The Zen of Measurement, Optimization, and Focus

In this new series, Tony and Chris discuss the importance of the right metrics in growing your business, and why you should not be paralyzed by math.

In this episode …

  • How you can determine the correct metrics for your business
  • Where to start, and what you need to focus on
  • Why the big Silicon Valley tech companies are not the right businesses to model

The Zen of Measurement, Optimization, and Focus

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Tony Clark: This is the Mainframe.

Welcome to our new series, everyone. We’re talking about the Zen of measurement, optimization, and focus. In this first episode, we’ll give an overview and an introduction of why you don’t really need to worry about doing this, don’t stress about it, and how this can be followed through with some easy steps.

How you doing, Chris?

Chris Garrett: I’m doing good. Another series. It’s good to start a good series like this, and as you said in the intro, people worry about this a lot, and they go to Facebook, and they go into forums, and they obsess about this. It’s very valuable, but it’s not worth upsetting yourself about.

Tony Clark: Exactly, and the other thing is that it tends to freeze people, so they don’t do anything. It’s better to measure some things and at least start getting good data to analyze than worrying about if it’s the right thing, or how you’re going to do it, or if you’re doing it right. You need to start early, start doing it, and then you can start to really expand on it, but people spend too much time worrying about if they’re tracking the right things.

Chris Garrett: Yeah. If you’re spending all your time refreshing analytics and obsessing about numbers, then you’re not spending time on your business, and what we’re talking about here in this new series is how you can grow your business by using these techniques, these technologies, but it’s not instead of doing your business.

How You Can Determine the Correct Metrics for Your Business

Tony Clark: Yeah, it has to be part of a larger strategy, and we joke a lot about … It’s only partially joking. People ask what’s the most important thing we measure, and we say, “Profit because we are a business, and we’re in the business of making money.” If you’re too worried about other types of metrics, but you’re not really focusing on how it’s making you money, then you’re tracking the wrong thing, and that’s really where you start, right? You start with what’s making you money.

Chris Garrett: Yeah, and I think it’s a good place here to talk about the difference between a bootstrapped business that’s built to make a profit versus a business that’s got outside investment.

Obviously, if you’re going to investors, if you’re even going for a big bank loan, then there is always going to be different metrics that are important because those third-parties are going to be looking for certain things. But if you run your business for you and you don’t have outside investors, then it’s all about what is the path to money, what is the path to profitability, what helps you make decisions that help you grow your business. And it highlights the difference between these publicly listed companies and a business like Copyblogger, where it’s always been bootstrapped and self-funded, right?

Tony Clark: That’s true, and the type of metrics that we looked at really correlated directly into what was making us money. So, what was working in terms of sales, what was working in terms of leads, and we actually measure these back to actual revenue and profit related to different products.

Where a lot of times, if you have a non-bootstrapped company and you have outside investors, there’s other metrics they’re looking for, but you’re also burning through a lot of that money. I’m not going to say just throwing stuff at the wall to see what sticks, but a lot of times, that’s the approach. If you’re following some of these strategies that are given to you by people that have outside investors, it may be the wrong approach for a small business who is looking to use something like digital commerce to grow their small business to a larger type of business or to just expand their reach through different types of measurements and different types of metrics that they’re keeping track of.

Chris Garrett: Yeah, and the “commerce” word is really important in this because you look at some of these big social media sites and big startups, your Twitters and your Facebooks, and their focus was on eyeballs, and activity, and member growth because they had to show massive growth to outside investors who were looking to see a ten times return, and they’re looking for billion-dollar unicorns as they say. They weren’t looking at commerce.

Whereas in a normal business, you’re looking at things like sales margin, profitability, and especially with digital where you don’t have a start. You don’t have inventory. You don’t have a lot of the overhead. Really, it’s a pure form of business in which you somehow add some value, you create something useful or you sell something useful, and you don’t just get one sale, you get repeat customers. So, you’re looking at how can you increase your profitability, reduce your cost, reach more people, reach more of that customer, so share of customer, and what are the metrics that tell you if you’re on the right path.

Tony Clark: Really, you’re looking at beginning with the end in mind because ultimately, you want to get to a point where you’re tracking straight through to how much money, specific types of activities, and certain things that you’re tracking. Events and metrics relate to that. So you start with what it is that’s making you money, and then you work back from that and track it all the way back to individual lead clicks, right?

Chris Garrett: Yeah, so we talk about goals, and we talk about them in the abstract in a motivational way, but in this, you have goals for your funnels. You have goals for your business, and you can actually go into Google Analytics and tell it how to recognize a goal, and that’s your endpoint, and then you can work back from there.

The famous phrase was, “The best time to plant a tree was last year. The second best time is to plant it now.” If you don’t have your Google Analytics installed, put your Google Analytics in. Then, maybe forget about it for a bit, but the first thing you need to do with an intention is tell Google what your goal is, and that means you have to first identify what your goals are, and it will be a sale, it will be an email opt-in, and then start working back.

Where to Start, and What You Need to Focus On

Tony Clark: Yeah. We’re talking about starting with goals, and these are real tangible goals. Everybody says when you’re setting life goals, it needs to be something that’s measurable. It needs to be something that’s tangible, and it’s the same with this. You need to be able to accurately track what the path that has been followed has actually accomplished, an event, a goal that relates directly to increasing leads or increasing your revenue.

Chris Garrett: Yeah, and what gets measured gets managed. Once you start identifying those paths, you’ll see where you’re losing people, where you’re wasting your time, where you’re wasting your efforts, but also, you’ll find that seam of gold in your goldmine that shows where the 20% which makes 80% as the revenue.

Immediately, you can see things that will help you make business decisions because without it, you’re flying blind, and a lot of businesses can get by like that without knowing their numbers, without knowing their best source of revenue until things start getting wobbly, and then it’s like flying blind into a side of a mountain. You don’t want that. You want to have visibility. You want to have a dashboard.

Tony Clark: That’s really what it comes down to because it helps you to find your focus.

You remember in Star Trek: Enterprise, they had the dashboards that they use to fly the ship? In the old show, you’d see a lot of flashing buttons, but one of the things that they focused on in Next Generation, which I always loved, was the UI of that and who the UI dashboard of what they were working on would change based on what it is they were doing. If they were trying to dock the ship or if they were flying at warp speed, it changed.

If you think about it the same way as that, you’re looking to define different things to help you focus on specific events and goals, so you can actually set your dashboards up to specifically show you those types of things and help you develop that focus. We’ll go into more detail in that in an upcoming episode.

Chris Garrett: Yes. You need to have your own version of a TRICARE, so you can know the health of your business. Really, what we’re talking about here isn’t super complex. It’s going back to the theme of today’s episode. It’s not about stressing about it. It’s not about worrying about it. It’s about getting visibility and clarity, and getting started. It’s actually less stressful if you do know your numbers because knowing is half the battle.

Tony Clark: You also got to work within your constraints, which is another thing that will help you worry about less because instead of just worrying about all these different things you have to measure, you’ve got to look at your constraints, right? What are the boundaries you have to work in, and that becomes a place to start, right?

Chris Garrett: Yeah. Let’s dive into that, and let’s go into detail about how you identify your constraints and how you can elevate them to use them as a business tool.

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How to Identify Your Constraints and How to Elevate Them to Use Them as a Business Tool

Chris Garrett: One of the things that came up a lot when I was doing consulting and coaching was people would come to me and say, “Chris, I need to build my business. I need more traffic.”

Nine times out of ten, I would look at their business situation, look at their systems, look at their website, I would realize that it wasn’t actually traffic holding them back. More exposure wouldn’t have helped them. It was their conversion rate. What was happening was people were hearing about them, visiting their website, and not taking action. So their constraint that they believed they had was traffic. Their actual constraint was their conversion rate.

There are a lot of small things you can do to change that quite radically, but as we said earlier, you need to know what your real constraints are. There are some really good books called “The Theory of Constraints,” and it’s a series. I’m not going to embarrass myself by trying to pronounce the guy’s name, so we’ll put it in the show notes. Reading that book, it was about manufacturing, and there was another one about supply chain, it really opened my eyes to this theory of constraints, and it comes down to identifying what your biggest constraint is, fixing that, and then moving on to the next one.

This is what you’ll find in your own funnels, your own flow. You’ll find that there is a constraint, a bottleneck. You’ll open that up, and then there’ll be another one. So your first job is to identify what your constraints are, and metrics will tell you that. Working back from the goal, working back from the end, and working towards where you are, working towards the front, you’ll see where those constraints are. The first one is probably either not enough people get into checkout or they’re not spending enough money, right?

Tony Clark: Exactly, and the value of constraints is helping you think more creatively, more strategically. Think about MacGyver and how creative he was able to be with just his mind and a few things, and he’d put something together. That’s the same type of strategic thinking that goes into identifying constraints and learning to work either within those constraints or opening those constraints up by changing your strategy. Again, we’ll talk about that in more detail as we go through the series, but it really becomes an opportunity to really think through your strategy for optimizing, and measuring, and keeping your focus very clear, right?

Chris Garrett: Yeah. I think that focus is super important because what you talked about, like with the MacGyver example, he had a focused goal. He needed to escape or he needed to get out of somewhere, get into somewhere, and so he built a flying machine with a stick of gum and some duct tape, but he knew exactly what he needed to do. He needed to get from A to B.

What we talk about here, it allows you to look at your business in sections, in chunks, but within an overall framework, and you know your goal is to get that prospect to sign up to your list, and then purchase, and then make repeat purchases, and be happy, and refer people. It’s a flow, and you have to look at where you are in that flow and release those constraints.

We’re not talking about the whole business. We’re not talking about the brand. We’re not talking about anything like that. We’re talking about looking at your content conveyor belt, and we’re talking about your conversion system. And that allows you to only worry about what’s in front of you, and it allows you to do it systematically because a lot of the anxiety around this comes from that big, ugly cloud of not knowing, confusion, and being overwhelmed.

Tony Clark: You have to understand that what this does is opens up the opportunity for you to experiment because unlike a fictional show like MacGyver, where it almost worked every single time, look at something like MythBusters where they had to go through different tests and experiments to get to a point where some type of thing that they built worked. With any kind of mechanism they did a variety of tests.

Experimenting is very important, and that’s really the third key to all this is learning how to build effective experiments, so that you can see what’s working and what’s not working, right?

Chris Garrett: Yeah. MythBusters is a great example because they would start with a hypothesis, and then they would do a small scale, and then they’d do a larger scale, and then they would do a full scale. Usually, something would explode at that point. Maybe intentionally. Whenever something went wrong, they would learn something, but the whole thing wasn’t ruined. It wasn’t a disaster. It was, “Oh, interesting,” and that’s how you’ve got to approach it.

Combining that focus, using the measurement, so you’ve got some numbers, and then doing experiments, the combination is very, very powerful, and it actually makes for your own personal competitive advantage. That creativity you can bring within your framework, with your audience, your products, is going to be completely different to anybody else, even in the same niche.

Tony Clark: That’s a really good point. If you think about this, and the way we approach it is from a creative thinking model. It’s very much about identifying what it is you need to test, and then figuring out creative strategies to set those experiments up, so you can test them. Look at what the results are of those tests and make actions accordingly.

It’s more of a creative process than just strictly numbers. I think one of the things that people tend to get caught up on and worried about is the whole idea of data analysis from a science perspective as opposed to looking at how you can approach it from a creative strategy because remember, this is a business goal that you’re after. It is not just data for data’s sake.

Chris Garrett: Exactly. We talk about working on your business and working in it, and so really, it’s that thing of chop wood, carry water. You’re doing the work, and you can be creative about it, but we’re not talking about it in the abstract and theoretical. We’re talking about actually doing your work, running your business. It’s very practical, very pragmatic, but the experiments allow you to make those breakthroughs that you need. We’re not talking about anxiety over choosing technology. We’re not talking about some heavy math, and we’re not talking about jumping on the new, shiny thing. We’re talking about practical analysis of your systems, making those systems incrementally better, and then seeing the benefits of that, right?

Tony Clark: Exactly, and actually, we could even subtitle this “Practical Analysis” because that’s what we’re looking at here. Just to give a wrap-up of what we are really looking at in this entire series, and we’ll go into more detail in upcoming episodes, but as an introduction, what is it that we really need to look at?

What You Need to Really Look At

Chris Garrett: The first thing is to not panic and keep calm, carry on. The next thing is focus on what makes you money, what makes you more profitable, what makes for a better customer experience. You can leave the rest of the stuff to one side, just focus, and that will take a lot of the pressure off.

Now, the next thing is to look at your constraints. What is holding your business back, or slowing it down, or causing friction? What will ease the flow through your system? Then, finally, what can you do to boost that? What experiments can you do?

Take a look at those metrics. Take a look at the constraints. What needs improvement? What can you test? What can you try? Wrapped up in all of that is … We’re not talking about trying out new tools. We’re not talking about looking at what other people are doing necessarily. We’re not talking about competing against other people. Incremental improvement and all the while you’re working on your business and in it.

Tony Clark: Exactly. Like we just said a little while ago, practical analysis. In the next few episodes we’re going to talk about some specific “hows” to do this, and we’re going to go into some more detail about things like constraints, focus and different types of experiments that you can do.