Dr. Ross Jaffe, the health care venture capitalist, believes that entrepreneurs need to understand what he calls “the physics of business”—the key forces that drive the sales and profits in a venture. He stresses that the most successful entrepreneurs are people who have an idea or technology but also understand how to put the system together, and where they should spend time and effort to drive the bottom line. The above discussion of Speed Anywhere and the search to identify the high-leverage point where specific efforts can yield the greatest impact on profits is one example of this type of thinking.

In Good to Great, Jim Collins makes an even stronger point with regard to the importance of metrics and what he calls the “denominator” question. Collins found that “every good-to-great company attained the notion of a single ‘economic denominator’”:

Think about it in terms of the following question: If you could pick one and only one ratio—profit per x (or, in the social sector, cash flow per x)—to systematically increase over time, what x would have the greatest and most sustainable impact on your economic engine? We learned this single question leads to profound insight into the inner workings of an organization’s economics . . .

Do you need to have a single denominator? No, but pushing for a single denominator tends to produce a better insight than letting yourself off the hook with three or four denominators. The denominator question serves as a mechanism to force deeper understanding of the key drivers in your economic engine . . .

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