Every business has thousands of metrics we can measure. But which ones do we really care about?

Let’s consider the following situation: You’re working as a data scientist or a business analyst for your company, and you’re tasked with building one dashboard that the CEO of your company needs to see every day. What would you put on that dashboard?

Most dashboards can realistically only fit four to six graphs or metrics. Therefore our goal is to determine what metrics showcase the most critical aspects of a business and only display those metrics.

Business health, therefore, is an in-depth understanding of your current business operations to address areas of concern and celebrate areas of strength. In addition, it evaluates your business’s goals, the tactics to achieve those goals and any associated risks.

Example Scenario: Uber Business Model

Let’s say you work at Uber or Lyft, and our goal is to build a high-level dashboard to track metrics that we want to know are stabilized day to day or at least are going in a steady direction.

To approach the problem, let’s try to imagine Uber as a business from its numerical equivalent to describe how the business works. For one, they make money by taking a cut of every transaction or ride that gets conducted on their platform.

To ensure that many rides are available in any given location, they acquire riders and drivers by advertising their app worldwide. And they work on converting as many downloads of their app into regular users that will drive or ride with them for a long time.

Essentially, Uber’s core business is broken down into the total number of app downloads, continued riders, continued drivers, and the number of rides and miles are driven per day. These could be realized as Uber’s business health metrics.

If any of those numbers go up or significantly down by 10%, Uber’s leadership team might panic and investigate (prompting a question from “Diagnosing and Investigating Metrics”).

This is one easy way to think about what business health metrics are; they are those metrics that matter the most when they vary by 10% in either direction.

You might think it wouldn’t be alarming if business health metrics go up since that indicates things are going smoothly. But we would still want to investigate that because:

• We want to know what specific changes to the business caused that increase so that we can replicate it in the future
• It would be important to conduct an audit to ensure that there isn’t a glitch or external factor causing the increase.

Deciding on and Measuring Business Health Metrics

Now that we’ve given an overview of what business health metrics are, we now want to actually determine which metrics to designate as business health metrics and how to measure them.

Doing this requires understanding what a product manager or executive wants to see when we’re creating dashboards or conducting analyses related to the business’s critical functions

Here is a general three-step plan to think about when understanding how we could set metrics:

1. Determine Business Priorities
2. Identifying Input and Output Metrics
3. Ranking and Prioritizing Metrics