The Lean Startup: The Million Copy Bestseller Driving Entrepreneurs to Success

by Eric Ries

We tracked the “funnel metrics” behaviors that were critical to our engine of growth: customer registration, the download of our application, trial, repeat usage, and purchase.

Cohort Analysis To read the graph, you need to understand something called cohort analysis. This is one of the most important tools of startup analytics. Although it sounds complex, it is based on a simple premise. Instead of looking at cumulative totals or gross numbers such as total revenue and total number of customers, one looks at the performance of each group of customers that comes into contact with the product independently.

But think back to the same data presented in a cohort style. IMVU is adding new customers, but it is not improving the yield on each new

Creating an Innovation Sandbox The challenge here is to create a mechanism for empowering innovation teams out in the open. This is the path toward a sustainable culture of innovation over time as companies face repeated existential threats. My suggested solution is to create a sandbox for innovation that will contain the impact of the new innovation but not constrain the methods of the startup team. It works as follows: Any team can create a true split-test experiment that affects only the sandboxed parts of the product or service (for a multipart product) or only certain customer segments or territories (for a new product). However: One team must see the whole experiment through from end to end. No experiment can run longer than a specified amount of time (usually a few weeks for simple feature experiments, longer for more disruptive innovations).

As Peter Drucker said, “There is surely nothing quite so useless as doing with great efficiency what should not be done at all.”2