Tinker On

Santosh dreams up a Web.

Category: Whiteboard

How Sticky Growth Models Work

by Santosh

What really matters is not the raw numbers or vanity metrics but the direction and degree of progress. – Eric Ries, ‘The Lean Startup’.

Most online services can be cast as having a sticky engine of growth. At it’s heart is the question – “Is the experience rewarding enough for new users to return?”. A model built around this question can help you determine the direction and degree of progress for eCommerce services, creative communities, Saa’Services and many more business models.

Three measures come together in this model – Retention Rate, New Customer Rate and Growth Rate. Each measure has it’s own story to tell. If you’ve read ‘The Lean Startup’, you’ll also learn that the model can reveal if your venture has figured out how to leap forward consistently.

With this honest a metric at hand, you won’t lose your way. I’ve found the model handy in most of the projects that I’ve worked on. Below is an interpretation of the model and how the three measures are derived.

Sticky Growth Model (Image)

With the model above,

1. Retention rate: ”Customers Retained in Current Period” by “Total Customers”.

2. New Customer Rate: ”New Customers” by “Total Customers”.

3. Churn Rate: “Customers you failed to retain” by “Total Customers”.

4. Growth: is the difference “New Customer Rate” – “Churn Rate”.

5. Total Customers: coming into a period are the Customers Retained in the previous period and New Customers you will engage in the current period.

Key scenarios shown in the test sheet (Google Docs Worksheet) that will help you grasp how the model works,

* When Retention Rate is 100%, Churn Rate is zero.

* When New Customers Added = Customers Retained in the same period, Growth is 100%.

* When Retention Rate is zero, Growth is negative for that period.

* When New Customers Added is zero, Growth is less than or equal to zero depending on the Churn Rate.

Thanks to Mitesh Bohra, CEO at Savetime.com for lending his time to whet iterations of the model. Do leave your feedback in the comments, especially if you have a different interpretation to share.

Don’t Miss the Trivial

by Santosh

Imagine you’ve been given the objective of designing a spacecraft that will need to take passengers to other star systems starting out from our own. A challenge of this nature starts with how do you sustain life through a journey that will potentially take millions of years. You can’t store energy without losing some to the environment. In the cold depth of interstellar space with the nearest star far far away, how is it possible to constantly recreate or source the energy needed for life? Really, how much energy does life need? This is the premise behind Rendezvous with Rama, a science fiction classic by Arthur C. Clarke.

If you’ve not read the book you could probably get around this paragraph and I’d avoid spoiling it for you. Many book reviewers found it strange that Rendezvous… does not have any alien life-forms in it. I’d say that the book is teeming with ideas, ideas about a different version of life. Life that flourishes in ways we understand but would find too obvious and will discard in the bat of an eyelid. Clarke’s fictional solution to interstellar space travel is to transport consciousness in a literally recyclable world where the life-forms are manufactured. Such life need only exist when an abundant energy source such as our sun is at hand. Now that we’ve got a grip on this central idea, you can ask why not? All we need to do now is to figure out how to sustain this consciousness in a low-energy state through the quiet between star systems.

Nine years ago on this day of 2004, Google first advertised a limited beta release of Gmail. It resonated with initial subscribers on the legs of another absurd idea – a 10GB inbox. Perhaps you’d thought, who’d need so much space? Or, how is it possible to give away so much space? At the time a GB cost a $1 on a hard drive** and most providers would only give away 10′s of MB’s to their millions of free users. I know I thought both those thoughts. I was a graduate student working at RIT’s Lab of Applied Computing. I recall dissecting how it would work with my colleagues at the lab. Obviously we needn’t allocate all that space right away. If we disassociated the inbox with the actual physical storage of an email, we could allocate just a few MB and simply grow the physical storage ahead of usage. This made the ’10GB inbox’ plausible.

Turns out, this idea was enough to spark millions of conversations within the first few weeks and drew several millions of users away from other email providers within it’s first year. Some enthusiastic users even tested the elasticity of their inboxes by growing them successfully all the way to the 10GB limit. It was fascinating to watch it all come together and yet I had more questions. Why were so many making this possible? I probably asked because I still didn’t think I needed that much space.

A few years later at a consulting gig, I’d been given an inbox on a client’s MS Exchange server. Every time I’d get a series of files weighing in at several 100KB’s, my inbox would cross a preset limit and I’d have to reach out to the admin for more space. While I waited, I’d delete older emails off the server or incoming emails would bounce back to senders. It was at this time that I wished dearly for Gmail’s magical expanding inbox and asked is this what drew the early adopters to it?

Many ideas are like that and I think they deserve a closer look. They’re really awaiting a marriage of the right mindsets before they can bloom. Perhaps someone who can see past first impressions to quickly spot the frustration of no solution and the genius beneath the unassuming? Someone who’s willing to put in the time to follow the idea through.

** Cost of Hard Drive Storage Space.

A Wallet Plan for those taking on Risk and Wealth Creation

by Santosh

I can go without earnings until my venture makes it to revenue.

Have you ever had this thought cross your mind? This morning I woke up to an unfortunate fever and an email from a colleague asking me about how she can get better at planning her financial future. She’s in her early twenties and is getting ready to go back to college. Whatever she’d saved up from her professional life was gone, she lamented. “What can I do now that I’m ready to wake up?” We’ve all been there. After writing to her, the question stayed with me and I knew I had writing left to do. What was I missing in my own plan given my experience with the nature of startups and fevers? Read the rest of this entry »

Create an Academic Calendar for your toddler in 3 steps

by Santosh

Here’s an easy calendar creator you can use to plot Nursery and Primary admission dates for your toddler. Read the rest of this entry »

How we continue to flourish?

by Santosh

The Pune OpenCoffee Club

… for startup founders put down roots in 2008. The group started out with the idea of meeting up at a regular time, place to exchange notes and to help each other out. Over time, our identity has changed.

Today, the group is an open platform for events in entrepreneurial education, building ties with the rest of the startup eco-system and encouraging networking. As a community co-founder, I’ve watched our identity morph to better reflect the needs of the community, and my own needs as well. In October of 2012, with a little reflection on how things had worked out so far, we realized our organization needed leadership and succession. Summarized here is the journey and lessons learned in organization building and community engagement. Read the rest of this entry »

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