North Star Metric: The guiding light
You have joined an early growth startup as a Lead Product Manager, the teams are smaller, and more energized; the CEO talks about moving from 0–1 at an accelerated rate almost every day. You hear Marketing, Revenue, and Product teams driving “growth” and every team has set goals and metrics as targets. However, half-yearly reviews are chaos for each and every stakeholder. Where on one head teams working in silos talk about “meeting” their goals, the company seemed to have not moved at all. It’s utter chaos to even zero down whether it’s the increasing revenue CEO should be happy about, or the growth in subscribers, or something else altogether.
This is where a clear North Star Metric comes into the picture — it helps in discarding the noise so as to make everyone focus on the real star. However, it’s important to choose the right metric as the guiding light, since it’s even more easy to focus on the wrong one.
Let’s talk about this metric a bit more and how it has been useful for some great companies out there.
What is a North Star Metric?
Advocated by Sean Ellis in 2010 through the growth hacking movements, the North Star Metric is the single metric that best captures the core value that the product delivers to customers. Optimizing the efforts to grow this metric is key to driving sustainable growth across your “must-have” customers who say they would be “very disappointed” if they could no longer use the product. The goal should be to expand this “must have value” across the existing and new customers, and the North Star Metric is how the company can quantify the expansion of this very value.
It is the source of truth that shows that the business is meeting the expectations of both the customers and the stakeholders. The right NSM is an essential part of the product strategy as it defines the relationship between the pain points the product solves and sustainable, long-term business growth.
Why does a North Star Metric matter?
The real idea to have an NSM is to align stakeholders, to have a clear goal as to what the company and the product wish to achieve in the long-term, simplify targets and efforts, and drive sustainable growth meanwhile ensuring all teams work in alignment with each other and set their goals in a manner that, at the end of the day, contribute to moving the NSM in the right direction.
Here are three of the main reasons why North Star Metrics are essential to the growth and success of the product:
- Aligns business and customers’ success
A North Star Metric gives the entire company a central goal to focus on. Instead of getting lost in team-specific goals (like customer success, sales, or technical goals), everyone needs to be able to answer: How does our work impact the North Star Metric? If they can’t answer it, they need a new goal. - Org-level focus
There’s always lots a company could focus on. Usually, the problem is prioritizing what’s most important now. An NSM gives the entire company a clear direction to place its focus. - Transparency about what’s important
A North Star Metric also makes it clear to everyone how the company is performing overall. It can assist the different teams in stepping back from the specifics and seeing the wider picture.
Additionally, in order to successfully define project objectives and adhere to OKRs, teams must understand how their work affects the company’s goals. Additionally, they will be more driven to work if they understand the impact their efforts have on driving the NSM.
How to set the North Star Metric ?— Use the famous NSM framework
The North Star Framework is a model for managing products by identifying a single, crucial metric (the North Star Metric) that, according to Sean Ellis “best captures the core value that your product delivers to [its] customers.”
In addition to the metric, the North Star Framework includes a set of key inputs that collectively act as factors that produce the metric. Product teams can directly influence these inputs with their day-to-day work.
This combination of this metric and inputs serves three critical purposes in any company:
- It helps prioritize and accelerate informed but decentralized decision-making.
- It helps teams align and communicate.
- It enables teams to focus on impact and sustainable, product-led growth.
Elements of the NSM Framework
- The North Star Metric
The North Star Metric is the building block of the NSM framework, which gives a clear indication of the long-term product strategy. It’s the leading metric whose movement plays a vital role in understanding the relationship between the end customer and the product, and how well the product is able to solve the problems of the user with sustainable growth in focus. - The Outcome
The North Star Metric is a leading indicator of sustainable business results and customer value. As one sees it change (ideally improving!), one can expect the business results to change accordingly. - The Input Metrics (not the vanity ones)
The inputs are just as important as the NSM. These are a small set (3–5) of influential, complementary factors that teams believe most directly affect the North Star Metric. These are L1 metrics (L0 being NSM) set by individual teams to measure their efforts and success, ensuring they directly have a positive impact on driving the NSM.
Companies nailing their North Star Metric
Netflix
The product vision of Netflix is something like: “Entertain the world”. The product strategy might be summarized and simplified as: “Netflix is a movie subscription service that delivers fast, easy entertainment in a friendly, straightforward way.”
Hence, their North Star Metric can look like “Median view hours per month (Engagement growth optimizing for depth of engagement).”
Netflix’s NSM is watching time and centres on the depth of engagement, reach as well as frequency. As an entertainment streaming platform, it’s not enough that users simply check in daily or weekly — Netflix is looking to increase the level of engagement. They want users to spend as much time as possible watching their content.
Spotify
Spotify has been the market leader in music streaming apps for years. Their user experience, recommendations and offerings have been the reason it has been a favourite among music fanatics.
If we think about Spotify’s NSM, cutting across all its offerings, it should be “Time spent Listening”. Here it could be music, podcast, an audio file, anything. At the end of the day, Spotify would want its users to listen using its application.
Airbnb
From Homestays to Experiences — Airbnb has been able to build itself as one of the biggest competitors for all hotel booking companies combined.
Even though it makes sense for Airbnb to have individual NSMs for their individual product offerings, “Number of nights booked” as a North Star Metric can collectively indicate whether the users are satisfied with the experience provided by Airbnb or not.
Uber
With the aim of providing value to both side of the platform — riders and drivers — the NSM for Uber should be “Rides completed per week”. This could lead to optimizing the number of transactions and speed, as part of their overall strategy.
Here’s a read on North Star Metric by Sean Ellis if you wish to read more on this — https://blog.growthhackers.com/finding-your-north-star-metric-fc1c1f71cbcb
