The Instrumentation Pyramid is 📝John Zdanowski's three-level map of a company's metrics, from the few Vital Signs that forecast the business at the top down to the detailed metrics beneath them, repeated for each department.
📝Level 1 Metrics, or 📝Vital Signs, are the minimum set of metrics required to accurately predict the business. In a direct-to-consumer business, as studied at 📝Assembled Brands, they are ad spend, web traffic, conversion rate, average order value, repeat purchase rate, product margin, and gross margin, from which the 📝LTV:CAC ratio can be calculated.
Level 2 metrics break the Level 1 metrics down so the business can be run: web traffic split into its sources, gross margin into margin by product, lifetime value into cohorts. 📝Level 2 Marketing Metrics are among the most complex of these to collect.
John's memos describe Level 3 in two ways. The pyramid drawing calls it the real-time transaction metrics of the business. 📝Level 3 Metrics describes it as the metrics of basic integrity: people inside the company who trust one another, and customers who keep the product and buy it again.
The pyramid is fractal: each department, each customer, and each employee may also have three levels of metrics. In a 📝CFO System, it sets the order of the work. The 📝Integrated Financial Model (IFM) focuses on the top of the pyramid, and 📝The Process is implemented from the top down.