Lean Analytics Book Summary - Lean Analytics Book explained in key points

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Lean Analytics summary

Name: Lean Analytics
Rating: 4 (81 reviews)
Author: Alistair Croll and Benjamin Yoskovitz

Alistair Croll and Benjamin Yoskovitz

Use Data to Build a Better Startup Faster

4 (81 ratings)

16 mins

Topics

Mathematics

Table of Contents

Lean Analytics
Summary of 8 key ideas

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Key idea 1 of 8

What’s in it for me? Get the necessary tools to analyze your start-up.

You have the brains, you have the drive, you even have a supportive network to get your start-up going. So what more do you need? The right kind of analytics, of course! No matter how smart or motivated, an aspiring entrepreneur should always be aware of that deadly pitfall: building something that nobody wants. By showing you how to use good metrics to assess your success, this book will ensure that your start-up is heading in the right direction.

So, what are the basic concepts you need to analyze your start-up? And how can you apply these concepts to make your start-up grow? These are some of the questions that Lean Analytics sets out to answer.

You’ll also discover

that some data can be good, but too much can be fatal;
how stickiness can drive the growth of your start-up; and
which number should matter most.

Start-up founders should be data-informed – not data-driven.

What is a start-up, exactly? It's an organization that aims to build a sustainable and replicable business model. Perhaps you’ve dreamed of founding one yourself?

If so, you'll need to stay informed about data. Data, in addition to guiding you along your journey, makes it hard to delude yourself.

So what is data?

It’s the numerical information that's vital to your business. If you run a media site, for example, you'll need data about ad-click numbers. If you're an investor, you'll need to know all the figures about the returns on your investments.

One reason that data is so crucial is that entrepreneurs often lie to themselves a bit when assessing their success. After all, they often need to convince other people (like investors!) of their ideas without having any hard evidence that these ideas will actually work.

However, if you believe too much in your dreams, your start-up probably won't survive. You need to stay grounded in reality – and that's where data comes in.

Data is the antidote to self-delusion. By allowing you to soberly measure your success, it keeps you on track: you'll know exactly where you stand as you work toward your goal.

You shouldn't become a robot that just follows the numbers, however. Your personal judgment is important too! You don’t want to be data-driven; instead, stay data-informed.

Though data is undeniably important, collecting and analyzing it can become addictive. Moreover, you'll run into trouble if you use data to optimize just one part of your business.

Imagine, for example, that you run a website, and your data shows that pictures of scantily clad women increase your click-through rate. If you just blindly follow that by filling your page with models in bikinis, you might undermine your business's image or integrity.

So don't become a slave to your data. Remember: data is ultimately just another tool.

Good metrics are ratios that are both comparable and understandable.

So what's the goal of staying data-informed? Ultimately, your data should guide you to the right product, and the right market, before your money runs out. But you also need to find an effective way to measure your success. That means finding good metrics that provide you with relevant and meaningful data.

Good metrics have three important characteristics: they're comparable and understandable, and they're most effective as ratios.

Start-up founders should concentrate on something that they’re good at, that they enjoy and that they can make money with.

The key to thriving as a start-up founder is finding where the demand for your product and your ability and desire to answer that demand intersect.

So first, find a business you're truly passionate about. Building a start-up isn't just about creating something that works. Ask yourself: What do you really want to do?

A start-up goes through distinct stages: Empathy, Stickiness, Virality, Revenue and Scale.

There are several ways to understand start-up development. The Lean Analytics framework says that start-ups go through five distinct stages: Empathy, Stickiness, Virality, Revenue and Scale.

In the first stage, Empathy, you identify a need that people have. This points you in the right direction: you'll know where your niche in the market is.

Start-up founders should always focus on one metric above all the others.

One of the keys to achieving success in your start-up is staying focused. That means you need to concentrate on the single metric that's most critical to whatever stage you're going through.

You should always know what your most important metric is at any given time. As a start-up founder, you'll have to keep track of multiple figures, like revenue per customer or customer satisfaction. Some of these numbers will matter immediately, and some you'll store for future use – when you present your company's history to an investor, for example.

Start-up founders have to outline their business model and find the right customers.

A lot of start-ups are based on truly creative ideas and some manage to attract large groups of people. Few start-ups actually make money, however. Even big organizations like Facebook and Twitter have struggled to make money from their user bases.

That's why your business model is so important. As a start-up founder, you need to define yours.

The best metric for an e-commerce start-up is revenue per customer.

If you're like most people, you've probably bought several things online during the course of your life. E-commerce companies are very common nowadays. In fact, they're probably the most common kind of online business there is.

E-commerce companies focus on customer loyalty and acquisition. They usually make money by selling products they can deliver electronically, like music downloads on iTunes, or physically, like shoes from Zappos.

Media sites make money through advertisements, so click-through rates are the most important metric for them.

Google's search engine and CNN's website are both examples of media sites, and much of these sites’ revenue comes from advertising. So if your business model is a media site, you'll probably be focused on earning money from advertisements, too.

Inserting ads into online content is fairly easy, and a lot of websites rely on the money from advertising to pay the bills.

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What is Lean Analytics about?

Lean Analytics (2013) offers key advice on how to successfully build your own start-up. It follows a data-based approach to explain how you can use effective metrics to help your organization grow.

Best quote from Lean Analytics

Instincts are experiments. Data is proof.

—Alistair Croll and Benjamin Yoskovitz

Who should read Lean Analytics?

Start-up founders and entrepreneurs
Anyone looking to make their organization more effective
People who want to understand start-ups better

About the Author

Alistair Croll is an entrepreneur, author and public speaker who focuses on web performance, big data, cloud computing and start-ups. He's also the chair of O'Reilly's Strata conference, TechWeb's Cloud Connect and Interop's Enterprise Cloud Summit. Ben Yoskovitz is an entrepreneur who serves as mentor to several start-ups. He also speaks at conferences and events like the Lean Startup Conference and the Internet Marketing Conference.

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