How to measure for customer impact
There are several ways to measure for customer impact. This article helps you define business metrics to validate hypotheses that arise out of an effort to build with customer empathy.
The Strategy methodology examines motivations and business outcomes. These practices provide a set of business metrics to test customer impact. When innovation is successful, results align with your strategic goals.
What are metrics in business? Business metrics are quantifiable metrics used to track and assess a specific business goal. Before establishing customer impact learning metrics, define strategic business metrics that you want this innovation to affect. Generally, those strategic metrics align with one or more of the following outcome areas:
- Business agility
- Customer engagement
- Customer reach
- Financial impact
- Solution performance, in the case of operational innovation.
Document your business metrics and track their impact frequently. Don't expect results in any of these metrics to emerge for several iterations. For more information about setting and aligning expectations across the parties involved, see Commitment to iteration.
Aside from motivation and business outcome metrics, this article focuses on learning metrics designed to guide transparent discovery and customer-focused iterations. For more information, see Commitment to transparency.
When you share the first version of a minimum viable product (MVP) with a customer, there won't be an impact on strategic metrics. Several iterations later, the team may still struggle to change behaviors enough to affect strategic metrics. During learning processes, such as build-measure-learn cycles, consider adopting learning metrics. These metrics enhance tracking and learning opportunities.
Customer flow and learning metrics
If an MVP solution validates a customer-focused hypothesis, the solution drives some change in customer behavior. Those behavior changes across customer cohorts should improve business outcomes. Changing customer behavior is a process. Each step provides an opportunity to measure impact. The adoption team can keep learning along the way and build a better solution.
Learning about changes to customer behavior starts by mapping the flow that you hope to see from an MVP solution.
In most cases, a customer flow has an easily defined starting point and no more than two endpoints. Between the start and endpoints are various learning metrics to be used as measures in the feedback loop. Here are the steps to measure customer impact using the customer flow:
- Starting point (initial trigger): The starting point is the scenario that triggers the need for this solution. For a solution built with customer empathy, that initial trigger inspires a customer to try the MVP solution.
- Solution steps: Steps required to move the customer from the initial trigger to a successful outcome. Each step produces a learning metric based on a customer decision to move on to the next step.
- Customer need met: A solution that meets a customer need validates the hypothesis.
- Individual adoption achieved: If the customer returns to the solution the next time they find the trigger, individual adoption has been achieved.
- Business outcome indicator: When a customer behaves in a way that contributes to the defined business outcome, a business outcome indicator is observed.
- True innovation achieved: When business outcome indicators and individual adoption both occur at the desired scale, you've realized true innovation.
Each step of the customer flow generates learning metrics. After each iteration or release, a new version of the hypothesis is tested. At the same time, tweaks to the solution are tested to reflect adjustments in the hypothesis. When customers follow the prescribed path in any given step, a positive metric is recorded. When customers deviate from the prescribed path, a negative metric is recorded.
These alignment and deviation counters create learning metrics. Each should be recorded and tracked as the cloud adoption team progresses toward business outcomes and true innovation. In Learn with customers, we'll discuss ways to apply these business metrics to learn and build better solutions.
Group and observe customer partners
The first measurement in defining learning metrics is the customer partner definition. Any customer who participates in innovation cycles qualifies as a customer partner. To accurately measure behavior, you should use a cohort model to define customer partners. In this model, customers are grouped to sharpen your understanding of their responses to changes in the MVP. These customer impact groups typically resemble the following groups:
- Experiment or focus group: Grouping customers based on their participation in a specific experiment designed to test changes over time.
- Segment: Grouping customers by the size of the company.
- Vertical: Grouping customers by the industry vertical they represent.
- Individual demographics: Grouping customers based on personal demographics like age and physical location.
These groupings help you validate learning metrics across cross-sections of those customers who choose to partner with you during your innovation efforts. All other metrics should be derived from definable customer groupings.
As learning metrics accumulate, the team can begin to learn with customers.
Some of the concepts in this article build on topics first described in
The Lean Startup, written by Eric Ries.