All Success Is a Lagging Indicator
One of Naval Ravikant most famous quote also happens to be one of my favorites:
“In 1,000 parallel universes, you want to be wealthy in 999 of them. You don’t want to be wealthy in the fifty of them where you got lucky, so we want to factor luck out of it … I want to live in a way that if my life played out 1,000 times, Naval is successful 999 times.” ― Naval Ravikant
What does this mean? It means that many times, when we feel successful or excel at something, in reality, it is only a product of circumstance, of being in the right place at the right time: luck. You were lucky.
But you want to be successful regardless of luck. The secret to accomplishing this is doing the things that will lead you to success regardless of anything else. This is where leading indicators come in.
As a Bloom Growth™ coach, I constantly notice how my clients’ weekly scorecards are all about what they have already accomplished. Their scorecards are filled with result-driven metrics. The best example is sales. Now, as you read this, you might be thinking: “What entrepreneur or business manager is not focused on sales? Aren’t we all always looking at this number, as it is THE number that feeds everything else in the business?”
Yes, sales are important, it is the fuel that keeps your business running.
But if you think about it, it’s only a lagging indicator: it already happened. It’s like looking in the rearview mirror. If you sold “x” last week or last month, there is nothing you can do about it. It’s in the past.
Leading indicators, on the other hand, look ahead and attempt to predict future outcomes.
At Stoic Mind , we teach our clients that the focus should be on the activities that will generate those results—AKA the leading indicators. So, ask yourself: What are the activities in my business that are going to ensure success?
This insight was reaffirmed to me a couple of weeks ago when I bumped into Isaiah Nolte at the Miami Airport. He leads our community of facilitators at Bloom Growth. I told him how I thought we should support our facilitators -with the end goal of helping our clients- in creating a more balanced scorecard—a good mix of leading and lagging indicators—because customers needed to see those metrics.
His answer initially took me by surprise:
“You don’t need lagging indicators on the weekly scorecard. Everybody likes them, but in reality, you don’t need them.”
As both an entrepreneur and a Bloom Growth coach, I thought: everybody needs them. We need to have a good balance. And as I sat on the plane, it hit me: “It’s not about the leading or the lagging; what we need is to understand the philosophy behind it. On a weekly basis, you don’t need to track results; you need to track the activities and behaviors that drive those results. Tracking lagging indicators doesn’t lead to discovering the obstacles you need to remove and the opportunities you need to attack to build the business you want. In the end, if you look at the results—lagging indicators—you will be back to talking about the behaviors and activities. It’s a waste of time.”
DeLaIsla: finding opportunities through leading indicators
De La Isla is a seafood supply chain business I lead in Central America. Our customers are not the companies that we sell our seafood to. Our customers are the hundreds of producers and fish collectors working side by side with artisanal fishermen.
Until a while ago, all our metrics revolved around the number of pounds we bought each week from them. I realized that although it’s a leading indicator of future sales, the question was, “What is the leading indicator of pounds bought?”
After facilitating a conversation with our operations team, we discovered that having calls with our collectors and producers was a leading indicator of pounds bought. The opportunity from this realization was that we needed to invest in training our buying team on the best techniques and strategies for making those calls.
Tracking the calls generated accountability in our buying team, and the training resulted in a better bond and improved relationship with the producers and collectors. As a result, our pounds bought increased, and so did our sales, with a consequential bump in market share for us.
How to build leading indicators for your weekly scorecard?
I’m going to act as your Bloom Growth coach right now. Let’s say we are in one of our quarterly sessions and we’ve realized your scorecard is filled with lagging indicators. We need to change that. This is what we (YOU) should do:
For one of the Quarterly and Annual KPIs that we’re setting goals for, we want to work backward toward an outcome. What activities can we measure weekly that comes before the Quarterly and Annual KPI goals?
An easy example is: ‘We need to hit this sales number,’ you know that to hit that sales number, you need to close 15 new deals. To close 15 new deals, you need to do 30 demos of your product or service. To get 30 demos, you need to have 60 introductions. So, we’ll write down the number of introductions needed per week.
To get the math right, divide the Quarterly KPI number by 13. So, back to our example: Say your Quarterly KPI goal is 60 introductions, so you’ll set the Weekly Goal for four introductions per week.
Last question: “Is there another activity before this outcome that we could do?”
Now, if you want to include lagging indicators in the Weekly Meeting KPIs in your business, be sure this will not generate obstacles or opportunities that impact the business as much. So, if you’re running your business on lagging indicators, welcome to being average.
Often, we have great sales results, but as the quote from Naval said, “It’s due to luck,” not because you were executing the activities that led you to hit that sale. You were lucky. Or as I say to many customers: you are playing catcher.
Remember, the goal is to be successful despite your luck. You want to be successful because of things entirely up to you. To make that happen, you have to rely on leading indicators.
As Ryan Holiday wisely tweeted a while back: “All success is a lagging indicator. All the good stuff (and bad stuff) in your life is downstream from choices made long before.
Hitting a personal record on the bench press is a lagging indicator of a lot of discipline and hard work. Receiving a promotion is a lagging indicator of a lot of quality work. Delivering a keynote with confidence is a lagging indicator of a lot of preparation.
Nothing comes from nowhere. Not success. Not inspiration. Not the muses. Not writer’s block. Everything is a lagging indicator.