Framework
Term

KPI (Key Performance Indicator)

A quantitative metric that summarizes ongoing operational health of a business function. KPIs answer 'is this part of the business running correctly?'; they are maintenance metrics, not ambition metrics.

Key Performance Indicators (KPIs) are the small set of metrics a function or business watches continuously to confirm operations are healthy. A KPI typically has:

  • A target range or threshold (not a stretch goal)
  • A defined owner accountable for keeping it inside the range
  • A regular review cadence (weekly, monthly, or quarterly)
  • A clear consequence if it drifts outside the range

KPIs are maintenance metrics, not ambition metrics. They answer "is this still working?" not "what are we trying to change?".

Examples of KPIs by function

  • Sales: pipeline coverage ratio, win rate, average deal size, sales cycle length
  • Marketing: cost per lead, lead-to-MQL conversion, organic traffic, brand search volume
  • Product: weekly active users, activation rate, feature adoption rate, churn rate
  • Support: first response time, CSAT, resolution time, escalation rate
  • Finance: gross margin, burn rate, runway, AR days outstanding

A function with no KPIs is essentially running blind — there's no early-warning signal when the underlying business is degrading.

KPI vs OKR

KPIs track ongoing health; OKRs set ambitious direction. A KPI moving outside its acceptable range might become the basis for an OKR ("get churn back under 2%"), but in steady state they're separate. Conflating them — by treating KPIs as quarterly stretch goals or treating OKRs as health metrics — produces meaningless goal-setting cycles where teams sandbag KPIs and ignore real strategic ambition.

Choosing KPIs

The discipline is keeping the count low. A function with 20 KPIs is watching nothing; one with 3–5 well-chosen KPIs is watching the things that actually predict performance. The test for each KPI: if this number drifted, would someone act on it within a defined window? If no, it's a dashboard metric, not a KPI.

Related

See also

Nearby terms

All terms →
ICP (Ideal Customer Profile)

A precise description of the customer type for whom a product delivers the highest value at the lowest cost to acquire and serve. ICP is the operational filter that prevents a sales team from chasing every lead.

JTBD (Jobs-to-be-Done)

A customer-research framework that models purchases as the customer 'hiring' a product to make progress on a job. Instead of asking who the customer is, JTBD asks what they are trying to accomplish.

LTV (Lifetime Value)

The total gross profit a business expects from a single customer over the entire duration of their relationship.

Moat

A sustainable competitive advantage that protects a business from competitors — analogous to a castle moat. Warren Buffett popularized the term in investing; the same concept applies to product strategy.