Linear thinking in a non-linear world.

  • Both segments currently contribute $10M each to total profits.
  • Retention Rate for Segment A is 10% and for Segment B is 40%.

Which segment would you choose?

  1. Never Assume that there is a linear relationship between the variables and the outcome you are optimising for. Always try to estimate 3–4 data points to understand the relationship, as any fewer data points could mislead you.
  2. Visualize the relationships through a simple chart as above. Visualization not only helps you to see the kind of non-linearity at play (there are 4 types), but also to identify the tipping points where outcomes change dramatically and deliver extraordinary returns (for example, increasing the retention rate from 60% to 80% can almost triple your CLV i.e. $15M to $40M).
  3. Focus on what creates the maximum impact by choosing the strategy that delivers the highest profits. As managers, our job is to prioritize and re-prioritize our actions to focus only on those activities that deliver the maximum financial value, everything else is just a distraction.

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Amit Rawal

Amit Rawal

@Apple Inc — Global Product Leader for new-age Data and Analytics Platform. Love using tech and data to deliver joy.