Define your leading and lagging indicators
The Overlap #61
Welcome to The Overlap! A newsletter somewhere between product and organization design.
Just as a reminder:
2/9: Free edition out ✅2/10-2/25: No Overlap (I’m in Thailand & the Philippines)
3/2: 🔒Subscriber-only edition out
3/9: Free edition out
This one’s on how to define leading and lagging indicators. I think every product manager and org designer should have this tool in their toolbelt.
Why are leading and lagging indicators important?
So that you don’t waste time, resources, and energy on things that won’t produce the results you want. You want to make sure that you’re focusing the organization’s time, resources, and energy on things that actually give the organization what they want.
What are leading indicators?
Leading indicators lead you to the result you want.
Examples:
# of times in the water >15 mins; # of falls taken per week (surfing)
% of users who track 3 rides within their first week (Strava)
% of new users who invite 2+ team members within the first 7 days; # of docs created within the first 7 days (Notion, Coda)
# of Mailchimp actions triggered from the Stripe dashboard in the first month within download (if you’re a merchant who uses Mailchimp and Stripe)
% of billable hours utilized on client work (indie consultants, agencies, consultancies)
What are lagging indicators?
Lagging indicators are the results you care about. They tell you whether you’re getting the result you want or not. They lag, meaning they take a while to tell you whether your efforts are paying off.
Examples:
⬆️ # of times in the water >15 mins; ⬆️ # of falls taken per week → ⬆️ % of waves < 6 feet surfed
⬆️ % of users who track 3 rides within their first week → ⬆️ % of users who use Strava at least once-a-week
⬆️ % of new users who invite 2+ team members within the first 7 days; # of docs created within the first 7 days → ⬆️ enterprise subscriptions
⬆️ # of Mailchimp actions triggered from the Stripe dashboard in the first month within download → ⬆️ subscriptions on the Mailchimp app on Stripe
⬆️ % of billable hours utilized on client work → ⬆️ quarterly profit margin
What should I not do?
Don’t focus too much on the lagging indicator. Or else you’ll fall into the Goodheart’s Law trap: when a measure becomes a target, it ceases to be a good measure.
Lagging indicators, by definition, aren’t controllable. Leading indicators are.
How do I figure out my leading indicators?
Make an educated guess. Then, try to influence (increase/decrease) that leading indicator, and see if that influences the lagging indicator. If it doesn’t, it’s probably not the right leading indicator.
If that’s the case, take a different guess. Repeat until you’ve found the leading indicator that impacts the lagging indicator.
Most businesses don’t know the inputs to their desired output. They just make sure “developers are typing” and “designers are clicking” because it *looks* productive. But looking productive ≠ producing results.
Define your desired outputs (lagging indicators). Clarify the inputs to those outputs (leading indicators). Then focus on those.
Further Reading
See you on 3/2 (if you’re a paid subscriber) or 3/9 (if you’re a free subscriber),
–tim