In order to ensure that finance teams zero in on the right metrics, they need to think creatively and provide leadership across departments when it comes to using data.
Tomasz Tunguz — managing director of venture capital firm Redpoint Ventures and the co-author of the book “Winning with Data” which explores the cultural changes big data brings to business, and Airbase CFO Aneal Vallurupalli, discussed how to do that in today’s uncertain economy in an Oct. 19 Airbase webinar.
Tunguz said finance leaders need to take leadership roles across departments when it comes to managing data. “There are different definitions of metrics between the marketing team and the sales team, and the finance team has an important role here because the finance team is where the buck stops when it comes to metrics definitions,” he said.
A data mesh — or the decentralization of data — can help finance executives to look at all the data, consolidate it and then decide what is important.
“By nature, those in the finance function are analytical and in some senses, dispassionate, so they fit naturally into this definition role,” said Tunguz. Those in the finance function are able to focus in on numbers in a way other functions are not.
But it’s not all about numbers: there are also important decisions that need to make about what numbers to measure. Tunguz cited Lloyd Tabb, the founder of software company Looker, who has espoused innovative ways to measure a business’ success, regardless of the state of the market.
Take a restaurant that gets poor reviews on Yelp that needs to determine the potential trajectory of the restaurant, Tunguz said. Instead of focusing on measuring the time customers wait for food, or the table turnover rate, Tabb looked at the level of water in all the glasses, because “if the glasses were empty it meant that the servers were not paying attention and the service was bad, and vice versa,” Tunguz said.
This approach is an example of an intuitive way that a restaurant can determine their success, and every business has their own, said Tunguz. Facebook, for example, determined that if a user can make seven connections via their platform then they will have a user for life.
“Right now, the correlations and metrics that matter are conversion rates through the business pipelines and looking at sales cycles, [and] there are also social media followers, and attendees at webinars,” said Tunguz. Not all metrics that determine success are obvious to finance executives, he said.
