book

Lean Analytics

by Alistair Croll, Benjamin Yoskovitz

March 2013

Beginner to intermediate

437 pages

11h 56m

English

O'Reilly Media, Inc.

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Praise for Lean Analytics
Dedication
Foreword
Preface
Who This Book Is ForHow This Book WorksThe Building BlocksCustomer DevelopmentLean StartupWe’d Like to Hear from YouO’Reilly SafariThanks and Acknowledgments
I. Stop Lying to Yourself
1. We’re All Liars
The Lean Startup MovementPoking a Hole in Your Reality Distortion FieldAirbnb Photography—Growth Within Growth
2. How to Keep Score
What Makes a Good Metric?Qualitative Versus Quantitative MetricsVanity Versus Real MetricsEight Vanity Metrics to Watch Out ForExploratory Versus Reporting MetricsCircle of Moms Explores Its Way to SuccessLeading Versus Lagging MetricsCorrelated Versus Causal MetricsMoving TargetsHighScore House Defines an “Active User”Segments, Cohorts, A/B Testing, and Multivariate AnalysisSegmentationCohort AnalysisA/B and Multivariate TestingThe Lean Analytics CycleEvaluating the Metrics You Track
3. Deciding What to Do with Your Life
The Lean CanvasWhat Should You Work On?Create a Lean Canvas
4. Data-Driven Versus Data-Informed
How to Think Like a Data ScientistLean Startup and Big Vision
II. Finding the Right Metric for Right Now

5. Analytics Frameworks
Dave McClure’s Pirate MetricsEric Ries’s Engines of GrowthSticky EngineVirality EnginePaid EngineAsh Maurya’s Lean CanvasSean Ellis’s Startup Growth PyramidThe Long FunnelThe Lean Analytics Stages and Gates
6. The Discipline of One Metric That Matters
Moz Tracks Fewer KPIs to Increase FocusFour Reasons to Use the One Metric That MattersSolare Focuses on a Few Key MetricsDrawing Lines in the SandThe Squeeze ToyDefine Your OMTM
7. What Business Are You In?
About Those PeopleThe Business Model FlipbookLots to Choose FromSix Business ModelsPick Your Business Model
8. Model One: E-commerce
What Mode of E-commerce Are You?A Practical ExampleConversion RatePurchases Per YearShopping Cart SizeAbandonmentCost of Customer AcquisitionRevenue Per CustomerWineExpress Increases Revenue by 41% Per VisitorKeywords and Search TermsRecommendation Acceptance RateViralityMailing List Click-Through RatesOffline and Online CombinationsShipping TimeStock AvailabilityVisualizing the E-commerce BusinessWrinkles: Traditional E-commerce Versus Subscription E-commerceKey Takeaways
9. Model Two: Software as a Service (SaaS)
Backupify’s Customer Lifecycle LearningMeasuring EngagementChurnChurn ComplicationsVisualizing the SaaS BusinessClearFit Abandons Monthly Subscriptions for 10x GrowthWrinkles: Freemium, Tiers, and Other Pricing ModelsKey Takeaways
10. Model Three: Free Mobile App
Installation VolumeAverage Revenue Per UserPercentage of Users Who PayChurnVisualizing the Mobile App BusinessWrinkles: In-App Monetization Versus AdvertisingKey Takeaways
11. Model Four: Media Site
Audience and ChurnInventoryPerformance and the Sessions-to-Clicks RatioAd RatesContent/Advertising Trade-offVisualizing the Media BusinessWrinkles: Hidden Affiliates, Background Noise, Ad Blockers, and PaywallsKey Takeaways
12. Model Five: User-Generated Content
Visitor EngagementContent Creation and InteractionEngagement Funnel ChangesValue of Created ContentContent Sharing and ViralityNotification EffectivenessVisualizing a UCG BusinessWrinkles: Passive Content CreationKey Takeaways
13. Model Six: Two-Sided Marketplaces
What DuProprio WatchesRate at Which You’re Adding Buyers and SellersRate of Inventory GrowthBuyer SearchesConversion Rates and SegmentationBuyer and Seller RatingsPercent of Flagged ListingsVisualizing a Two-Sided MarketplaceWrinkles: Chicken and Egg, Fraud, Keeping the Transaction, and AuctionsKey Takeaways
14. What Stage Are You At?
Pick the Stage That You’re At
15. Stage One: Empathy
Metrics for the Empathy StageThis Is the Best Idea I’ve Ever Had! (or, How to Discover Problems Worth Solving)Finding a Problem to Fix (or, How to Validate a Problem)Signs You’ve Found a Problem Worth TacklingRunning Lean and How to Conduct a Good InterviewHow to Avoid Leading the WitnessConvergent and Divergent Problem InterviewsHow Do I Know If the Problem Is Really Painful Enough?Calculating the ScoresCloud9 IDE Interviews Existing CustomersHow Are People Solving the Problem Now?Are There Enough People Who Care About This Problem? (or, Understanding the Market)What Will It Take to Make Them Aware of the Problem?A “Day in the Life” of Your CustomerFinding People to Talk ToGetting Answers at ScaleLikeBright “Mechanical Turks” Its Way into TechStarsCreating an Answers-at-Scale CampaignBuild It Before You Build It (or, How to Validate the Solution)Localmind Hacks TwitterBefore You Launch the MVPDeciding What Goes into the MVPMeasuring the MVPDon’t Ignore Qualitative AnalyticsBe Prepared to Kill FeaturesStatic Pixels Eliminates a Step in Its Order ProcessA Summary of the Empathy StageShould You Move to the Next Stage?
16. Stage Two: Stickiness
MVP StickinessIterating the MVPqidiq Changes How It Adds UsersPremature ViralityThe Goal Is RetentionSeven Questions to Ask Yourself Before Building a FeatureHow Rally Builds New Features with a Lean ApproachHow to Handle User FeedbackThe Minimum Viable VisionThe Problem-Solution CanvasVNN Uses the Problem-Solution Canvas to Solve Business ProblemsA Summary of the Stickiness StageExercise #1: Should You Move to the Next Stage?Exercise #2: Have You Identified Your Biggest Problems?
17. Stage Three: Virality
The Three Ways Things SpreadInherent ViralityArtificial ViralityWord-of-Mouth ViralityMetrics for the Viral PhaseBeyond the Viral CoefficientTimehop Experiments with Content Sharing to Achieve ViralityInstrumenting the Viral PatternGrowth HackingAttacking the Leading IndicatorWhat Makes a Good Leading Indicator?Correlation Predicts TomorrowCausality Hacks the FutureA Summary of the Virality StageShould You Move On to the Revenue Stage?
18. Stage Four: Revenue
Metrics for the Revenue StageThe Penny MachinePenny Machines and Magic NumbersFinding Your Revenue GrooveWhere Does the Money Come From?Customer Lifetime Value > Customer Acquisition CostParse.ly and the Pivot to RevenueMarket/Product FitReview Your Old AssumptionsBegin a Process of EliminationDeep DiveFind SimilaritiesThe Breakeven Lines in the SandBreakeven on Variable CostsTime to Customer BreakevenEBITDA BreakevenHibernation BreakevenRevenue Stage Summary
19. Stage Five: Scale
The Hole in the MiddleMetrics for the Scale StageIs My Business Model Right?Buffer Goes from Stickiness to Scale (Through Revenue)The Three-Threes ModelFinding Discipline as You ScaleA Summary of the Scale Stage
20. Model + Stage Drives the Metric You Track
III. Lines in the Sand
21. Am I Good Enough?
WP Engine Discovers the 2% Cancellation RateAverage Isn’t Good EnoughWhat Is Good Enough?Growth RateIs Growth at All Costs a Good Thing?Bottom LineNumber of Engaged VisitorsBottom LinePricing MetricsSocialight Discovers the Underlying Metrics of PricingBottom LineCost of Customer AcquisitionBottom LineViralityBottom LineMailing List EffectivenessBottom LineUptime and ReliabilityBottom LineSite EngagementBottom LineWeb PerformanceBottom LineMake Your Own Lines in the Sand
22. E-commerce: Lines in the Sand
Conversion RateBottom LineShopping Cart AbandonmentBottom LineSearch EffectivenessBottom Line
23. SaaS: Lines in the Sand
Paid EnrollmentBottom LineFreemium Versus PaidUpselling and Growing RevenueBottom LineChurnOfficeDrop’s Key Metric: Paid ChurnBottom Line
24. Free Mobile App: Lines in the Sand
Mobile DownloadsBottom LineMobile Download SizeBottom LineMobile Customer Acquisition CostBottom LineSincerely Learns the Challenges of Mobile Customer AcquisitionApplication Launch RateBottom LinePercent Active Mobile Users/PlayersBottom LinePercentage of Mobile Users Who PayBottom LineAverage Revenue Per Daily Active UserBottom LineMonthly Average Revenue Per Mobile UserBottom LineAverage Revenue Per Paying UserBottom LineMobile App Ratings Click-ThroughBottom LineMobile Customer Lifetime Value
25. Media Site: Lines in the Sand
Click-Through RatesBottom LineSessions-to-Clicks RatioBottom LineReferrersBottom LineEngaged TimeBottom LineWhat Onsite Engagement Can Tell You About Goals and BehaviorsSharing with OthersBottom LineJFL Gags Cracks Up YouTube
26. User-Generated Content: Lines in the Sand
Content Upload SuccessBottom LineTime on Site Per DayBottom LineReddit Part 1—From Links to a CommunityEngagement Funnel ChangesBottom LineReddit Part 2—There’s Gold in Those UsersSpam and Bad ContentBottom Line
27. Two-Sided Marketplaces: Lines in the Sand
Transaction SizeBottom LineWhat Etsy WatchesTop 10 ListsBottom Line
28. What to Do When You Don’t Have a Baseline
IV. Putting Lean Analytics to Work
29. Selling into Enterprise Markets
Why Are Enterprise Customers Different?Big Ticket, High TouchFormalityLegacy ProductsIncumbentsSlower Cycle TimeRationality (and Lack of Imagination)The Enterprise Startup LifecycleInspirationEmpathy: Consulting and SegmentationHow Coradiant Found a MarketStickiness: Standardization and IntegrationVirality: Word of Mouth, Referrals, and ReferencesRevenue: Direct Sales and SupportScale: Channel Sales, Efficiencies, and EcosystemsSo What Metrics Matter?Ease of Customer Engagement and FeedbackPipeline for Initial Releases, Betas, and Proof-of-Concept TrialsStickiness and UsabilityIntegration CostsUser EngagementDisentanglementSupport CostsUser Groups and FeedbackPitch SuccessBarriers to ExitThe Bottom Line: Startups Are Startups
30. Lean from Within: Intrapreneurs
Span of Control and the RailroadsSkunk Works for IntrapreneursChanging—or Innovating to Resist Change?Stars, Dogs, Cows, and Question MarksSwiffer Gives Up on ChemistryDoritos Chooses a FlavorWorking with an Executive SponsorEMI Embraces Data to Understand Its CustomersThe Stages of Intrapreneur Lean AnalyticsBeforehand: Get Buy-inEmpathy: Find Problems, Don’t Test DemandSkip the Business Case, Do the AnalyticsStickiness: Know Your Real MinimumViral from the StartRevenue Within the EcosystemScale and the Handoff
31. Conclusion: Beyond Startups
How to Instill a Culture of Data in Your CompanyStart Small, Pick One Thing, and Show ValueMake Sure Goals Are Clearly UnderstoodGet Executive Buy-inMake Things Simple to DigestEnsure TransparencyDon’t Eliminate Your GutAsk Good Questions
A. References and Further Reading
B. About the Authors
C. The Lean Series
Index
About the Authors
Copyright

Overview

Whether you’re a startup founder trying to disrupt an industry or an entrepreneur trying to provoke change from within, your biggest challenge is creating a product people actually want. Lean Analytics steers you in the right direction.

This book shows you how to validate your initial idea, find the right customers, decide what to build, how to monetize your business, and how to spread the word. Packed with more than thirty case studies and insights from over a hundred business experts, Lean Analytics provides you with hard-won, real-world information no entrepreneur can afford to go without.

Understand Lean Startup, analytics fundamentals, and the data-driven mindset
Look at six sample business models and how they map to new ventures of all sizes
Find the One Metric That Matters to you
Learn how to draw a line in the sand, so you’ll know it’s time to move forward
Apply Lean Analytics principles to large enterprises and established products

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and much more.

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