How I align tech initiatives to business goals
A CTO's job is to align tech strategy with the company's business strategy. The most valuable part of my job is helping clients achieve this. This is how I do it.
There are 2 keys to aligning tech initiatives to business goals:
✅ 1st key: actually start with a business goal.
Let’s consider this business goal example:
"Break even on our unit economics"
i.e. reach a situation where Customer Acquisition Cost (CAC) becomes lower than Customer Lifetime Value (LTV), i.e.
CAC <= LTV
Strategies that could support this goal:
Reduce CAC by 20%.
Increase LTV by 20%.
(Why 20% — no reason, but always define what to aim for.)
2nd key: don't dive immediately into tech stuff; stay on the business side for a while …
Product Metrics
Before we jot down some relevant tech initiatives, let's consider some leading indicators that influence the above-mentioned lagging metrics, and are usually within the CTO's sphere of influence — at least partially.
We can usually influence leading indicators more directly, and they give us faster feedback.
Bounce Rate — % of visitors who ditch upon arrival.
Decreasing the bounce rate widens the top of the funnel, which should increase all of the numbers further down, i.e. potentially reduce the CAC.
Of course, the landing page content must speak for itself, and that is usually not a CTO thing. But technical factors can bounce visitors even before they've been exposed to your captivating copy.Registration Rate — % of visitors who sign up (trial or free version).
Increasing this value widens the middle of the funnel, and thus gives more people a chance to activate later on, i.e. potentially reduce the CAC.
Activation Rate & Time to Activation — % of registered users who perform a specific meaningful action that indicates they are benefiting from the product, and the average time it takes until they do it. The more people who succeed in using the product and who do so in less time, the lower the CAC (potentially).
Subscription Rate — % of registered users who become paying customers.
Increasing the subscription rate reduces the CAC, because you're increasing the number of paying customers for the same ad spend.
Sessions per Week/Month — The average number of times a registered user access the product. The subscription rate should rise with "stickiness", and so should lifetime value.
Actions per Session — The average number of actions a registered user performs per session. The more useful the product, the higher the subscription rate, the lower the CAC and the higher the lifetime value.
Referral Rate — % of registered users who refer the product to others. Each referred visitor is one we don't have to pay to bring, i.e. potentially reduces CAC.
Initiatives
With the above metrics in mind, we can now propose some very focused tech initiatives that will move the relevant dials in the right directions.
Initiatives that support "Reduce CAC by 20%"
Deploy an analytics tool and configure it to measure bounce rate, registration rate, etc.
Rework entry pages to achieve a Google Page Speed score above 90, in order to reduce the bounce rate.
Add social sign-up methods to increase registration rate.
Analyse, streamline and shorten user journeys that lead to activation.
Know who is an activated user and prompt activated users to subscribe.
Add a refer-a-friend feature; prompt and incentivise users to bring us more traffic.
Deploy a tool/service that automatically collects client-side error logs and reports, and act on them to increase the perception of quality and thus conversion and retention rates.
Initiatives that support "Increase LTV by 20%"
Initiatives 1 and 7 (above) are relevant, as well as these:
Email inactive subscribers and give them a compelling reason to log on.
Shorten user journeys, simplify actions and generally reduce friction, to increase the number of actions performed per session (and also the number of sessions).
Did you notice?
Many of the above initiatives overlap with Product.
A good CTO understands product too.
Wrapping Up
We took a business goal,
broke it down into strategies,
considered appropriate leading indicators (for early feedback),
and only then did we derive a list of supporting tech initiative candidates for selection.
Do you have example where the intiatives aren't just business as usual? Or what initiatives would have been cancelled by the alignment? I feel like the example here is just saying you would do things that you should have been doing anyway, trying to get and retain customers.