I first learned about this concept from Jim Collins and his Good To Great series of books. He refers to it as Economic Denominator. I think he may have also referenced it as an Economic Engine or something like that.
But what he found while researching successful companies, those that succeeding for the long-term, those that went from being just okay to great and those that succeeded during trying times, always had a metric of some kind to guide them.
One example in that article is Walgreens. They figured out that their economic denominator was Profit Per Customer Visit. Upon this discovery they could then make just about all of their decisions with the goal of increasing this metric.
Often this example in the business world is some kind of profit per metric. I think for Southwest Airlines the metric was profit per airplane. A retail store might be profit per square foot. For Wells Fargo it was profit per employee. Many tech companies in recent years have gone to profit per subscription as compared to profit per product.
The Benefit Of A Single Metric
One of the interesting challenges today is that there are a lot of metrics in the world. Even in our individual worlds we have access to all kinds of data. It can be overwhelming. It can be difficult to figure out what metric to follow.
That can lead to paralysis or not choosing a metric. But it can also lead to little commitment to a single metric. You go from metric to metric trying to find what will work, but never settle on one that shows potential. You are always looking for the one thing that will work.
But the focus on a single metric leads to focus. Even if it’s not entirely the correct metric, having the single focus can lead to success.
Single Metrics In Golf
Sports is really interesting because analytics has really taken a hold of just about every sports. Mostly in the last ten years, but going back even farther.
Starting around 1999, some in the golfing world started hearing rumors that Tiger Woods was working on a small series of metrics to focus on for his golf game.
- No 6s on par 5s
- No double bogeys
- No 3-putts
- No bogeys from 150 yards
- No easy blown saves
There is a little room for subjectiveness in these. Especially the last one. You could take that as no two-chips on one hole or no short-sided approach shots. And you could look at the first two as no penalty shots.
But basically what Tiger had found was that the secret to really great golf was not giving strokes away relative to par. It wasn’t about trying to play aggressive and make birdies. It was about not giving away shots with bogeys or double bogeys and giving himself a lot of chances for plausible birdies.
Say a pin was close to the edge of a green with water off that edge. Instead of hitting at the pin and possibly having a short birdie putt, but also having a high chance of a penalty, and a double bogey, Tiger would fire away from the pin and likely have a chance at either a long birdie putt or a relatively easy chip and save for par.
Tiger realized that if he had 6 of these rules infractions in a 72-hole tournament that he would likely win. And he was right.
Single Metrics In Football
I don’t know that he’s come out and said it, but it’s been pretty clear throughout his career that Aaron Rodgers values Passer Rating as a guiding metric for how he plays the game. It can drive his teammates and fans crazy sometimes. Because Rodgers will take a sack versus throwing an interception. But in the context of Passer Rating, it makes sense. Take the sack. You likely have another down. You have a long way to go, but you still have a chance. Whereas with a turnover, you have no more chances. And if it’s fourth down, you can at least punt, which likely leads to worse field position for the other team than if they were to intercept it.
Football has all kinds of stats. It’s also probably the most team-dependent sport in the world. Aaron Rodgers isn’t even on the field for half of the plays in a game.
But teams still include individuals and it can be helpful for each individual to identify a key metric and to do their best to optimize to that metric.
Single Metrics In Basketball
The number of three pointers that NBA teams shoot in a game has dramatically increased in the last 20 years. You could say that the first ones to make the shift and go all in on this strategy, Golden State Warriors, reaped the benefits at least for a few years.
The metric seems to be points per possession. It seems that it basically comes down to make percentage. During a possession, you can take a jump shot from the free throw line and make slightly less than half of them. You get two points. Step back seven feet and take a three and you make only slightly fewer, but you get three points.
The points per possession is much higher if you just shoot more three point shots than shots from the free throw line.
It seems that teams have put all their effort into either shooting from close to the basket or from beyond the three point line.
There are all kinds of metrics that could change your life. It could be business or work. It could be something with your family. It could be something in your personal life. The key seems to be to find one metric to focus on. It makes it easier to make your decisions. And it makes it easier to track your success. If you’re struggling with something, it’s worth taking time to consider a metric to follow and then to try it for a month to see how things might change.