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Barel Karsan
Barel Karsan

Book Review: Lean Analytics

November 05, 2013

One does not need to take huge risks in order to grow most businesses. Techniques to understand markets before scaling are explained very well in a book that has been previously discussed on this site, The Lean Startup. But what specific metrics should managers focus on, in order to ensure they are on the right path? Alistair Croll's Lean Analytics seeks to answer this question.

The book's main theme is that at every point in a business' life, there are only a couple of metrics that really matter. Businesses should focus on improving these key metrics until diminishing returns are met. At this point, it is other metrics that become important, and it is on these new metrics that managers should focus.

Since the important metrics for a business at any one time will vary significantly by industry and by individual business, the authors don't present an exhaustive list of all possible metrics, but rather a way for managers to think about what the important metrics are for themselves. For example, a newly established retailer with little mind share might consider traffic per week to be the most important metric at a certain point in time. A media site might consider page views per day important, while a social media site might consider minutes on the site per unique visitor to be important.

Whatever the most important metric at the time, each business should apply a build->measure->learn loop (also discussed in the book) on a small scale until it figures out what works, and then scale that solution up. For example, once the retailer's traffic is up enough such that there are diminishing returns (because extra investment brings in little marginal benefit or it has reached the traffic goals it considers appropriate for its market), it's time to move on to another metric (e.g. basket size, or net promoter score, or whatever other metric is deemed appropriate to reach the company's goals).

The authors clearly come from a tech background, so many of the example cases discussed are in software, cloud or other areas in which readers of this site may not be familiar. But I strongly believe that the business concepts described in the book apply not just to tech but other businesses as well, with one caveat; most of these techniques are best applied to consumer-facing businesses.

If you want to think about what kind of metrics are important to the businesses in which you are invested, or you want help thinking about what metrics you should be thinking about in order to grow your own business, then this book is for you.

About the author:

Barel Karsan
Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

Rating: 5.0/5 (1 vote)


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