Kellogg Strategic Use and Abuse of SaaS Metrics
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Slides from my presentation at SaaStr 2023 entitled The Strategic Use and Abuse of SaaS metrics.
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Kellogg Strategic Use and Abuse of SaaS Metrics
- 1. The Strategic Use and Abuse of SaaS Metrics with Dave Kellogg Dave Kellogg EIR Balderton Capital R3.1
- 2. Why I Wanted To Give This Presentation ● I’ve been a C-level executive for >25 years ● I’ve sat on ~10 boards ● I’ve been to countless e-staffs, QBRs, and board meetings (1K+) ● I’m naturally drawn to metrics ● And I’ve seen a lot of problems ● Many are tactical (to be discussed another day) ○ The mechanics of presentation, formatting, charting, info density, and cognitive load ● Others are strategic 2
- 3. The numbers don’t lie, but the stories well tell around them sometimes do. 3
- 4. Self Introduction Past Employment ● CMO, $30M to $1B, Business Objects ● SVP/GM, $0.5B out of $3.0B, Salesforce ● CEO, $0 to $80M, MarkLogic ● CEO, $8 to $50M, Host Analytics Today’s Work ● EIR, Balderton Capital ● Director, 10x including Alation, Jiminny, Nuxeo, Profisee, Scoro ● Advisor, 20x including Tableau, MongoDB, Recorded Future, Bluecore, dbt Labs, Logikcull, Pigment ● Angel/investor, incl. Alation, Cube, DataGrail, Faros, FloQast, Hex, Skyflow, Unaric ● Author, Kellblog 4
- 5. Today’s Three Topics ● Fifteen signs of strategic SaaS metrics problem ● A SaaS metrics maturity model ● Traversing the five layers to increase your SaaS metrics maturity 5
- 6. Fifteen Signs of a Strategic Metrics Problem 6
- 7. Fifteen Signs of a Metrics Problem, I ● Bludgeoning: numbers are used to bludgeon management ● Misleading: metrics used to obscure, not enlighten 7
- 8. Misleading Metrics, Selective Highlighting 8 “We’re 96% of plan” “We’re 60% of new logo ARR, 93% of expansion ARR, 73% of new ARR, and 60% of net new ARR”
- 9. Fifteen Signs of a Metrics Problem, I ● Déjà vu: you go to the same board meeting three quarters in a row ● Rat-holing: you discuss the metrics, not the business using metrics ● Semantics: what do “best case” and “commit” mean again? 9 ● Bludgeoning: numbers are used to bludgeon management ● Misleading: metrics used to obscure, not enlighten
- 10. Semantics: What Do FC, Best-Case, and Commit Mean? ● BoD: What’s the forecast for new ARR this quarter? ● Sales VP: $4.3M, with a best case of $5.0M. ● BoD: What’s the most likely outcome? ● Sales VP: $4.5M. ● BoD: What are you really going to do? ● Sales VP: I think we can do $4.7M. ● BoD: What’s the worst case? ● Sales VP: $3.5M. 10
- 11. Fifteen Signs of a Metrics Problem, I ● Recalculation: board members recalculate metrics themselves ● Inexplicability: the company is not performing, but numbers don’t show why 11 ● Bludgeoning: numbers are used to bludgeon management ● Misleading: metrics used to obscure, not enlighten ● Déjà vu: you go to the same board meeting three quarters in a row ● Rat-holing: you discuss the metrics, not the business using metrics ● Semantics: what do “best case” and “commit” mean again?
- 12. Fifteen Signs of a Metrics Problem, II ● Dissonance: the words don’t match the music ● Innumeracy: only the CFO and the ops people present metrics ● Déjà vu: you go to the same board meeting three quarters in a row 12
- 13. 13 I’ve Been To This Board Meeting Before 13
- 14. Fifteen Signs of a Metrics Problem, II ● Disconnect: metrics are unlinked to strategy 14 ● Dissonance: the words don’t match the music ● Innumeracy: only the CFO and the ops people present metrics ● Déjà vu: you go to the same board meeting three quarters in a row
- 15. Disconnect Example: Metrics Unlinked to Strategy 15 Consider an SMB company executing an up-market push
- 16. Fifteen Signs of a Metrics Problem, II ● Piecemealing: numbers are evaluated in isolation, not holistically ● Mis-benchmarking: comparing to the wrong companies ● Causality: correlation confused with causation ● Torture: selecting and twisting the data to justify prior conclusions 16 ● Dissonance: the words don’t match the music ● Innumeracy: only the CFO and the ops people present metrics ● Déjà vu: you go to the same board meeting three quarters in a row ● Disconnect: metrics are unlinked to strategy
- 18. Twisted SaaS Metrics Example ● Our churn rate is only 5% ○ Ergo 20-year LT and amazing LTV/CAC ● Net churn is 25% ● Gross churn is 29% ● Logo churn is only 5%, because of … ● Four $1 renewals (to hide the problem) 18 See: https://kellblog.com/2020/09/02/churn-is-dead-long-live-net-dollar-retention-slides-from-my-saastr-2020-presentation/
- 19. Do People Actually Do This? See: https://www.youtube.com/watch?v=0njymB06JB8 19
- 20. A SaaS Metrics Maturity Model 20
- 21. What’s Really Going On Here? ● There’s no shared metrics foundation ○ What metrics mean, how they are calculated, and why they matter ● There’s no trust ○ Data and calculations, tell the real story, and aren’t used to mislead or to bludgeon ● Metrics are not integral to strategy ○ Financing tool only, not linked into OKRs, and no leading indicators ● The culture is not metrics-driven ○ Numeracy as prerequisite for conversations about the business ● Metrics are not being used define trajectory and long-term goals ○ We may not agree on what we’re trying to build, trade-off, and sequence 21
- 22. A SaaS Metrics Maturity Model •Models for long-term trajectory, sequencing, and trade-offs Level 5: Trajectory •Culture of data-driven decision making Level 4: Culture •Goals, OKRs, and leading indicators Level 3: Strategic Linkage •Templates, cadence, and continuous improvement Level 2: Trust •Definitions, calculations, and semantics Level 1: Foundation 22
- 23. Improving SaaS Metrics Maturity is a Journey 23 ● Layer 1 can be measured in quarters, not weeks ● Change management calls for iron will ● May require staff upgrades ● Will change regular meeting cadence and agendas ● Requires trust and the willingness to be vulnerable
- 24. Traversing the Five Layers to Increase SaaS Metrics Maturity 24
- 25. 1. Lay The Foundation ● Definitions and calculations ○ Pipeline stages, forecast categories, close dates, values, SaaS metrics, … ● Semantics ○ What do words like best case, forecast, commit, and downside mean? ● Rework of underlying systems ○ Example: GL to deliver P&L in the standard SaaS structure ● Benchmarks ○ Which are available and most applicable to our size and aspirations? ● Suggest offloading to metrics committee(s) ○ At both board and QBR level 25
- 26. 2. Build Trust ● Template, templates, templates ○ Metrics selection & presentation ○ History & context ○ Footnotes: never hide exceptions ○ Levels: summary vs. drill-down ● Cadence: which templates used at which meetings? ○ Weekly e-staff ○ Quarterly business review ○ Post-quarter board meeting ● Continuous improvement ○ Fix data at the source ○ Improve templates as you use them 26
- 27. 3. Link to Strategy ● Identify your top challenges ● Define 4-6 strategic goals (OKRs) ○ Example: average sales price (ASP) as key result (KR) for up-market push ● Find KPIs that lead the KRs ○ How will we know if it’s working? ○ Is the bow coming through the wind? ○ Example: pipeline ASP, ASP win rates 27
- 28. 4. Build a Metrics Culture ● Numeracy as a prerequisite ● Knowing the numbers ● Cadence and discipline ● Not conversations about the metrics, but conversations about the business ● Wary of oversimplification ○ Limits of interpretation ○ Emphasis on triangulation 28
- 29. 5. Agree on Strategic Trajectory ● Timeframe ● Sequencing ● Convergence ● Trade-offs ● Drivers ● Scenarios 29 Using models and benchmarks to establish mid- to long-term agreement on what you’re trying to build
- 30. Conclusions ● SaaS metrics can be tools of enlightenment, oppression, or obfuscation ● We’ve discussed 15 symptoms of a SaaS metrics problem ● We’ve introduced a five-layer SaaS metrics maturity model ● We’ve discussed things you can do at each level to build your metrics maturity ● I wish you all well on the journey 30
- 31. Resources ● Blogs (alphabetical) ○ Clouded Judgement by Jamin Ball ○ Kellblog by Dave Kellogg ○ Mostly Metrics by CJ Gustafson ○ OnlyCFO’s Software World ○ SaaSletter by Matt Harney ○ The Next Big Teng by Janelle Teng ○ The SaaS CFO by Ben Murray ○ The SaaStr Blog ● Podcasts (alphabetical) ○ SaaS Talk with the Metrics Brothers by Ray Rike and Dave Kellogg ○ The SaaStr Podcast 31