Amazon is one of the few (and possibly only) retailers in the world where the CEO doesn't obsess about conversion rate.  In Amazon-land, you can cry about conversion but you can't directly do anything about it.  The Amazon discipline is to measure things that are actionable – if a measure doesn’t directly drive an action, they don’t talk about it.

In the third of my four part series looking at Amazon’s revolutionary management of online retail, I look at it’s approach to measurement.

In a letter to shareholders in 2010, Jeff Bezos said: “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.”

Knowing what to measure is crucial in the complex, interconnected world of online retail.    Measurement is critical to understanding what’s happened and to work out where to focus – it requires turning the vast tsunami of online data into something meaningful.

Measurement in online retail is challenging – data is interconnected, complex and comes in vast quantities.   Data is often incomplete and lives in silos.  Perfect is often the enemy of good enough.   Data (the raw material) needs to be turned into information (something useful) and then presented in a dashboard that makes it easy to interpret.

The online challenge is to create a metric hierarchy that connects target outcomes (revenue/profit) with controllable inputs (things that people can affect).  It is the only way to make sense of what’s happened, and help inform where to focus.

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