To make data-driven decisions that scale, you need to properly instrument your business; establishing the processes that allow you to measure, monitor, and manage key performance indicators effectively.
For high-growth, venture-backed companies on the path to going public, best-in-class instrumentation provides the necessary framework for validating growth strategies and mitigating risks before they become roadblocks.
To dive deep into this subject, we invited Mohit Daswani, the CFO of ThoughtSpot, to share his insights with FirstMark’s CFO Guild, our private community for the tech industry’s top finance leaders. As a seasoned growth investor and CFO in the tech industry, Mohit provides a practitioner’s perspective on how a data-driven approach to financial operations and perfecting your operational cadence can be the critical unlock for high-growth companies looking to join or take that next step on the IPO track.
Real-Time Metrics: Making Bets & Tracking Performance
From Mohit’s perspective, the role of a CFO or executive isn’t just about overseeing finances — it’s about strategic capital allocation. This means understanding the various investments or “bets” the company is making and rigorously tracking how they’re performing. It’s not enough though to just highlight the headline metrics each quarter — the real value comes from digging deeper to understand the why behind the numbers.
“Being a private company, it’s not the precision in the forecast that is the key thing. But [when] setting ambitious targets, I don’t want to wait till the end of the quarter to know that we missed. I like to know what is happening in the business, in as close to real-time as possible, so we can either course correct, or at least know where we are tracking at any given week in the period.”
If a sales goal was missed, was it because the sales team ramped up too slowly? Or maybe the SDRs didn’t generate enough pipeline? Perhaps a business partner dropped the ball on closing key deals?
Understanding these nuances is crucial for ongoing business iteration and effective capital allocation. Whether it’s investing another dollar into a high-performing product or reallocating resources from underperforming areas, effective instrumentation is crucial for making informed financial decisions.
While having clear data generally leads to better decision-making, the real unlock is achieved when that data can be functionally leveraged across the entire business.
As Mohit puts it, “data is power.”
“If you have the benefit of seeing all the strengths and warts of the business, you get the power to lean in and manage to better outcomes. Data is objective and transparent. There are no favorites, [which] allows cross-function alignment on what is working well and what isn’t.”
Data not only imposes organizational discipline but also serves as the ultimate equalizer. Forget about departmental loyalties or internal politics; when effective systems deliver real-time, granular insights, the outcome serves as a universally accepted source of truth. This data-driven objectivity paves the way for unified efforts and alignment across all business functions.
How to Instrument: Identification, Measurement, and Operational Cadence
What does effective instrumentation look like in practice? Mohit shares his three-step process:
- Identification: Define the operating metrics that are crucial for the success of your business, and break down the components that materially drive each operating metric.
- Measurement: For each driver identified, aim to measure and monitor them in as close to real-time as possible by implementing appropriate tracking systems. The results from there allow for experimentation, iteration, and business model refinement.
- Operational Cadence: Get in the habit of establishing repeatable meetings that provide a platform for managers and executives to share updates, discuss challenges, and seek support if needed. What worked? What didn’t? What can be learned and improved for the next cycle? It’s not just about whether you achieved the key results, but also about what you learned in the process.
Two tactical examples from ThoughtSpot showcase how they 1) pinpoint and measure key operating metrics and 2) set an operational cadence around evaluating performance.
The first (below) outlines an identification and measurement framework, particularly for Annual Recurring Revenue (ARR). This process can and should be applied to other key operating metrics such as Cost of Goods Sold, Capex / Opex, etc. Here’s the approach:
Operating Cadence: The Drum Beat of Execution
Once you’ve put in place a robust framework for monitoring identified key operating metrics and drivers, the second critical step is to establish a consistent operational cadence. This sets the rhythm for how those metrics are utilized and promotes accountability and urgency across the business.
The key outcome here is the same repeated cadence which everyone aligns on and expects.
Examples of essential elements within ThoughtSpot’s Operating Cadence include:
The operational cadence is not limited to your routine weekly sessions—it also includes the other Leadership Meetings to align on larger organizational blockers and your Quarterly Business Review (your opportunity to take a panoramic view of the business).
It’s not just about sales numbers, ARR, or customer retention, but it also gauges how you’re faring in terms of recruitment and employee retention. This holistic check-in serves as a moment to regroup, catch your breath, and lay the groundwork for future strategic goal setting. By continually cycling through this process, you cement a rhythmic operational cadence that synchronizes the whole business.
Critical Instrumentation Challenges
When the data signals a potential issue or growth opportunity, it falls on management to diagnose and communicate that insight across the organization. In doing so, they remove the fog around challenges and obstacles, and empower teams to devise effective solutions.
Finance leaders often face obstacles throughout their instrumentation journey. Some of the most prevalent include:
- Balancing Growth with Fiscal Responsibility: The days of “growth at all costs” are over — in today’s business landscape, responsible investment and growth are non-negotiable.
- Time Allocation for Major System Overhauls: When rolling out a new system or tool, remember that implementation takes time. Be ready to allocate enough resources, even if it means pulling back in other areas.
- Data Collection Quality: Good data hygiene is essential. Striking a balance between meticulous tracking and other business tasks like client interaction can be tricky.
- Organizational Buy-In: Without widespread agreement on the importance of data and metrics, you’ll face resistance. It’s crucial to get everyone on board. Once results begin to manifest, they validate the instrumentation process and make it easier to allocate resources effectively.
- Communication Skills: If you aim for a data-driven culture where finance isn’t just seen as a buzzkill, your storytelling skills are crucial. Learn how to articulate your operational narrative in a way that connects high-level metrics to bottom-line results and effectively engages all stakeholders.
By paying attention to these areas, you’re better positioned to navigate the complexities of instrumenting your business, from tactical decisions to strategic planning.
Harnessing Instrumentation for Scalable Success
In a rapidly evolving business landscape, the foundation of success for high-growth companies lies in data-driven decision-making. Instrumenting your business isn’t just about implementing tracking systems, but about creating a holistic approach that encompasses identification, measurement, and a rhythmic operational cadence.
By understanding the intricacies of what drives business metrics, leadership can anticipate challenges, capitalize on opportunities, and foster a culture that values transparency and collaboration. It’s this embrace of objective, real-time insights that differentiates industry leaders from the rest, making instrumentation not just a tool, but a strategic imperative for long-term growth.