Key Results):

   • What It Is: Specific, measurable goals that connect product deliveries to the business's strategic objectives.
   • Example: Increase user retention by 20% over the next 3 months.
   • When to Use: Ideal for measuring product success holistically and ensuring alignment with the long-term vision.

2. Product Metrics (North Star Metrics):

   • What It Is: A key metric that reflects the value generated for users and the product's growth.
   • Example: Number of bookings completed for a travel app, 30-day retention rate, or NPS.
   • When to Use: To track product health and impact.

3. Business Outcomes:

   • What It Is: Revenue generated, reduced churn, or increased market share.
   • Example: Increase ARR by $100,000 per quarter.
   • When to Use: To communicate the product's impact directly on the business.

2. Delivery Metrics (Team Effort)

These metrics evaluate the team's progress and efficiency in developing the product.

Options for Measurement Units:

1. Story Points:

   • What It Is: A measure of the effort estimated by the team to complete a task.
   • Example: Completing 30 story points per sprint.
   • When to Use: Ideal for planning and tracking deliveries in agile sprints.

2. Velocity:

   • What It Is: Story points delivered per sprint.
   • Example: The team delivers an average of 25 story points per sprint.
   • When to Use: To measure delivery capacity over time.

3. Throughput (Completed Tasks):

   • What It Is: The number of tasks completed in a period.
   • Example: 12 tasks completed per sprint.
   • When to Use: To objectively track productivity without relying on estimates.

4. Lead Time and Cycle Time:

   • What It Is:
     • Lead Time: The time from task creation to delivery.
     • Cycle Time: The time from starting active work to completion.
   • Example: Average of 2 days to complete a task.
   • When to Use: To measure workflow efficiency.

3. Combination of Value and Effort Metrics

The most effective approach often combines impact and delivery metrics. This enables you to:

• Prioritize Customer Value: Focusing efforts on deliveries that truly generate impact.
• Track Development Progress: Ensuring the team is working at a sustainable pace.

Proposed Model:

1. Business Metrics as the Final Goal:
   • Example: User retention, increased conversions.
2. Delivery Metrics for Planning and Execution:
   • Example: Velocity, throughput, lead time.
3. Regular Alignment:
   • Frequently reassess whether team deliveries are positively impacting value metrics.

How to Choose the Best Unit of Measurement

1. If the focus is business value:
   • Use metrics like retention, churn, revenue, or customer satisfaction.
2. If the focus is team efficiency:
   • Use story points, velocity, or throughput.
3. For long-term products:
   • Combine North Star Metrics with delivery metrics to track both progress and impact.

Conclusion

• Customer Impact Products: Use metrics like retention, conversions, and NPS.
• Agile Development Projects: Prioritize story points, velocity, and throughput.
• Hybrid Projects: Align business metrics (value) with delivery metrics (effort).