Leading vs lagging indicators
A lagging indicator tells you what already happened. A leading indicator moves first, so you can do something before the result shows up. You watch the leading number to steer and use the lagging number to prove it worked. You need both, because each one fools you on its own.
An example from a lunch line
Say the goal is a shorter school lunch line. The wait time is the lagging number. By the time last month’s average comes in, the month is over and there’s nothing left to change.
Now say the fix is a sheet where students sign up to pre-order. Sign-ups on Monday move before the wait does. If Monday is low, you know by lunchtime that Thursday won’t look any better, and you can do something about it this week. That’s leading.
Examples from product work
Leading: people who finish setup in their first week.
Lagging: how many are still using it three months later.
Leading: free trials started this week.
Lagging: paid subscribers at the end of the quarter.
Leading: support tickets about one confusing screen.
Lagging: people who cancel and say it was too hard to use.
Why you need both
A leading number on its own can flatter you. Sign-ups can jump while nobody sticks around. A lagging number on its own is honest but late. It tells you the truth after you can’t do anything about it. Put them side by side and you get an early warning and the proof.
Add one North Star
Most teams pick a third number: a North Star, the one that goes up only when people get what the product is for. For the lunch line, that’s the median minutes from joining the line to sitting down. One star to judge by, a leading number to steer by, a lagging number to prove by. Three numbers is a dashboard people will read.
Where KPIs fit
A KPI can be either kind. “Key performance indicator” just means a number you’ve decided matters. The useful question is whether it warns you early or confirms things late, and then making sure you’re watching at least one of each.
Questions people ask
Is revenue a leading or lagging indicator?
Usually lagging. Revenue shows up after people have already decided to buy, stay or leave. Things that happen earlier in that decision, like trials started, setup finished or a feature used in the first week, tend to lead it.
What is a vanity metric?
A number that makes you feel good and can’t make a decision for you, like total downloads or total sign-ups since launch. It only ever goes up, so it looks like progress even if the product quietly died last week. Leading and lagging numbers should be able to go down.
Learn it by doing it
The app teaches this in Module 3, Shipping Isn’t Winning, and Module 9, Numbers That Matter (and Ones That Flatter).
Product Management is a course for curious teens, in five-minute lessons with something to play with in every one. Part I is free on iPhone, iPad and Android. No account, no ads.