For years, businesses of all shapes and sizes have focused on using the most standard of metrics to measure success. Things like sales revenue, operating productivity and customer loyalty have long been considered the keys to facilitating growth and understanding business operations. But as more and more companies continue to get caught up in improving these numbers in an effort to look good on paper, they begin to lose sight of what metrics are actually put in place to accomplish.
The Lean Analytic Cycle as described by Alistair Croll and Benjamin Yoskovitz in their book Lean Analytics, is a simple four step process that’s designed to help businesses develop sustainable solutions to problems by identifying metrics that are relevant to their particular operation. It focuses on using basic analytics and planned experimentation to continually improve the business model. Unlike many other common techniques for achieving success, the Lean Analytic Cycle produces hard data that gives owners valuable insight into their customer base by showing them what works, why it works and who it works for. An outline of the Lean Analytic Cycle is provided below.
Step 1: Identify What Needs to Be Improved – Whether you’re a clothing store that’s looking to boost online sales or a data-driven startup that needs to achieve higher conversion rates, understanding your business and setting a goal is a critical part of this process. Identify a metric that you want to improve and choose a key performance indicator (KPI) that can help you track your progress.
Step 2: Form a Hypothesis – You know your business better than anyone, so making an assumption based on past experience shouldn’t be a problem. For instance, if your KPI is something like number of online sales, your hypothesis could be “If I get more people to visit my site, sales will go up.” After you’ve made an educated guess regarding your business, you can move on to the next step.
Step 3: Design an Experiment – This part of the Lean Analytic Cycle gives you room to be creative but first you need to identify the who, what and why’s of your business. Who is the target audience, what do you want them to do and lastly, why should they do it. After you’ve answered these questions, you can use your imagination and do whatever you think will help you achieve your goal. For instance, maybe you want to redesign your user interface or change the way you present your product or alter the wording under your descriptions. The options are endless but it’s important to make some kind of a change so you have something to measure.
Step 4: Measure the Success of Your Experiment – Now that your experiment is up and running, it’s time to sit back and collect the data. If you’re seeing an increase in the number of online sales, your experiment was a success and the changes you made to your model clearly worked. If you didn’t, it’s time to go back, make some changes and try another experiment. If that doesn’t work, try something else. This process is simple, iterative and fail-proof. Even if the majority of your experiments don’t work (which they probably won’t), you’re still gathering useful information about your customer base.