Best practices for B2B software startups
Bridging the gap between commercial KPIs and the product roadmap
Dorus Olgers - Principal
In a world where data has become the catalyst for continuous improvements throughout the organization, and data-driven decision-making enjoys primary consideration, KPIs have found their way into most software start-ups.
As reaching a repeatable and perhaps even predictable commercial process is one of the key pillars to the scalability of your value proposition, it is understandable that KPIs are often widely adopted within commercial teams and are therefore often only associated with commercial success. Today I would like to discuss the use of KPIs – albeit from a different angle – to measure the effectiveness of your product roadmap. Take upselling. It is easy to conclude that upselling is the direct consequence of a good customer success process and excellent execution. Although this is undeniably true, there is clearly much more to it. You could argue that the ability to proactively upsell is also indicative of your product leadership and therefore seems to be a perfect way to determine the successfulness of your product strategy.
Too often start-ups forget to connect KPIs with their business strategy, tracking all available data points. However, they forget the essence of why they are measuring. I would define the role of KPIs as follows:
KPIs provide guidance on where to improve your business. In other words, they answer two essential questions regarding your company’s strategy, namely, "Are you doing (or still doing) the right thing?" and "Are you doing (or still doing) these things right?"
Today I want to put more emphasis on the product roadmap, but then in relation to the KPI interpretation.
A roadmap should be a reflection of a company’s strategic direction. The success of your product roadmap will ultimately be confirmed by your commercial KPIs.
In order to connect your business objectives with your product roadmap, I would like to introduce you to the following framework (see below), which will hopefully help you bridge the gap between roadmap features and the SaaS KPIs that you are familiar with in a simple manner.
"A roadmap should be a reflection of a company’s strategic direction and the success of your product roadmap will ultimately be confirmed by your commercial KPIs."
Features: Product functionality that has a corresponding benefit or set of benefits for the end user. Integrations: Bringing together various types of software subsystems to increase added value (two-sided). Product Hygiene: User experience and interface, bugs, stability, and scalability. From a business perspective, however, these product roadmap items should in essence always contribute to your business in one of the following three ways: 1. Creating stickiness or retention; 2. Creating upselling; 3. Improving the sales cycle and implementation. These three categories can be easily measured, for example, with the aid of the following more commercial-looking KPIs: upselling, LTV, net dollar retention, average sales cycle, churn, and new MRR.
If you keep assigning your roadmap items to your business goals, this will allow you to convert them into smart objectives and as a consequence allow you to measure them by applying the same KPIs that are already in use. As we have argued, KPIs determine the success of a company’s strategy. Make sure you measure the relevant ones and ensure that accountability for these KPIs is company-wide. Product teams should start celebrating the success of net dollar retention, upselling, and MRR, as they reflect the success of the company’s strategy and they have played an essential part in this. Start measuring the basics first and adjust them to more granularity once you are ready to move to the next level. Start small and then expand. If you start with too many KPIs, the chances are that most of them will not provide enough information, because the amount of meaningful data will be too limited and as a result, nobody will look at the KPIs anymore.