You can see below my calendar for the month of September 2021. Marked with circles, are the Jewish Holidays we had in this month: Rosh HaShana (the Jewish New Year), Yom Kippur, Sukkot and Simchat Torah. The red circles are the days I did not work (including Shabbat), and the orange circles are the days I have worked only partially.
My Calendar for September 2021
As you can observe, this month had very few regular work days, and as such we could say that it was not very “productive”. But all these forced vacations helped me to boost my energy levels. I’m feeling now much better than I was a month ago. I can now resume my routine with a fresh mind and many good memories of celebrations with my family and friends.
Thus our definition of a “productive day” should be expanded to include also the days in which we were able to increase considerably our energy levels. You can have a productive day when you complete a task, or you can have a productive day when you achieve some goal, but you certainly can also have a productive day dedicated to rest and fun.
Recently, many articles have been written about Boreout: the phenomenon of people who are so bored at their jobs that they start feeling sick. According to researchers, the symptoms of boreout syndrome may include: “depression, listlessness and insomnia, but also tinnitus, susceptibility to infection, stomach upset, headache and dizziness.”
In some ways the Boreout is similar to its cousin the Burnout, but it may even be worse. Because perhaps an employee who feels burned-out may recover after taking some vacations or reducing the workload. But in the case of Boreout the solution is probably to find a new job.
An employee who feels bored-out is not likely to be selected for promotion or to be transferred to a more interesting project. The managers can immediately identify a person who is disengaged and has poor performance. So at the moment the employee feels bored-out, it’s probably already too late to find him a new position in the company he is working for.
In this article I will discuss several aspects related to Boreout, including the need for realistic expectations, the main drivers of motivation and the Flow theory. This article is also inspired by several classes I had at ThePowerMBA that emphasize the importance of employee wellbeing.
On Realistic Expectations
I believe that Boreout is a concrete problem that should be addressed by employers. However I also think that nowadays lots of people have unrealistic expectations about the amount of pleasure they can derive from their jobs. In other words, I believe that too many employees expect that their jobs should be the main source of meaning in their lives, and even happiness.
I think that people should have realistic expectations. In general, I don’t think it is always possible to follow our passion when we choose our career. And I certainly don’t believe that people should have fun at their jobs, or that their co-workers should also be their best friends. As I wrote in a previous article, frustration is caused by the gap between our expectations and our reality, so that to avoid frustrations we should make sure that our expectations are realistic.
So what would be these realistic expectations? In my opinion most people should expect that, in any job, they will have to do hard work, and at least part of the time they will be forced to perform tasks that they don’t really like. After all, if someone is being paid to work, it’s because this work is difficult and demanding. In general people are not going to be paid to do things that are fun and enjoyable.
Sources of Motivation: Autonomy, Mastery and Purpose
The good news is that it is possible to be happy in our jobs even if they are difficult and demanding. The best-selling author Daniel Pink, in his book “Drive: The Surprising Truth About What Motivates Us”, presents the three necessary ingredients to guarantee that employees are motivated to perform their jobs: autonomy, mastery and purpose.
Autonomy means that people should have some level of control about how they perform their jobs. In other words, workplaces should avoid having strict rules and allow employees to have some freedom. This is reflected very well in a quote by Steve Jobs: “It doesn’t make sense to hire smart people and tell them what to do. We hire smart people so they can tell us what to do.”
Mastery is the feeling that we are acquiring new skills, learning new subjects and developing our potential. In other words, employees should be able to grow while performing their jobs. At the same time that we are executing work-related tasks, we should feel that we are improving our capacity to perform these tasks.
Purpose is achieved when employees understand the importance of their work, and believe that they are contributing significantly to reach their project’s goals. In general a true feeling of purpose requires the employees to identify with the company’s vision and mission statements. We can only be really engaged and motivated when we feel part of something bigger.
It is important to notice that the Purpose factor is not necessarily related to a person individual’s passion. It’s possible for an employee to be fully engaged and find purpose in one’s job even if this job does not contribute to this particular person’s passion. For example a person may find purpose as a lawyer even if this person’s passion was to be a musician.
Flow “is the mental state in which a person performing some activity is fully immersed in a feeling of energized focus, full involvement, and enjoyment in the process of the activity.” When a person reaches a state of Flow, this person becomes completely absorbed in the activity that is being performed. This concentration is so intense that this person may lose the sense of time and become oblivious to the world.
According to the Flow theory, a person becomes fully engaged with a task if there is a match between this person’s abilities and the complexity of the task. As depicted in the graph on the right, when the person is skilled but the challenge is low the activity is considered boring. In contrast, when we are skilled and the challenge is high, this can bring us to a state of arousal.
In other words, the proper balance between our skills and the challenges we are facing enable us to reach an optimal performance. The consequences are self improvement, continuous learning and an increased sense of satisfaction and achievement. When we reach such a state we feel completely in control of our actions, and we are certainly not bored by our tasks.
Again, it is important to note that the state of Flow is not necessarily related to an individual’s passion. A person may be extremely skilled in performing his job, such as the case of a surgeon or a programmer, even if this person’s professional choice was mostly pragmatic, with the goal to be remunerated by the work being performed. The surgeon’s passion may be playing the saxophone while the programmer’s passion is gardening.
The Third Space Theory
As we discussed above, passion is not necessary for us to feel motivated to perform our job. We must have Autonomy, Mastery and Purpose, but the job’s purpose does not need to be related to our individual’s passion. We also observed that passion is not required to reach a state of Flow, we only need the right balance between the Challenge and our Skills.
So the question is: Should we forget about our passion? Can we be fully satisfied as a person if we are successful in our jobs, and have fulfilling relationships with our family and friends? Should the professional achievements in our careers replace the need to follow our passion?
In my opinion, if our profession is not related to our passion, we should find a way to perform other activities that contribute to our sense of meaning. In other words, if we are not able to follow our passion in the workplace, we should find a different space to do that.
According to the Third Space Theory, “one space is the domestic sphere: the family and the home; a second space is the sphere of civic engagement including school, work and other forms of public participation; and set against these is a Third Space where individual, sometimes professional, and sometimes transgressive acts are played out: where people let their “real” selves show.”
Most people certainly have their First Space (their family) and also a Second Space (their workplace) but they do not have a Third Space to express themselves. Therefore these people make the mistake to believe that they should try to follow their passion in their Second Space, and become very frustrated when they fail.
I agree with the opinion that was recently expressed by Marc Andreessen, co-founder of Silicon Valley venture capital firm Andreessen Horowitz. He said: “Don’t follow your passion. Your passion is likely more dumb and useless than anything else. Your passion should be your hobby, not your work. Do it in your spare time.”
This may sound a bit rude, but it’s probably true for most people. We should turn our passions into our hobbies, practice them in a Third Space and in our free time. Then, when we are able to follow our passions outside the workplace, we will be much less likely to become victims of Boreout when performing our jobs.
In the next articles I intend to continue to discuss interesting topics I’m learning at ThePowerMBA. Please use the comments below if you would like to suggest a subject.
In my recent studies at ThePowerMBA, one of my favorite modules has been the one about Self Management, which focuses on the management of our limited personal resources.
In general, when people discuss this subject, they focus on Time Management, including topics like how to define our priorities, how to delegate tasks and how to have more effective meetings. Time Management has been studied for several decades now, with the goal of making workers more effective, efficient and productive, but it is clear that most people still have the feeling that they are not realizing their full potential at their jobs.
Thus it was a pleasant surprise to me when I discovered that ThePowerMBA module focused on Personal Energy Management, including topics such as Mindfulness, meditation and the importance of finding your purpose (Ikigai). In particular, I really enjoyed how they presented the importance of the balance between Body, Mind and Soul.
Body
It should be obvious that we must take care of our bodies, but very frequently people neglect their bodies, either because they fail to understand their basic needs or because they intentionally make sacrifices in order to reach their goals.
There are some clear warning signs that our body is being abused: some people start getting frequently sick, others feel worned out or chronically tired, and others suffer from insomnia or lack of quality sleep. These signs may indicate that our body is not getting the proper level of exercise, neither the right nutrition and the required amount of rest.
Regarding exercise, we should ask ourselves how frequently we do physical activity. Our ancestors were farmers or had to do other kinds of hard work, but today we spend most of our time in air-conditioned offices, sitting on a comfortable chair and making some very small movements with our hands when typing on the keyboard or moving the mouse.
Our nutrition also is very different from the one of our ancestors.Today we eat more food with more calories, including all kinds of processed food with artificial ingredients that did not exist in the past. We should ask ourselves if we are eating to satisfy our physical needs or if we are just consuming food with the goal to have a pleasant experience, as sweet as possible.
Another great difference is the amount of rest we get. Very frequently people today work so much that the only way for them to have some leisure time is by sleeping less. But the problem is not only the amount of hours we sleep: the intensity of the activities we do at night are increasingly causing us to have a bad quality of sleep.
Mind
With the kind of intellectual work that most people do today, our mind is our most valuable asset. However, some people treat their minds as if it was an infinite repository of resources to be exploited, and do not understand the cause-consequence relationship between the materials we insert in our mind and the ideas that get out of it.
Our mind also produces warning signs that there is something wrong: when we can’t focus on the task to be done, when we have emotional outbursts (that cause conflicts with our family and coworkers), when we feel high levels of stress, when we have trouble managing our relationships or when we are simply burnt out.
There are several things we can do to improve our state of mind. One topic that became very popular recently is the one of Mindfulness, which emphasizes the importance of living the present moment instead of spending our energy with regrets about the past or worries about the future. Among other things, Mindfulness includes different meditation techniques.
It is also very important to develop our Emotional Flexibility, which means our ability to be aware of our own emotions. For example, if we want to control our anger, we first need to understand what is causing us to be angry. In general, we would like to know what is triggering our feelings, in order to eliminate any undesirable reaction (such as yelling at people when we are frustrated or blaming other people for our problems when something bad happens).
Finally, we must understand that our mind will only perform well if we have enough space for renewal. We must learn how to disconnect from work, from the disturbing news on TV and from the many types of digital distractions we have today. In the previous section we mentioned that we consume much more food than our ancestors, but we are also consuming much more information, and this certainly is not healthy.
Soul
Sometimes I have the impression that, in the modern world, people have become less aware that their souls also have needs. I think that a common phenomenon we observe today is that people try to satisfy the needs of their souls through the acquisition of material artifacts.
There are several warning signs that our souls are not getting what they need: we may feel empty, we may get the impression that something is missing in our lives, sometimes we don’t feel connected to the world around us, we may feel apathetic or depressed.
Then some people will try to fill their emptiness with food, others will decide that they should spend as much time as possible having fun and others will waste the money they don’t have buying expensive cars, clothes or jewelry. But in order to satisfy the needs of our souls, we Humans need Meaning and Belonging.
Finding Meaning means defining what is the purpose in our lives. In the now famous Japanese Ikigai concept (depicted in the image below), our individual purpose is the unique combination of our personal interests, our greatest talents, the things we can be paid for and the things that the world needs.
But it is not enough to understand what our purpose is. We must regularly engage in meaningful activities, according to our very personal interests and talents, providing the needed satisfaction to our souls. We must realize our potential by performing activities that contribute to the world.
Besides Meaning, we also need a feeling of Belonging. We must fill our unique roles in our families, we must invest in having good relationships with our friends and coworkers, and we must also be part of a bigger community. We cannot satisfy our feeling of Belonging if we do not have healthy interactions with other Humans, and this became very clear during the recent Covid Pandemic in which people were forced to stay at home and keep social distance.
In Practice
This month I had the privilege to put several of these ideas in practice. I participated in a full-day seminar at the Galilee, in the North of Israel, under the guidance of my friend Ran Weber. In the past Ran was, like me, an entrepreneur who dedicated all of his time to the startup he founded. But today he is a best-selling book author, sharing with his many readers the beautiful insights he had in his journey for spirituality.
During the seminar we talked about “Hitbodedut”, a Jewish form of meditation. The Hebrew word “hitbodedut” could be translated as “being alone”, but the main goal in this meditation is to have your own private and secluded time and space to get closer to God through an intimate and informal conversation.
Then we went to a forest and each one of the seminar participants found a spot under the trees to perform his own “Hitbodedut”. We kept enough distance from each other so that we could not hear other people talking, and each person had the feeling that they were really alone in the forest. This enabled us to express our most profound feelings without any fear.
As someone who has spent the last 1.5 years working from home, including being under several lockdowns, this was a really transformative experience. I must thank Ran for being such a good mentor, sharing with us his experience, and I recommend the Hebrew speakers of my blog to read his many life-changing books.
I’m also very happy that ThePowerMBA included this module that made me much more aware about my Body, Mind and Soul needs. When I registered to follow this business course, I did not expect to learn so much about Mindfulness, Meaning and Belonging.
In general, a startup founder needs to do many difficult things. It is even more difficult because the founder will probably be doing these difficult things for the first time.
“Hard things are hard because there are no easy answers or recipes. They are hard because your emotions are at odds with your logic. They are hard because you don’t know the answer and you cannot ask for help without showing weakness.”
“Startup CEOs should not play the odds. When you are building a company, you must believe there is an answer and you cannot pay attention to your odds of finding it. You just have to find it. It matters not whether your chances are nine in ten or one in a thousand; your task is the same.”
“People always ask me, “What’s the secret to being a successful CEO?” Sadly, there is no secret, but if there is one skill that stands out, it’s the ability to focus and make the best move when there are no good moves.”
As I said in a previous post, I believe that the most effective approach to succeed is to avoid the basic mistakes that are being made by most entrepreneurs. Below I present a list of such common mistakes in the “road to disaster”, which was the topic of a very interesting class I had at ThePowerMBA, based on the work of Eric Ries, author of “The Lean Startup”.
Typical Mistake 1: Excessive Planning
Most startup founders spend a considerable time working on a detailed Business Plan (BP). This BP includes, among other things, the conclusions of market research, competitive analysis and financial projections, both for the future expenses and the expected revenues.
The main problem is when founders spend too much time thinking and doing all kinds of analyses instead of validating their product. Indeed, by preparing the BP the entrepreneurs may be learning about the market and about the competition, but this is not useful to validate their product nor to validate their business model. In other words, this kind of planning does not help bring the company closer to product-market fit, which should be the main goal for any early-stage startup company.
“Plans are only good intentions unless they immediately degenerate into hard work.” ― Peter Drucker, author and management consultant
Typical Mistake 2: Excessive Confidence and Optimism
Entrepreneurs are natural optimists. It is their optimism and confidence that enables them to face the risk of creating a startup company. People who lack this level of positive thinking about their abilities will not leave the safety of their jobs to start a new business. However, this optimism may be very dangerous when founders assume that they know what’s going to happen.
Of course startup founders should be optimists and should also have confidence in their abilities, but at the same time they should assume that they are going to be wrong. Most founders don’t have much business experience before they create their startup, so they will be attempting many difficult things for the first time. Even if they do have previous experience, if the product is really innovative, they should not make too many assumptions about how the market will react to their product idea.
“Making assumptions simply means believing things are a certain way with little or no evidence that shows you are correct.” ― Daniel Handler, book author
Typical Mistake 3: Expert Advice instead of Customer Validation
Many startup founders, when trying to get feedback for their ideas, look for advice from “experts” or friends. This kind of feedback is easily accessible, and in general helps the entrepreneurs to reinforce their beliefs. The problem is that this advice may also be very misleading, because it is being provided by people who do not have “skin in the game”.
The business experts may be able to provide us with some valuable feedback when their experience is relevant. But when a product is very innovative, only validated learning with real customers matters. Real users, who are paying with their money to buy our product or access our service, have “skin in the game”. Only this kind of validation may bring the company closer to product-market fit.
“Your most unhappy customers are your greatest source of learning.” ― Bill Gates, founder of Microsoft
Typical Mistake 4: Building the Perfect Product
Unfortunately, many startup founders are perfectionists. This is particularly the case of the technical founders, which may consider it unacceptable to deploy a software with some bugs or partial functionality. These founders will delay the launch date, and as a consequence postpone the contact with real customers, trying to build the perfect product.
In contrast, early-stage startup companies should get out of the building stage and start learning as soon as possible. While the software is being implemented there is no one using it to provide us any kind of feedback. At this stage the company has a high burn-rate but very low learning rate. Only validated learning enables the company to make progress towards product-market fit before all the company resources have been burned-out.
“If you are not embarrassed by the first version of your product, you’ve launched too late.” ― Reid Hoffman, founder of LinkedIn
Typical Mistake 5: Keeping a Secret
It is common for startup founders to be afraid to share their ideas with others. They don’t tell anyone about their vision nor the product features because they think that someone will steal their startup idea. They want it to be a secret.
But this fear is prejudicial to the founders. They cannot benefit from keeping a secret. In contrast, the entrepreneurs’ goal should be to validate their ideas as soon as possible. We cannot learn anything from an idea that is not being exposed to the market.
“Ideas are commodity. Execution of them is not.” ― Michael Dell, CEO of Dell
Typical Mistake 6: Premature Focus on Profitability
Some startup founders focus too early on gaining traction. This means that they try as early as possible to make their startup profitable and to start growing without additional investments. In other words, they try to bootstrap their company.
However, for an early-stage startup, the only goal is learning, and everything else is waste. It is extremely risky to try to become profitable when the company has not yet made a real effort to get closer to product-market fit. An early-stage startup could easily consume all its resources trying to sell a product that is not ready to be sold.
“In the business world, everyone is paid in two coins: cash and experience. Take the experience first; the cash will come later.” ― Harold S. Geneen, ex-president of ITT Corporation
Typical Mistake 7: Focus on Vanity Metrics
Very frequently we observe that early-stage startup companies focus on Vanity Metrics. This kind of metrics includes the number of user logins, number of app downloads and number of likes on social networks. They are not indicative of product-market fit because we can increase each one of these metrics by simply increasing our marketing spend.
In contrast, startup founders should focus on Actionable Metrics. Examples of these metrics are the Conversion Rate, the Customer Acquisition Cost (CAC) and the Customer Life-Time Value (CLTV). If we are able to improve the Conversion Rate, reduce the CAC or increase the CLTV, we are getting closer to product-market fit.
“Vanity metrics wreak havoc because they prey on a weakness of the human mind. In my experience, when the numbers go up, people think the improvement was caused by their actions, by whatever they were working on at the time. That is why it’s so common to have a meeting in which marketing thinks the numbers went up because of a new PR or marketing effort and engineering thinks the better numbers are the result of the new features it added. … Actionable metrics are the antidote to this problem. When cause and effect is clearly understood, people are better able to learn from their actions. Human beings are innately talented learners when given a clear and objective assessment.” ― Eric Ries, author of The Lean Startup
In Summary
The table below summarizes the typical mistakes and the correct approaches.
In my future articles I intend to continue sharing what I’ve been learning at ThePowerMBA. Please use the comments below to let me know what would be your main topics of interest.
There are several different types of challenges in a work environment. In order to succeed, we must be able to identify these challenges and develop the appropriate skills to face them.
One obvious kind of challenge is the inherent difficulty to perform the tasks required by our professional role in the organization. Thus the sales person has the challenge of closing deals, the marketing person has the challenge of creating leads and the software developer has the challenge of implementing algorithms. When we choose a particular profession and go to college, our goal is to acquire the tools that will enable us to handle this kind of challenge.
However, there is also a very different type of challenge: interacting with our colleagues in the workplace. This includes the conversations we have with our boss, the collaboration with co-workers in our department and managing subordinates in the case we are in a leadership position. In general all these different types of relationships may become a dangerous source of conflicts and misunderstandings, but very few people actively invest their time in developing tools to handle these situations.
The first time I was exposed to the importance of managing relationships in the workplace was when I was still a Computer Sciences student and read Lee Iacocca’s autobiography. He was an American automobile executive who worked for Ford developing several successful new car models, and later became the CEO of Chrysler, saving it from bankruptcy at that time.
Iacocca studied Mechanical Engineering, but he also took several psychology courses. In his autobiography he writes about the relevance of studying psychology: “I’m not being facetious when I say that these were probably the most valuable courses of my college career.” He adds: “It makes for a bad pun, but it’s true: I’ve applied more of those courses in dealing with the nuts I’ve met in the corporate world than all the engineering courses in dealing with the nuts (and bolts) of automobiles.”
Personality Types
One of the topics I recently studied at ThePowerMBA was the diverse Personality Types. In particular, we covered the Myers-Briggs Type Indicator (MBTI) framework, which has 16 personality types, that are the possible combinations of 4 dimensions:
The first dimension is the Introvert/Extrovert scale. Introverts need more time by themselves, being alone and focusing on their inner world. Extroverts need to spend their time socializing with others, focusing on the outer world.
The second dimension is the Sensing/iNtuitive scale. When processing information, individuals on the Sensing side focus on evidence and experience in arriving at a decision they are comfortable with. In contrast, people who are more Intuitive tend to interpret things and give them a personal meaning.
The third dimension is the Thinking/Feeling scale. When making decisions, people on the Thinking side prefer to employ logic and a rational analysis. On the Feeling side, people are more driven by emotions and their personal feelings.
The fourth dimension is the Perceiving/Judging scale. When dealing with the outside world, people on the Perceiving side prefer to stay open to new information and alternatives. In contrast, people on the Judging side want to arrive quickly at a decision.
The image below, from the ToolChest website, summarizes the 4 MBTI dimensions:
I recently read an excellent book about the importance of Personality Types. It’s called “Surrounded by Idiots”, by the Swedish behavioral expert Thomas Erikson. This book is based on the DISC method, which classifies Human Behavior into four types: Dominance (D), Inducement (I), Submission (S), and Compliance (C). In his book, Erikson describes the many differences among the four types, in a way that is both practical and entertaining. Based on his own experience as a consultant for big companies, Erikson focuses on the situations created by these four types in the workplace. He gives concrete advice on how to overcome conflicts and develop productive relationships with our colleagues.
In the opening of the first chapter, Erikson explains why it is so difficult to communicate effectively: “Everything you say to a person is filtered through his frames of reference, biases, and preconceived ideas. What remains is ultimately the message that he understands. For many different reasons, he can interpret what you want to convey in a totally different way than you intended. What is actually understood will, naturally, vary depending on who you are speaking to, but it is very rare that the entire message gets through exactly as you conceived it in your mind.”
Understanding Human Behavior
One of the aspects that was covered in my ThePowerMBA class was the importance of understanding Human Behavior in order to improve relationships in the workplace. There are several benefits we can obtain from an increased awareness about the particular needs and expectations of the different types of people collaborating with us in our jobs.
Everyday communication: understanding how others perceive the world enables us to adjust our communication to them. For example, a person who is detail oriented may want to analyze all the values in a report. For such a person, focusing on the big picture may be seen as something abstract and not actionable. We need to know if the person we are working with is someone who expects to learn all the details or if this person feels comfortable by knowing only the bottom-line.
Coordinating a team: assigning tasks to the different team members according to their personality types ensures higher productivity. Some people will prefer to work on problem solving tasks that require mostly analytical skills, while others will feel better brainstorming new ideas, using their creativity and imagination. While some people feel comfortable speaking in public, others will prefer to contribute by preparing written documents.
Dealing with emotions and stress: being aware of what causes us and others stress will help us avoid it. Most professionals prefer to work on a few well-defined tasks with clear deadlines, even if some people actually enjoy developing multiple projects in parallel. The pressure to multi-task and the constant interruptions in the workplace may have a strong negative impact on the employees’ emotional wellbeing.
In general, a better understanding of Human Behavior will be beneficial for all professional activities that require interactions with co-workers. This includes our personal relationship with our boss, the effective cooperation with colleagues in a project or leading and coordinating the tasks of the members of our team.
Talking to Strangers
Another very interesting book about this subject is “Talking to Strangers”, by the best-selling author Malcolm Gladwell. This book presents several real-world stories that illustrate the difficulties we have when interacting with other humans. In his book, Gladwell brings fascinating examples of misunderstandings and misjudgments. Unfortunately some of these stories had a tragic end, with the cost of innocent human lives.
One phenomenon described by Gladwell in his book is the “default to truth“: we tend to believe in the things people tell us. Therefore, it is very difficult for us, as human beings, to accurately detect that someone is lying to us. In his words: “You believe someone not because you have no doubts about them. Belief is not the absence of doubt. You believe someone because you don’t have enough doubts about them.”
In Summary
It is essential for our personal and professional success to be able to understand human behavior. In order to acquire tools to improve our relationships, we should invest in learning about psychology and the different personality types. These skills can have a direct positive impact in the workplace and influence the development of our careers.
One of my favorite topics during my recent studies at ThePowerMBA was the Lean Startup. I read the Lean Startup book by Eric Ries several years ago, and since then I have been trying to follow its main principles. In my opinion his methodology is applicable not only to startup companies, but also to any project which is very innovative and involves a high degree of risk.
One of the fundamental ideas in the Lean Startup approach is that we must plan experiments to test our hypotheses. This is called the Build-Measure-Learn Feedback Loop.
“A core component of Lean Startup methodology is the build-measure-learn feedback loop. The first step is figuring out the problem that needs to be solved and then developing a minimum viable product (MVP) to begin the process of learning as quickly as possible. Once the MVP is established, a startup can work on tuning the engine. This will involve measurement and learning and must include actionable metrics that can demonstrate cause and effect question.”
In the quote above, I emphasized the concept “actionable metrics”. One of the main mistakes that entrepreneurs do when trying to apply the idea of the feedback loop is that instead of measuring actionable metrics they measure vanity metrics.
Actionable vs. Vanity Metrics
Here is a very nice definition of Vanity Metrics from the Tableau website:
“Vanity metrics are metrics that make you look good to others but do not help you understand your own performance in a way that informs future strategies. These metrics are exciting to point to if you want to appear to be improving, but they often aren’t actionable and aren’t related to anything you can control or repeat in a meaningful way.”
In contrast, Actionable Metrics are useful to make decisions and adapt our strategies, because they are related to things we can control and repeat.
“An actionable metric is one that ties specific and repeatable actions to observed results.”
In the sections below we will analyze the main differences between vanity metrics and actionable metrics. I will illustrate these differences with relevant examples of both kinds of metric that are frequently used in startup companies.
Measuring Cause and Effect
In the build-measure-learn feedback loop our main goal is to learn. In the early-stages of a startup company we want to reach product-market fit.
Vanity Metrics are not good for learning because they are not necessarily a sign of a better product-market fit.
Actionable Metrics are good for learning because they are a clear sign of having stronger product-market fit.
For example, the number of followers on a social network or the number of visitors on a website are vanity metrics. A company may purchase followers to its page on Facebook. In the same way, a company may drastically increase the number of visitors in its website using paid campaigns on Google AdWords. However, these metrics are not indications of product-market fit. We can increase the values of these metrics by simply increasing our marketing spend.
In contrast, the conversion rate or the activation rate are actionable metrics. In an early-stage startup company, we can gradually learn how to increase the conversion rate. We can plan a series of experiments and test different hypotheses of how to improve the activation rate. If a company is able to increase these metrics, it is clearly getting closer to product-market fit.
What does the Metric Represent?
When using metrics, it’s very important to understand what we are measuring. In the context of the build-measure-learn feedback loop we want to focus on metrics that help us validate our product and our business model.
In general, Vanity Metrics are used to measure the size of the business.
On the other hand, Actionable Metrics are used to measure individual behaviour.
For example, the number of leads or the number of apps downloaded are vanity metrics. They certainly provide an indication of the size of our operation, but they do not help us validate our business model. We certainly want to increase the number of leads or have a higher number of apps downloaded, but this growth does not necessarily indicate product-market fit. Again, a company may increase its number of leads or have a higher number of apps downloaded just by increasing its marketing spend.
In contrast, the Cost per Acquisition and the Customer Life-Time Value (CLTV) are actionable metrics. An early stage startup company may try different strategies to reduce its cost per acquisition. In other words, this company may plan experiments to learn how to decrease its cost per acquisition. In the same way, a company may adopt several tactics to increase the CLTV. We may define a hypothesis of how to improve the CLTV and test it in practice. By working on the refinement of the Cost per Acquisition and the CLTV we are gradually validating our business model and getting closer to product-market fit.
Measuring Aggregates and Ratios
As we have observed above, in general the vanity metrics are used to measure the size of the business while the actionable metrics are used to measure individual behavior. This is reflected in the respective types of these metrics.
Vanity Metrics: In general, measure gross quantities.
Actionable Metrics: In general, measure ratios and unit economics.
Additional examples of vanity metrics are the total number of registered users and the total revenues. These measures are important, but they are an aggregation. This kind of metrics alone are not useful to provide an indication of the “health” of our business. Actually, it is very common that a company may be increasing these totals at the same time that it is deteriorating other metrics. For example, an early stage startup company may increase the total number of registered users by increasing the user acquisition cost (which of course is undesirable), or it may increase its total revenues at the same time that it is decreasing the average CLTV.
Compare this to some additional examples of actionable metrics, such as the Repeat Rate and the Churn Rate, both of which are ratios and not aggregates. The Repeat Rate measures the ratio of users who are coming back to use our services or buy our products again. The Repeat Rate is an indication of customer loyalty and retention. The opposite is the Churn Rate, which measures the relative number of users who are leaving our product or platform. The Churn Rate is an indication of attrition and loss of users over time. Both the Repeat Rate and the Churn Rate have a clear impact on the CLTV, and as such are very valuable metrics.
When to Use the Metrics
Now that we have a clear understanding of vanity metrics and actionable metrics, and we have seen several examples for each kind of metric, it is time to ask when to use them.
In general, Vanity Metrics are important when the company wants to scale.
Actionable Metrics are important when the company is trying to reach product-market fit.
Thus, when a startup company reaches its growth stage, the vanity metrics may be useful to measure this growth. It makes sense for a company that is scaling up to measure the number of logins in its website, the number of apps downloaded and its total revenues. The values of these metrics over time provide an indication of the growth rate. In other words, these metrics together tell the history of growth. But we need to observe the actionable metrics in order to conclude if this growth is sustainable.
When a startup is still trying to reach its product-market fit, it must focus on actionable metrics such as the conversion rate, the user acquisition cost and the retention rate. Actually these metrics should be used to guide the company in its efforts to validate its product and validate its business model. If a company makes the mistake of being driven by vanity metrics in its early-stage, it may consume all its resources before it reaches product-market fit. In other words, an entrepreneur following only the vanity metrics will probably fail and also be surprised by this failure.
Please feel free to share in the comments below about your own experience with vanity metrics and actionable metrics. In my next posts I will continue to share interesting insights about the topics I’m learning at ThePowerMBA.
See below a summary of the differences between Vanity Metrics and Actionable Metrics (extracted from ThePowerMBA materials):
One of the most interesting concepts I’ve studied at ThePowerMBA was the Platform Business Model. Many of the most successful companies today are based on platforms:
Amazon is a platform in which consumers are able to purchase almost anything.
Facebook is a platform in which users generate and share content with other users.
Uber is a platform in which clients get easy access to transportation almost anywhere.
AirBnB is a platform in which guests can rent rooms from private hosts.
WhatsApp is a platform in which users send instant messages to each other.
YouTube is a platform in which users can share videos with their followers.
PayPal is a platform that enables eCommerce websites to easily receive payments from users.
Of course all social networks are also platforms: Twitter, Instagram, LinkedIn, Pinterest, Snapchat, TikTok.
There are also many platforms for content sharing: Medium, WordPress, Blogger, Slideshare, Reddit, Pocket, Vimeo.
In the same way, all online marketplaces are platforms: Alibaba, eBay, Etsy.
It is obvious by now that all these different platforms together have had a profound impact in our lives. They have changed the way we buy products; they have extended our ability to communicate with our family and friends; they have disrupted traditional industries; they have enabled us to become content creators and build a follower base.
Thus, I think it would be very interesting to analyze the main attributes of the Platform Business Model, and identify its strengths and challenges.
Strengths of the Platform Business Model
The main attribute of the Platform Business Model is that it enables users to create value for other users. In general the platform is not directly responsible for creating content or selling products and services that are consumed by the users. In the case of platforms, the users themselves are responsible for content generation and the provision of products and services.
In one-sided platforms all the users are of the same type, and they can be both producers and consumers at the same time. This is the case of most social networks like Facebook, in which users are active both posting and interacting with the posts of their friends.
In two-sided platforms there are different types of users, and some of them are producers while others are consumers. This is the case of marketplaces in which there are buyers and sellers and content-sharing platforms in which there are bloggers and readers.
But in all kinds of platforms there is a network effect: the bigger the number of users, the higher the value that is being generated for these users. In other words, as the number of users increases, the value for these users also increases.
This network effect creates a virtuous circle:
The growth in users creates a growth in value.
The growth in value brings new users.
This network effect is one of the reasons that the platform business model is so attractive for startup companies. If a startup is able to create the virtuous circle, it can actually grow exponentially. There are many startup companies that have experienced such explosive growth, and a recent example is the innovative social network Clubhouse, which reached millions of users in a short period of time.
Many platforms try to create this phenomenon of viral growth by motivating their current users to invite their friends to join the platform. This is the case of Clubhouse, which adopted successfully the policy of being invite-only. This kind of viral growth strategy may also drastically reduce the average user acquisition cost.
Very often the exponential growth also creates a winner-takes-all effect: only a few platforms reach the scale that enables them to operate efficiently and become profitable. As a consequence, each one of the few successful competitors dominates a significant share of the market. In some cases these few competitors may operate in practice like an oligopoly.
Another consequence of these effects is the creation of high entry barriers for new competitors. In a market in which there are already a few platforms operating successfully, and each one of these platforms has a significant share of the market, it is very difficult for a new competitor to penetrate this market.
Challenges of the Platform Business Model
The Platform Business Model also presents many challenges to entrepreneurs. Unfortunately, it is very common for the founders of platform-based startup companies to underestimate these challenges. In particular, founders without a business background fail to understand the main obstacles because these challenges are not related to the product features or its technology, they are related to the execution of the go-to-market strategy.
First of all, it is clear that a platform must reach a critical mass before it becomes really valuable for its users. For example, a messaging app like WhatsApp or Telegram is only useful for us if most of our friends are also using the same app. The platform as a product may have amazing features and it may be based on advanced technology, but if there are not enough active users in the platform it will not provide any value.
For this reason we commonly observe that the adoption of specific platforms follows geographic boundaries. In some cases a platform may be very popular in one state but have relatively few users in a different state. The map below shows the most popular messaging platforms by country in 2018:
In the case of two-sided platforms, this creates the well-known chicken-and-egg problem. When a startup is trying to create a two-sided platform, it has a dilemma: which kind of user should we acquire first? The producers or the consumers? For example, in the case of marketplaces, there is no value for the sellers if there are no buyers, and there is no value for the buyers if there are no sellers.
Thus, in the case of two-sided platforms the challenges are even bigger, because they must reach a critical mass for both types of users. They also must make sure that the growth of their user base is always balanced: the platform will not be able to scale if the number of producers is growing much faster than the number of consumers, or the opposite.
One of the main consequences of this need to reach a critical mass is that platform-based startups also need more funding. If the startup founders are not able to obtain a considerable initial investment, they will not have the resources to implement their user acquisition strategy.
In Summary
A startup based on a Platform Business Model may benefit from network effects and grow virally and exponentially. If successful, this startup will dominate a significant market share and enjoy the protection of high entry barriers against potential competitors.
However, there are many challenges, in particular the need to reach critical mass before the platform delivers real value to its users. In general a startup company will only succeed in reaching this critical mass if it is able to raise considerable investments.
The insights in this blog post were inspired by the materials I learned during my studies at ThePowerMBA. Please let me know in the comments below if this post was useful for you and which other startup-related topics would you like to explore.
The image below has become very popular recently, with lots of people sharing it on social networks. It addresses the issue of Work-Life Balance, which I already discussed in a previous post.
I don’t like the image above, because it mixes together many different things: time, money, health, happiness.
In my opinion, the right way to measure our success is through Dimensions of Self-Realization.
The idea is that our lives have several dimensions, and we should look for our self-realization in each one of these dimensions. In other words, we should try to make progress in each one of these different dimensions simultaneously.
For example, these are some possible dimensions we may have in our lives:
Professional: We want to acquire new professional skills, make progress in our careers, have more authority and more responsibility.
Intellectual: We want to learn new subjects, educate ourselves, read books, make courses and get certificates.
Material: We want to have a higher salary, a bigger house and be able to buy expensive products.
Health: We want to preserve and improve both our physical and mental health.
Family: We want to have a good and enjoyable relationship with our spouse and children.
Social: We want to meet friends, participate in parties, have an active community life.
Spiritual: We want to be connected to forces and traditions that give us more meaning to our lives.
These different dimensions should not conflict with each other. There should be no contradiction between making an effort to have a higher salary, being a better parent to our children and dedicating more time to socialize with friends.
I would say that the real success measure for an individual is the ability to make progress in each one of his/her dimensions of self-realization without feeling guilty. We should not have the impression that it is necessary to make big sacrifices in one dimension in order to develop a different dimension.
What do you think? Please share your opinion in the comments below.
During my studies at ThePowerMBA, I had the opportunity to revisit the main concepts of the Blue Ocean strategy, which offers several tools for companies that want to improve their unique value proposition, by differentiating their products from the competition.
The goal is to apply the four actions in order to create a product that is very different from the competition. This product may be cheaper than the competition (because it eliminates and reduces several costs), but at the same time it should offer something unique (because it raises and creates some relevant factors).
Below I will explain in detail how we have applied each one of these four activities in my startup company KashKlik, and as a result we have created a very innovative product that is extremely different from the competition.
Example: KashKlik Influencer Marketing Platform
Eliminate:
Influencer Search: There are many platforms that enable the advertisers to search for influencers. On KashKlik, the advertisers cannot search for influencers. They simply create campaigns and define the targeting. Our algorithms automatically find the best influencers to promote each campaign.
Influencer Approval: On most platforms, the advertisers need to approve each influencer individually. On KashKlik, the advertisers do not need to approve the influencers. If the influencer satisfies the selection criteria that was defined in the campaign, then he/she can promote the campaign.
Negotiation with Influencer: In general influencers do not have fixed prices, and the advertisers need to negotiate with each influencer to define the amount to be paid for the promotion of the campaign. On KashKlik the advertisers do not need to negotiate with the influencers about the cost of the campaign. The advertiser pays a fixed value per-click to all the influencers promoting its campaign.
Post Approval: Many platforms require the advertisers to approve the contents of each post on the social networks. On KashKlik the advertisers do not need to approve individual posts. We trust the influencers based on the scores that were computed by our Machine Learning algorithms. The best influencers have higher scores.
Communication with Influencer: On other platforms, in order to negotiate payments and approve posts, the advertisers need to communicate directly with the influencers. On KashKlik there is no negotiation and no approval, so the advertisers do not need to communicate with the influencers.
Reduce:
Control Over Influencer Choice: On KashKlik, the advertisers have less control over the choice of influencers. The influencers are selected according to the targeting and profile requirements that are defined by the advertisers when the campaign is created.
Control Over the Contents of Posts: On KashKlik, the advertisers have less control over the influencers’ posts. The advertisers do provide examples of texts and images that may be used by the influencers to promote the campaign, but each influencer is free to use other contents that fit his/her audience.
Raise:
Campaign Management Efficiency: Because of all the features that were eliminated and replaced by automation, the KashKlik platform drastically reduces the amount of time and effort that the advertisers need to spend in order to create and manage their campaigns. Each campaign may start being promoted immediately after the advertiser has activated it. This is much more efficient than having to go over a process that requires direct communication between advertisers and influencers.
Audience Size Flexibility: KashKlik’s automation enables advertisers to work effectively with micro-influencers, who have audiences of less than 50 thousand followers. When there is no automation, it is not cost-effective to work with small influencers. Thus KashKlik provides more flexibility in the choice of audience sizes for each campaign.
Budget Size Flexibility: Thanks to KashKlik’s automation and the work with micro-influencers, it’s possible to create Influencer Marketing campaigns using budgets as low as a few hundred dollars. Traditional influencer marketing campaigns require budgets of tens of thousands of dollars. Thus KashKlik provides more flexibility in the choice of budget sizes for each campaign.
Machine Learning Application: There are several platforms that claim to use Machine Learning, but KashKlik raised the application of sophisticated algorithms to provide a new level of automation. KashKlik applies Machine Learning to create rich influencer profiles and to build an advanced Recommender System to match each campaign to the best influencers.
Scalability: Thanks to automation and the reduction in the time and effort required to promote the campaign, KashKlik makes it possible to promote a campaign using hundreds of micro-influencers simultaneously. Other platforms, that do not provide this level of automation, are not scalable.
Create:
Pay-Per-Click: KashKlik was a pioneer in the introduction of the Pay-Per-Click (PPC) model for Influencer Marketing. Most other platforms adopt the models of pay-per-post or pay-per-engagement. The adoption of PPC means in practice a very innovative combination of Influencer Marketing with Performance Marketing.
Influencers Choose Campaigns: KashKlik created a real marketplace that has inverted the relationship between advertisers and influencers. Instead of advertisers searching for influencers, on KashKlik the influencers search for campaigns.
Influencer Marketing for SMBs: Thanks to KashKlik’s reduction of the minimum budgets and the reduction of time and effort required to manage campaigns, the channel of Influencer Marketing became accessible to Small and Medium Businesses (SMBs). Previously, using traditional methods, which are very expensive and require lots of time and effort, SMBs could not afford to work with influencers.
As you can observe, as a result of the application of the four activities in the ERRC Grid, KashKlik has become one of the first Influencer Marketing platforms that addressed the SMBs market. In other words, we have created a Blue Ocean. I hope you have enjoyed this example. Please share your comments or questions below.
In a previous post I have shared a presentation and a video explaining how the application of these four activities have enabled KashKlik to create a new value curve that is very different from the competition.
In my next posts I intend to continue to share how the materials I’m learning at the ThePowerMBA can be directly applied to my startup company KashKlik. Please leave a comment if you would like me to address some specific topic. Thanks.
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