Measuring What Really Matters
In our previous article, How Companies Can Overcome Misalignment, we explored how organizations can shift from an inside-out perspective to a customer-centric approach. However, even companies that adopt this mindset often struggle to measure success effectively.
Many businesses still rely on traditional metrics like revenue, market share, or return on investment (ROI) to gauge a product’s performance. While these indicators are widely accepted, they fail to capture what truly matters:
- Does the product solve real customer problems?
- Does it foster long-term user engagement and loyalty?
- Is it improving the customer experience over time?
Financial metrics provide a snapshot of business performance, but they do not reflect user satisfaction or product effectiveness. The result? Many companies believe their software is thriving when, in reality, it fails to meet customer expectations.
Business Metrics Miss the Essentials
In many companies, the success of software products is still primarily measured using traditional business metrics such as revenue, market share, or return on investment (ROI). While these metrics are widely accepted and well-established, they fail to capture what truly matters: whether a product meets the actual needs of customers and fosters long-term loyalty. They measure financial outcomes but overlook the fundamental customer experience that ultimately defines a product’s long-term success.
Value as a Guiding Principle
Building on the insights from the first thesis, one thing becomes clear: A software company’s strategic alignment must be guided by the value it creates for its customers. But what does “value” mean in this context? There is no universal, formal definition. Instead, value emerges at the intersection of customer needs and the solutions a company provides.
Focusing solely on company-centered metrics like revenue, market share, or ROI is too narrow. While these indicators often create an illusion of success, they fail to account for the customer perspective. The risk? Products that appear successful from a business standpoint may simultaneously fail in terms of customer experience.
A Real-World Example A financial services provider developed a mobile app designed to make money transfers easier via smartphone. In its first year, the number of downloads exceeded all expectations, and transaction volumes steadily increased. At first glance, the app seemed like a resounding success.
However, a closer analysis revealed a different picture: only 40% of users were able to complete transactions successfully. The reason? A buggy, unintuitive user interface that frustrated customers.
The feedback was clear, yet it was overshadowed by superficially positive metrics such as downloads and transaction volume. These traditional indicators masked the fact that the app failed at its core purpose—providing users with a smooth and convenient money transfer experience.
The Key: Value-Oriented Metrics
To accurately assess a product’s performance from the customer’s perspective, companies must realign their metrics. In addition to traditional financial indicators, they should introduce value-oriented metrics that shift the focus toward the customer experience. Here are three examples:
Net Promoter Score (NPS): Measures how likely customers are to recommend the product—a strong indicator of satisfaction and long-term loyalty.
Customer Effort Score (CES): Evaluates how easy it is for customers to achieve their goals using the product. The lower the effort required, the higher the perceived value.
Churn Rate: Indicates how many customers continue using the product over time versus those who abandon it.
What’s Next? Measuring Success Beyond the Numbers
Shifting toward value-based metrics is just the first step. The real challenge lies in integrating these insights into product development and ensuring that business decisions align with customer needs.
In the next article, we will explore:
- Why traditional control mechanisms fail in software development.
- How businesses often react incorrectly to software failures.
- Why internal efficiency doesn’t translate to customer success.
→ Continue reading: The Illusion of Control – Why Old Ways of Thinking Fail