Dwarfed by Metrics

Interesting insight in this short (less than a minute) snippet of Tom Conrad’s talk for Stanford’s Entrepreneurship Corner. He looks for the bigger, more humbling number to keep his team sharp. Specifically, Pandora may be the giant of Internet radio but it’s a very small piece of total radio. Nice approach.

(The video should be embedded here on the page. If it isn’t, you can click this link to go to the source page.)

Tom Conrad, the speaker, is CTO of Pandora, and also has history with Apple Computer, Documentum, and Pets.com. The same site has a full one-hour talk he gave last month. My second favorite snippet there is success is not about you. It’s very refreshing.

2 thoughts on “Dwarfed by Metrics

  1. Great reminder Tim! It is easy to find metrics that can be misleading or drive us in the wrong direction. Many times these metrics are buried in our everyday operations without our knowledge. For example, most ERP packages are still using the variable cost based 1913 EOQ formula to make ordering decisions. This framework no longer fits the world of business today, which is why we developed a process to use Economic Value Added. In the case of inventory, this metric is ideally suited to balance cost and cash needs.

    We have seen attempts to imitate what we do but, in the end, they are using misleading metrics such as Days of Sales targets which are still manual arbitrary objectives that are your best guess.

    In today’s world of information overload – we need to carefully select which metrics to utilize.

  2. The big problem with many of our metrics is they are based on an outdated accounting system. I earned my degree in accounting and have worked in a number of accounting and finance positions in corporate America, and our accounting system is just not well-suited for today’s economy. Accounting is backward-looking and too dependent on financial measurements. We focus too much on dollars instead of the activities that produce and spend the dollars.

    Our metrics need to focus more on operations and on what helps our business look forward, not backward. Even the best accounting information can only allow to see what has happened in the past. We can then only use that historical finance information to make decisions about the future with less than perfect information.

Leave a Reply

Your email address will not be published. Required fields are marked *