As a product manager, you're responsible for driving the success of your product. The question is, what does success look like?
There isn't always a clear-cut answer to this question. Even within your organization, your team's definition of success will change over time.
That's where KPIs, or key performance indicators, come in. KPIs are quantitative metrics that indicate how effectively you're achieving your goals — and ultimately, how successful your product is. Because as Peter Drucker famously said, you can't manage what you can't measure.
As Peter Drucker famously said, you can't manage what you can't measure.
Whether you're starting a new role as a product manager or you're updating your existing product strategy, defining the right KPIs is critical. KPIs give your product team concrete goals to work toward, and when you get them right, they rally everyone around what matters most.
In this post, we'll walk through a four-step process for defining product KPIs, complete with a template you can use to guide you through each exercise. But first, we need to unpack the role KPIs play in your product strategy — and why so many product teams get it wrong.
Most product teams document their KPIs in one place and their strategic product roadmap in another. Why is that? After all, good KPIs don't exist in a vacuum.
Let me repeat that. Good KPIs do not exist in a vacuum.
In reality, your team's success metrics are a critical building block of an effective product strategy. The two go hand-in-hand.
In a recent blog post, we broke down the five steps to creating a strategic product roadmap with built-in resiliency — because it's clearer now, more than ever, that product teams need to prepare for the unexpected. Each step of the planning process builds upon the previous ones, culminating in the creation of a strategic roadmap that's adaptable by design.
It starts with defining your product vision. Your product vision encapsulates why your product exists, who it serves, and how it's different. It should be aspirational but attainable. Then, with the product vision as your North Star, you can open a cross-functional dialogue to define KPIs that align with that vision.
Once you've identified the right KPIs (more on that in a minute), you can continue building out your product strategy. At this point, the entire team is aligned on a clear vision, and they're working toward the same goals. The next step is figuring out the steps you'll take to achieve them.
Now, here's where the resiliency comes in. A lot of product roadmaps lay out the what and when, but they fail to address the what if? Using the KPIs you've agreed on, your team can begin to ask critical questions that will help define a scope of releases that will move you closer to your goals.
The reality is that things will change, and product teams need to account for that. Your strategic roadmap, and by extension, your KPIs, are not immutable artifacts. Having the perfect product strategy is unrealistic. What really matters is having these ongoing, cross-functional conversations that empower you to ask tough questions and plan in the face of an uncertain future.
Now, the moment we've all been waiting for. How can you ensure you're prioritizing the right KPIs?
Let's walk through a four-step process that will help your team define what success looks like. These exercises can be completed in a 90-minute workshop, in collaboration with stakeholders from your product management, product design, UX, and engineering teams.
⏰ 30 minutes
Instead of diving headfirst into metrics, start by taking a step back and looking at the broader context around your product. One way to do this is with the Business Model Canvas (BMC), originally created and popularized by Strategyzer. The variation below comes from the folks at Moonshot by Pactera EDGE.
Use the BMC to deconstruct the nine core aspects of your product's business model and provide your team with a clear, concise overview of how the business operates. This context will help cross-functional stakeholders from product, user experience, engineering, and beyond get on the same page. Above all, this exercise should get everyone thinking about the ins and outs of the business, where your product falls within that landscape, and the different levers you can pull to achieve your goals.
Here's an example of what it looks like when it's all filled out, from the perspective of a product team at a fictional fintech startup whose core product is a mobile investment app for millennials.
⏰ 15 minutes
KPIs are indicators of how well you're tracking toward your goals — so before you can define your KPIs, you need to understand what you're aiming to achieve. If all goes well, what will you be doing six months from now? Two years from now? Five years from now? Think qualitative, not quantitative, and refer to your BMC and product vision to guide your decision-making.
⏰ 15 minutes
At this point, you have what you need to make your goals measurable. Map the goals you identified in step two to KPIs that will illustrate how well you're achieving those goals. Your KPIs can be tied to any aspect of your business, from overarching business goals to product usage metrics. At this point of the process, you can use the completed BMC to help you identify success metrics in terms of feasibility, viability, and desirability.
Let's build upon the example from step one: the fintech startup with a millennial audience. They might have a short-term goal of making investing as engaging as a video game and as fun as a casino, which they can measure by looking at registrations, monthly active users, and peer-to-peer invites. As a long-term goal, they envision their product becoming their customers' banking app of choice, as measured by feature adoption, conversion rate, and a funnel analysis.
⏰ 10 minutes
The final step is simple enough; you're essentially tying a bow on the work you did in the first three steps. If you're using the resilient product roadmap template, you can synthesize your work in the "Metrics for Scale" section. The final output will be an overview of the success metrics your team will prioritize as you continue to scale.
Setting goals and defining KPIs for the short-term and long-term allows you to be both realistic and aspirational about what you can achieve, and it empowers you to create a release timeline that reflects your long-term priorities.
We explored some examples of KPIs in the four steps above. Now, let's take a closer look at some common metrics that product teams track. This list is not comprehensive by any means, but it is a solid starting point to help product teams, especially at SaaS companies, to define their KPIs.
Broadly speaking, there are two types of KPIs you should look at: business performance metrics and product metrics.
These are the top-level KPIs that virtually everyone in your organization is collectively working toward. Examples include:
Product usage metrics tell you about product adoption, engagement, and and how your users are engaging with your product. For example:
Some of your KPIs will undoubtedly rely on collaboration with other teams. Make sure everyone who has a role in realizing your goals is aligned around the same KPIs, and set aside time to check in with cross-functional stakeholders on a regular cadence.
Your product KPIs are informed by your product vision, and in turn, they help drive your product strategy. But there are a few more building blocks you need before your strategy is complete, and we created a template to guide you through the process.
The resilient product roadmap template is designed to evolve and with the changing needs of the market, customers, and internal teams. You can use MURAL’s shared digital workspace to facilitate these conversations and guide your team through the product planning process, even when you can't be in the same room.