Traditional Business Metrics are Outdated, shows Tesla

Are you still relying on your old and traditional metrics for your business? Are you still talking ‘market share’, ‘market penetration’ and such? It’s time you maybe want to recognize the flaws with traditional business metrics and complement them with new ones. Here is what we can learn from Tesla.

Elon Musk from Tesla, an industry leader, from his way of doing business, shows how the traditional metrics are outdated. Relying on traditional metrics can create overconfidence or underestimation. Metrics like market penetration and market share are the very things causing businesses to miss market opportunities and threats.

Market Share

Market share is one of the widely used and misused business metrics. The biggest problem is the very definition of “market”. For Tesla, some define their market as electric vehicles while the others define it as large luxury cars. The simple reason being the same electric vehicle being a large luxury car and serving the needs of customers in two different markets.

Market Penetration

Market penetration is what percent of people in the defined market buy your product. This is another traditional metric which is being widely used, and sometimes widely mislead. The reason for this is because most data for this metric is being collected at the transactional level. However, transactional data only tells you what people bought and not why people bought.

Modern Metrics

You can read the entire article by Laura Schneider at this link. However, the takeaway is that traditional metrics have to be reviewed and if possible converted to modern and more meaningful metrics. For instance, market share can be redefined as market growth share and market penetration as problem penetration. You don’t have to completely get rid of traditional metrics but be bifocal on the traditional and the modern business metrics.

Author Details

Abilash Praveen

I'm the founder and lead strategist at Consign IT who is always keen to identify and solve real-world problems. I'm also Computer Science Engineer who is also passionate about entrepreneurship, leadership and empowerment, a senior member of the world's largest technical professional organization - IEEE, an avid blogger and a sought after motivational speaker who addresses various forums regularly.

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