Leading vs. Lagging Indicators.

The new year is upon us. Whether you are setting personal or professional goals, one of the best things you can do is focus on leading indicators.  

Jeff Bezos wrote about goal setting in his 2009 shareholder letter; it is one of the best illustrations of leading indicators.

Here are the most relevant parts:

“Senior leaders that are new to Amazon are often surprised by how little time we spend discussing actual financial results or debating projected financial outputs.

To be clear, we take these financial outputs seriously, but we believe that focusing our energy on the controllable inputs to our business is the most effective way to maximize financial outputs over time.

A review of our current goals reveals some interesting statistics:

  • 360 of the 452 goals will have a direct impact on customer experience.
  • The word “revenue” is used eight times and “free cash flow” is used only four times.
  • The terms “net income, gross profit, margin, or operating profit”  are not used once.

Taken as a whole, the set of goals is indicative of our fundamental approach.

Start with customers and work backwards.”

Set your sights on an output that will get you excited, and work backwards so you understand what inputs will get you there.

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