(Founder Stories) Eric Ries: On “Vanity Metrics” And “Success Theater”

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Resuming their conversation from episode I, Chris Dixon asks Lean Startup author Eric Ries to offer evidence of uber successful “internet/software companies that have adopted or used the lean startup movement.”

Ries has worked with companies such as Dropbox, Groupon, and Intuit, but he doesn’t claim any credit for their success. He notes though that the larger point is this: “How do you know just because someone claims to have followed this model and that it made them rich and successful how do you know that is actually true? How do you know there is any causal link between the two?” He tells Dixon, “I want The Lean Startup to be a scientific theory that is itself falsifiable.”

Ries encourages leaders to test The Lean Startup’s concepts, at least on a small scale, and decide for themselves if it improves performance.

Below, the topic turns to “vanity metrics,” which Ries thinks are bogus. He says when companies roll out stats like number of users or hits they offer a “good strategic weapon” but really represent a whole lot of nothing. “The reason companies like to talk about vanity metrics is they both make your competitors feel bad about themselves and also reveal nothing about your business.”

Vanity metrics devolve into what Ries calls “success theater” which is the action of “making people think that you are being successful rather than energy you could put into serving customers.” Reis says “if you look at the accounting metrics, ROI, profitability, everything we get trained to do as a corporate CFO or VC, those metrics cannot tell the difference between the team that is on the brink of success or a team that spent that year goofing off.”

Hammering home the point he says “the current metrics paradigm literally can’t tell the difference between absolute success and total disaster.”

Prime example?  Twitter. Watch the video to find out why—and to find out what data Ries claims companies should focus on.

Past episodes of Founder Stories are here.