Review

Lean Analytics is an incredibly insightful, data-driven approach specifically designed to rapidly assist startups in building superior products. Expertly co-authored by Benjamin Yoskovitz and Alistair Croll, this book serves as an invaluable guide to understanding the most effective way to measure progress. It empowers businesses to ask the most impactful questions and discern what vital information can be gleaned from the data to make swift and informed decisions in our ever-changing market. This book is absolutely essential for entrepreneurs, data analysts, and product managers who are determined to leverage data to drive their product strategy.

Personally, I believe this book could have easily been divided into two compelling volumes. The book ambitiously delves into six distinct business models and five different stages, spanning over 400 pages and making it quite an extensive read. I would suggest that it is best read when you are situated within a company where you can directly apply the knowledge and simply bypass what’s not relevant.

Key Takeaways

The 20% that gave me 80% of the value.

• The Lean Startup focuses on quickly learning about your greatest risks in pursuit of a scalable and repeatable business model. Lean Analytics aids in tracking progress and deciding what to concentrate on next, as part of the build-measure-learn loop.
• Entrepreneurs have to be relentlessly optimistic. They create a reality distortion field of positivity to push through the odds stacked against them. Analytics is the necessary counterweight of realism.
• Analytics can help you quickly find your way to the right product and the right market. Good metrics should inform our next move and change our behavior. Ratios and rates are great as they’re comparative and easier to act on.
• The Lean Analytics Cycle follows these steps:
  1. choose a crucial metric to improve.
  2. set a realistic target, using industry benchmarks as a guide.
  3. determine how to enhance the metric.
     • find out what good users do, make it easier
     • brainstorm ideas, test them, implement the best
  4. measure the impact of the change on the metric.
     • if the change fails, pivot, try a different approach, or conduct more discovery.
     • if the change succeeds, select a new metric to improve.

• The Lean Canvas is a great way of consistently articulating your hypotheses and verifying it with real customers.
  • Problem: Identify real problems that people know they have.
  • Customer Segments: Define your target market and the messaging that will help you reach them.
  • Unique Value Proposition: What is the clear, distinctive, and memorable way to explain how you’re better or different?
  • Solution: Can you solve the problems effectively?
  • Channels: Determine how you will deliver your product/service to customers and how you will receive their payments.
  • Revenue Streams: Are they one-time or recurring? Is it a direct transaction or something indirect?
  • Cost Structure: Identify the direct, variable, and indirect costs.
  • Metrics: Do you know which numbers to track to understand if you’re making progress?
  • Unfair Advantage: What is the “force multiplier” that gives your efforts a greater impact than your competitors’?
• Avoid these common data analysis pitfalls:
  • Assuming clean data: Always clean your data to reveal patterns and prevent errors.
  • Not normalizing data: Compare data within context to avoid misleading results.
  • Excluding/including outliers: Outliers can skew results. Include for insights, exclude for general models.
  • Ignoring seasonality: Consider seasonal trends to accurately interpret data.
  • Ignoring size in growth reports: A high percentage increase from a small user base may not be significant.
  • Data vomit: Avoid overwhelming with too much data without actionable insights.
  • Metrics that cry wolf: Be cautious with overly sensitive metrics that trigger false alarms.
  • The ‘Not Collected Here’ syndrome: Don’t dismiss external data that could offer valuable insights.
  • Focusing on noise: Focus on the significant trends rather than getting distracted by minor fluctuations.
• The Lean Startup is the process you use to move toward and achieve your vision. Early-stage founders aren’t building a product, they’re building a tool to learn what product to build.

• The Lean Analytics stages suggest an order to the metrics you should focus on. The stages closely mirror what other Lean Startup advocates advise:
  1. Empathy – Gate: I’ve found a real, poorly met need in a reachable market
     • Focus on understanding the customer’s needs and problems.
     • You need to validate that there is a real need for your product or service in a market that you can reach.
  2. Stickiness – Gate: I’ve figured out how to solve the problem in a way that they will accept and pay for
     • Focus on developing a product or service that solves the customer’s problem in a way that they are willing to pay for.
     • You need to validate that your product or service is sticky, meaning that customers will continue to use it.
  3. Virality – Gate: The users and features fuel growth organically and artificially
     • Focus on making your product or service viral, meaning that it grows organically through word-of-mouth marketing.
     • You need to validate that your product or service has the potential to grow virally.
  4. Revenue – Gate: I’ve found a sustainable, scalable business with the right margins in a healthy ecosystem
     • Focus on developing a sustainable and scalable business model.
     • You need to validate that you can generate enough revenue to cover your costs and make a profit.
  5. Scale – Gate: I can achieve a successful exit for the right terms
     • Focus on scaling your business to reach a larger market.
     • You need to validate that your business can be scaled to achieve your desired outcome.

• Choose the One Metric That Matters (OMTM). The one that’s crucial given your current stage. Success lies in focus and discipline. Optimizing your OMTM squeezes that metric so you get the most out of it, but it also reveals the next place you need to focus your efforts, which often happens at an inflection point.
• Draw lines in the sand. Establish a clear target number for success metrics, and be ready to reassess if it’s not met. Success can be defined by what your business model needs or by comparing to industry norms when the business model is not yet clear.

• To decide which metrics you should track, you need to be able to describe your business model simply and just think about the really big components.
• Business growth comes from improving one of these five knobs: selling more stuff, to more people, more often, for more money, more efficiently.
• Not all customers are beneficial. While some are valuable, others can be distracting, resource-consuming or harmful. It’s essential to distinguish valuable users from detrimental ones, then implement changes to maximize the real users and minimize the harmful ones.
• A business model is a combination of things:
  • The acquisition channel is how people find out about you.
  • Selling tactics persuade visitors to become users or customers, often through scarcity, exclusivity, or additional benefits.
  • Revenue sources, direct or indirect, may include transactions, subscriptions, ad revenue, data resale, donations, among others.
  • The product type is what value your business offers in return for the revenue.
  • The delivery model is how you get your product to the customer.

• The Problem-Solution Canvas helps you maintain discipline and focus on a weekly basis. What’s the problem, how do you propose to fix it, and how will you know if you succeeded? Use it to home in on the key problems you’re facing. Agree on and prioritize your problems.
  • Current status: key metrics you’re tracking compared to previous period
  • Last week’s lessons learned: What did you learn, what was accomplished?
  • Top problems: List and prioritize the top problems
  • For each problem:
    • Hypothesized solutions: list the possible solutions. Rank them. Explain how you think they’ll solve the problem
    • Metrics / Proof / Goals: List the metrics you’ll use to measure the solutions, list any qualitative proof you’ll need. Define the goals for the metric.

• There is a normal or ideal for most metrics, and that normal will change significantly as a particular business model goes from being novel to being mainstream.
• How you feel about a metric changes when you know what’s normal or best in class for your type of business. “When I first saw our churn, which was around 2%, I was very concerned, but when I found out that 2% is pretty much the lowest churn you’ll get in the hosting business, it changed my perspective a great deal.”
• Before investing time and effort into a metric, understand your position against competitors and industry averages. Benchmarks guide whether to continue working on a metric or tackle the next challenge.
• That said, realize there’s a reason most startups fail: average is nowhere near good enough.
• Strive to reach established target metrics, not adjust targets to current performance levels.
• Optimization efforts usually have diminishing returns, indicating when it’s time to shift focus to a different metric.
• Achieving local maxima and seeing diminishing returns on improvements can serve as a baseline and indicate when to shift focus to other areas.

A selection of insights:

• The MVP is a process, not a product. An MVP isn’t a product it’s a tool for figuring out what product to build. As you iterate, your goal is to improve on the core metrics that you’re tracking. If a new feature doesn’t significantly improve the One Metric That Matters, remove it.
• Correlation is nice, but spotting a leading indicator that causes a change later on is a superpower. You can now change the future. You just have to make that leading indicator happen more often.
• Identify common traits among users hooked on your product, focus on their needs, and expand. Claiming your beachhead will enable faster iteration on a highly engaged market segment.
• Treat your paying users as a separate customer base and track their behavior, churn, and revenue separately from your nonpaying ones
• Knowing when users churn gives you an indication of why they’re churning and what you can do about it.
• In a media site business model you get paid based on who your visitors are rather than what your site contains.
• UGC sites have a power curve of content creation, where a small number of people create the vast majority of content.
• If you can’t find 15 people to talk to, imagine how hard it’s going to be to sell to them.
• Sketch your business model and key metrics: