- What’s the Future of Work (Tim O’Reilly) — Tim’s been exploring how technology is changing what work is and how we build our society around it. New conference coming!
- Monitoring 101: Collecting Data — the world-view behind instrumenting modern software is just as interesting as the tools to make it possible.
- Building a High-Performance Team: It’s Not Just About Structure — move beyond copying Spotify’s structure and work on your company’s Habits, Values & Culture, and Leaders & Management.
- Google Calendar Concept Art — In the future … your content will be available directly within your calendar.
Toward unifying customer behavior and operations metrics.
For the last ten years I’ve had a foot in both the development and operations worlds. I stumbled into the world of IT operations as a result of having the most UNIX skills in the team shortly after starting at ThoughtWorks. I was fortunate enough to do so at a time when many of my ThoughtWorks colleagues and I where working on the ideas which were captured so well in Jez Humble and Dave Farley’s Continuous Delivery (Addison-Wesley).
During this time, our focus was on getting our application into production as quickly as possible. We were butting up against the limits of infrastructure automation and IaaS providers like Amazon were only in their earliest form.
Recently, I have spent time with operations teams who are most concerned with the longer-term challenges of looking after increasingly complex ecosystems of systems. Here the focus is on immediate feedback and knowing if they need to take action. At a certain scale, complex IT ecosystems can seem to exhibit emergent behavior, like an organism. The operations world has evolved a series of tools which allow these teams to see what’s happening *right now* so we can react, keep things running, and keep people happy.
At the same time, those of us who spend time thinking about how to quickly and effectively release our applications have become preoccupied with wanting to know if that software does what our customers want once it gets released. The Lean Startup movement has shown us the importance of putting our software in front of our customers, then working out how they actually use it so we can determine what to do next. In this world, I was struck by the shortcomings of the tools in this space. Commonly used web analytics tools, for example, might only help me understand tomorrow how my customers used my site today.
Learn to resist vanity metrics
One of the things we preach in Lean Analytics is that entrepreneurs should avoid vanity metrics—numbers that make you feel good, but ultimately, don’t change your behavior. Vanity metrics (such as “total visitors”) tend to go “up and to the right” but don’t tell you much about how you’re doing.
Many people find solace in graphs that go up and to the right. The metric “Total number of people who have visited my restaurant” will always increase; but on its own it doesn’t tell you anything about the health of the business. It’s just head-in-the-sand comforting.
A good metric is often a comparative rate or ratio. Consider what happens when you put the word “per” before or after a metric. “Restaurant visitors per day” is vastly more meaningful. Time is the universal denominator, since the universe moves inexorably forwards. But there are plenty of other good ratios. For example, “revenue per restaurant visitor” matters a lot, since it tells you what each diner contributes.
What’s an active user, anyway?
For many businesses, the go-to metric revolves around “active users.” In a mobile app or software-as-a-service business, only some percentage of people are actively engaged. In a media site, only some percentage uses the site each day. And in a loyalty-focused e-commerce company, only some buyers are active.
This is true of more traditional businesses, too. Only a percentage of citizens are actively engaged in local government; only a certain number of employees are using the Intranet; only a percentage of coffee shop patrons return daily.
Unfortunately, saying “measure active users” begs the question: What’s active, anyway?
To figure this out, you need to look at your business model. Not your business plan, which is a hypothetical projection of how you’ll fare, but your business model. If you’re running a lemonade stand, your business model likely has a few key assumptions:
- The cost of lemonade;
- The amount of foot traffic past your stand;
- The percent of passers-by who will buy from you;
- The price they are willing to pay.
Our Lean lemonade stand would then set about testing and improving each metric, running experiments to find the best street corner, or determine the optimal price.
Lemonade stands are wonderfully simple, so your business may have many other assumptions, but it is essential that you quantify them and state them so you can then focus on improving them, one by one, until your business model and reality align. In a restaurant, for example, these assumptions might be, “we will have at least 50 diners a day” or “diners will spend on average $20 a meal.”
The activity you want changes
We believe most new companies and products go through five distinct stages of growth:
- Empathy, where you figure out what problem you’re solving and what solution people want;
- Stickiness, where you measure how many people adopt your solution rather than trying it and leaving;
- Virality, where you maximize word-of-mouth and references;
- Revenue, where you pour some part of your revenues back into paid acquisition or advertising;
- Scale, where you grow the business through automation, delegation, and process.