Measure Now For Investment Later
It is never too early for an IoT SME to start measuring performance to prove their worth to prospective investors and customers alike. But financial metrics may not be enough and the variability inherent in the IoT means there is no one-size-fits-all approach to determining and measuring relevant key performance indicators (KPIs). This blog will outline why KPIs are important to an IoT SME and provide guidance for SMEs to consider when coming up with metrics for their company, product or service.
The internet of things (IoT) is a highly diverse and competitive marketplace and the host of IoT start-ups jostling for mindshare now will be competing for investment further down the line. It may sound dull and far from innovative, but measuring performance from the outset could mean the difference between getting investors on board or not. It will also help a company track operational performance and hone product development and marketing.
Of course a start-up has no financial or operational key performance indicators (KPIs) to measure, but there are still indicators that can be quantified. For Alexandra Deschamps-Sonsino, founder of Good Night Lamp and consultant at designswarm, the key to success has been how well the company works with its partners. Constant vigilance has ensured those relationships continue to be mutually beneficial.
Deschamps-Sonsino advises that prospective investors take a variety of factors into consideration when deciding whether or not to invest, such as the ability to retain staff, the number of sign-ups to a newsletter or followers on social media, the regularity and extent of press coverage, presentations at public events, and awards or competition wins. By setting such targets and making necessary changes if the goals are not met, a start-up can prove its mettle to a potential investor and make sure it is operating effectively and efficiently, even if it does not yet have a product on the market or is not yet profitable.
Getting into the habit of tracking performance early on will also help as the startup grows. Like any other company, an IoT SME should track standard KPIs as a matter of course. But there are other non-standard metrics they should also consider measuring and reporting against. There is no one-size-fits-all approach to selecting the right KPIs for an IoT company but there are two important areas to consider.
The first is to measure product development. That is, to set a goal of regular releases of new functionality or product versions and stick to that goal.
Of greater importance is to quantify the benefit the particular device or service delivers. The indicator(s) should measure the unique value proposition of the specific product and the benefit to the user. This could encompass the cost, time or energy savings delivered per unit or per customer, and the cumulative total could make for an attention-grabbing headline (see our recent blog post for a prime example – How to save 8m through the IoT ecosystem) or a compelling counter on a website.Having a track record of quantifiable metrics can help an IoT SME stand out from the crowd as a raft of companies jostle for both customers and investment. Razor sharp customer focus can put the SME ahead of its competition in what is likely to be a crowded field. KPIs can enable a company to better articulate its message to help prospective customers understand exactly what the product can do for them. They can also help the SME track operational performance in a very customer-focused way and hone in on the customer benefit rather than an irrelevant – to the customer – metric such as the number of units shipped.
On the investor side, the measured KPIs can help keep current investors happy, as well as prove the business case and scale of the opportunity for future investors. They also help investors understand what could be a complex, niche product so they can evaluate it against other opportunities. The SME will be able to demonstrate it understands its business and is able to deliver against targets.
Any metric should be easy to measure in a consistent and regular manner so that performance tracking does not become an onerous burden that outweighs any potential benefit. Above all, ensure that the process is manageable. It is better to properly measure against a few relevant KPIs than a raft of arbitrary statistics that deliver reams of useless data, and to overachieve rather than miss unrealistic targets.
Take time at the outset to consider and define the right metrics for your company, product or service and implement a straightforward, preferably automated, recording mechanism that can display the results quickly and in an easily digestible format. Even if there is no obvious immediate benefit, further down the line their value could be the difference between success and failure.