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1-Page Summary of Lean Analytics

Overview

You have the motivation and drive to start your own business, but you need more. You need analytics to make sure that what you’re doing is right. This book will help you learn how to use analytics so that your business can succeed.

There are several concepts you need to consider when analyzing your start-up. They include: customer development, experimentation, metrics, and agile software development. The book aims to explain these concepts in detail so that readers can apply them to their own businesses.

You will also learn that some data is important, but too much can be detrimental; how stickiness can help your business grow; and the number you should pay attention to.

Big Idea #1: Start-up founders should be data-informed – not data-driven.

A start-up is a company that tries to develop a sustainable business model. The author says that you should keep up with data, because it will help you in your journey and make it harder for you to be deluded about what’s going on.

Data is important in today’s business world. It can help you understand the numbers that are crucial to your company. For example, if you run a media site, data about ad-click numbers will be useful. If you’re an investor, data about returns on investments will be important for making decisions.

Entrepreneurs often lie to themselves a bit when assessing their success. They need to convince other people of their idea without having any hard evidence that these ideas will actually work.

However, if you believe too much in your dreams, they won’t become reality. You need to stay grounded and focused on the data that proves whether or not your start-up is successful. That’s how you’ll know where you stand as you work toward your goal.

It’s important to follow the numbers, but you shouldn’t neglect your own judgment. You have to be data-informed and not just driven by it. It can become addictive if you focus too much on collecting and analyzing data. Also, if you only optimize one part of your business with data, then that part will fail.

If you run a website, for example, and data shows that scantily clad women increase your click-through rate, it would be unwise to fill your page with models in bikinis. This might undermine the integrity of your business.

Because of this, don’t let your data control you. Remember that the data is just a tool to help you make decisions.

Big Idea #2: Good metrics are ratios that are both comparable and understandable.

So what’s the goal of staying data-informed? It will ultimately lead you to the right product and market. You need an effective way to measure your success, so finding good metrics is key.

To understand metrics, you should look at three things: comparability, understanding and ratios. Comparable metrics tell us how things are developing. It’s important to compare them with different time periods or groups of consumers or competitors. A ratio is a way to convey information about something in comparison to other things. For example, saying that revenue increased by 2 percent tells us little about the business; however, saying that revenue increased by 2 percent from last week does provide more meaningful information because we can compare it with another period of time (last week).

A good metric is also understandable. Your data should help you move in the right direction, but if nobody can comprehend or remember it, it’ll just turn into a burden. It won’t lead to any positive changes in your organization. So keep your metrics simple, like “revenue per week.” The most useful metrics are also ratios—for instance, ad clicks per day instead of ad clicks per month because they allow for comparisons over time and are easier to act on.