Lead vs lag indicators
Only measure what matters
Very simply put, lead indicators measure things that show progress towards the goal. They are predictive and actionable and allow proactive measures to improve outcomes. Lag indicators measure the outcome. They are retrospective and reflective and should be used to evaluate past performance.
Both types of indicators can be useful, but for a new innovation venture, it tends to be more helpful to concentrate on lead indicators. We’re looking forward after all.
“‘Do not measure success by today’s harvest. Measure success by the seeds you plant today.’”
Lead indicators
These are forward-looking metrics that predict future outcomes.
Website traffic: The number of visitors to your website, indicating future sales or leads.
Social media engagement: Likes, comments, and shares that can predict brand awareness and potential conversions. But is your social media audience the same as the audience you need?
Number of sales calls or emails sent: Measures proactive outreach efforts likely to drive sales.
Customer inquiries: The volume of questions or interest shown in your product/service.
Training hours: Employee skill development that predicts future productivity and quality.
Marketing campaign reach: The number of people exposed to your advertising efforts.
Customer Satisfaction (CSAT) scores: Short-term customer happiness, which can predict loyalty and retention.
Pipeline value: The total value of opportunities in your sales funnel.
Lag indicators
Backward-looking metrics that reflect past performance or outcomes.
Revenue: The total income generated over a specific period.
Profit margin: A measure of financial performance after costs are subtracted from revenue.
Customer retention rate: The percentage of customers who return over a period.
Market share: Your share of the total market compared to competitors.
Net Promoter Score (NPS): A measure of customer loyalty based on past interactions.
Units sold: The total quantity of products/services sold in a timeframe.
Customer Lifetime Value (CLTV): The total revenue generated by a customer over their relationship with the business.
Expenses vs. Budget: How actual spending compared to planned budgets.
