By Chris Heivly, Techstars Senior Vice President for Ecosystem Development

Every business leader today has a set of KPIs (Key Performance Indicators) that they use to measure their business as well as their individual performance. KPIs focus teams so that the actions, behaviors, and productive time spent are aligned to the overall vision or mission.

A great KPI is aligned with the mission and makes it crystal clear what everyone should be doing to support that shared vision.

If you buy into a systems view of the world where everything we do has inputs, processes, and outputs (or outcomes), we can easily match KPIs to one or more of the systems components.

There are many different types of KPIs, but here are a few categories aligned with a systems viewpoint:

• Financial indicators (outputs) used to evaluate performance (revenue, bookings, profits)

• Process indicators that represent the efficiency or the productivity of the process (time to complete a task, change in speed/time to execute a task)

• Input indicators that can predict the outcome of a process (# of web leads - revenue)

• Process (actions) indicators that support an organization’s intent to effect a change (meetings, white papers, hirings/firings, team assignments)

The challenge for every funded effort to support ecosystem development is that invariably the funder wants/needs to develop a set of KPIs to measure progress. How else can we determine whether the staff, programs, initiatives, vision is working? And, just as important, how will I be judged as the signature of the funding? KPIs are the obvious tool to serve that need.

KPIs are a natural function of systems where the input variables are all known, the interactions between the variables are fixed, and the outcomes are clearly defined and predictable. We call these complicated systems.

Entrepreneurial ecosystems have none of these qualities. There is no direct correlation between the inputs & processes (capital deployed, innovation space, founder programming) and the intended outcomes. In fact very few of us can agree on the outcomes (a unicorn company, an increase in outside capital deployed, doubling the # of startups in the community).

Complex systems — our view of entrepreneurial ecosystems — are difficult if not impossible to measure with a strict KPI mindset. This is not to say there are no variables to measure — only to say that the measures are not the ones you are most comfortable with.

The application of complicated system KPIs to a complex system is a trap that will have a negative impact on your ecosystem goals.

As an economic development champion with the task to enhance your entrepreneurial ecosystem, try the following three steps:

01. Learn to view the ecosystem and your role in it through the lens of a complex system. (My partners Brad Feld and Ian Hathaway have a new book — The Startup Community Way — that’s a great primer.)

02. Examine the typical KPIs (capital deployed, net new startups) and review what behavior optimizing that KPI will have in the near term and the long term.  (Happy to discuss this one on one if interested.

03. Consider getting community-wide buy-in and support for a set of goals, then look back to determine the signals that would provide you comfort that you were heading towards those goals.

Folks, it's not easy and we all have many masters to serve. As humans we naturally have different viewpoints on how we achieve our mutual goals. Be careful that in our efforts to serve our constituents that we don't accidentally create unintended outcomes.

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