leananalytics

How you get and make money drives what metrics you should care about. In the long term, the riskiest part of a business is often directly tied to how it makes money Many startups can build a product and solve technical issues, some can attract the right (and occasionally large) audiences, but few make money. Even giants like Twitter and Facebook have struggled with extracting money from their throngs of users.  There’s no more iconic symbol of a startup than the lemonade stand, and with good reason—it’s a simple, entrepreneurial, low-risk way to learn how businesses operate. And like a lemonade stand, while it might be reasonable and strategic to delay monetization—giving away lemonade for a while to build a clientele—you have to be planning your business model early on. If we asked you to describe the business model of a lemonade stand, you’d probably say that it’s about selling lemonade for more than it costs to make it. Pressed for more detail, you might say that costs includ...

Founders are magpies, chasing the shiniest new thing they see. They often use the pivot as an enabler for chronic ADD, rather than as a way to iterate through ideas in a methodical fashion. But one of the keys to startup success is achieving real focus and having the discipline to maintain it. You may succeed if you’re unfocused, but it’ll be by accident. You’ll spend a lot more time wandering aimlessly, and the lessons learned are more painful and harder-won. If there’s any secret to success for a startup, it’s focus.  Focus doesn’t mean myopia. We’re not saying that there’s only one metric you care about from the day you wake up with an idea to the day you sell your company. We are, however, saying that at any given time, there’s one metric you should care about above all else. Boiled down to its very essence, Lean Startup is really about getting you to focus on the right thing, at the right time, with the right mindset. As noted in Chapter 5, Eric Ries talks about three en...

Over the years we’ve seen a number of frameworks emerge that help us understand startups and the changes they undergo as they grow, find their markets, and help startups acquire customers and revenue. Each framework offers a different perspective on the startup lifecycle, and each suggests a set of metrics and areas on which to focus. After comparing and contrasting a number of these frameworks, we’ve created our own way to think about startups, and in particular the metrics that you use to measure your progress. We’ll use this new framework throughout the book—but first, let’s take a look at some of the existing frameworks and how they fit into Lean Analytics. Dave McClure’s Pirate Metrics Pirate Metrics—a term coined by venture capitalist Dave McClure—gets its name from the acronym for five distinct elements of building a successful business. McClure categorizes the metrics a startup needs to watch into acquisition, activation, retention, revenue, and referral—AARRR.* Figure...

Data is a powerful thing. It can be addictive, making you overanalyze everything. But much of what we actually do is unconscious, based on past experience and pragmatism. And with good reason: relying on wisdom and experience, rather than rigid analysis, helps us get through our day. After all, you don’t run A/B testing before deciding what pants to put on in the morning; if you did, you’d never get out the door. One of the criticisms of Lean Startup is that it’s too data-driven. Rather than be a slave to the data, these critics say, we should use it as a tool. We should be data-informed, not data-driven. Mostly, they’re just being lazy, and looking for reasons not to do the hard work. But sometimes, they have a point: using data to optimize one part of your business, without stepping back and looking at the big picture, can be dangerous—even fatal. Consider travel agency Orbitz and its discovery that Mac users were willing to reserve a more expensive hotel room. CTO Roger Liew to...