Data-Driven vs Metric-Driven

There is a fundamental difference between having a data-driven and a metric-driven company. Data-driven companies and individuals tend to be skeptical of any new metric. Metrics mask relevant data that can lead to imprecision.

The Dow Jones Industrial Average is not a perfect indicator of economic health. It doesn’t speak to the balance of debt vs. free capital. It doesn’t speak to the value of the US dollar abroad. It doesn’t say anything about employment. It doesn’t even cover small-cap or mid-cap performance. That said, it is a reasonable metric for reporting on the overall health of the stock market.

Metric-driven companies focus on driving improvements in key metrics. Data-driven companies focus on completely understanding their business fundamentals. The question isn’t what-is-our-per-development-hour professional-service cost and can we reduce it, but what drives our per-development-hour professional-services cost? Given those drivers which can be directly influenced? What is the theoretical minimum cost? How far are we from theoretical minimum? What are other companies achieving? How much does it cost to reduce per-development-hour costs by $1/hr? At what point does it cost more than $1 to make $1?

Data-driven management is very time and labor-intensive. Managing by metrics is a fine way to drive change without understanding all the data. That said, often as you dig into the data, it becomes clear the obvious approach to driving down the metric is not always the most fruitful.

Metrics-driven management is better than gut-instinct driven, but the best decisions require a solid analysis of the data.