North Star Metrics
Fewer things have a greater impact on achieving your business goals than measuring performance and knowing how you are doing in relation to your goals.
Most Common Metric Problems
- Trying to monitor too much data
- monitoring metrics that are irrelevant to the vision and mission
- All measures are short-term focused
- Measures that drive the wrong performance
- Only used to monitor not to manage. Stop wasting time and energy on metrics that have no leverage in your business.
- Team members aren’t made responsible for driving their numbers
Everyone in the company must know:
- why they are measuring a specific metric
- understand how it relates to the overall business vision, purpose and goals
Metrics should be linked to your key business drivers as well as a market’s critical success factors.
Not everything that can be counted counts and not everything that counts can be counted -Albert Einstein.
North Star Metrics
A North Star Metric is vital for several reasons, all of which help steer a company towards long-term success:
- Focus: It unifies the company under a single goal. Although different teams may track their own specific metrics, the North Star Metric aligns everyone's efforts towards the same endpoint. This cohesion ensures that all parts of the organization are working harmoniously towards a common objective.
- Clarity: It provides a clear indicator of the company's performance. With a North Star Metric, anyone within the organization can quickly understand how well the company is doing without needing to delve into more complex details or various metrics.
- Customer Focus: It prioritizes customer value over everything else. By focusing on a metric that measures the real value customers derive from your product or service, your company naturally aligns more closely with customer retention. This focus helps ensure that strategies and efforts are not just about winning new business but about nurturing and retaining existing customers, which is vital for sustainable growth.
Overall, a North Star Metric not only guides strategic decisions and day-to-day actions but also helps maintain a customer-centric approach, enhancing both customer satisfaction and business performance.
Well-known North Star Metric examples are:
- Spotify = ‘Time spent listening‘
- Airbnb = ‘Number of nights booked‘
- Facebook = ‘Monthly active users‘
- Quora: Number of questions a user answers
- WhatsApp: Number of messages a user sends
- Amazon: “Average Number of purchases per month”
- Slack: “Daily Number of messages send”
- Uber: “Rides per week“
Example: Myspace VS Facebook NSM
The difference between why Myspace tanked and Facebook took off really boils down to what each focused on as their main success metric. Myspace was all about Registered Users—essentially just counting how many people signed up. It sounds impressive, but it doesn’t tell you much about whether people actually stuck around or found the platform useful.
Facebook, on the other hand, zeroed in on Monthly Active Users. This metric is way more telling because it shows how many people are not just signing up but are actively coming back, engaging, and getting something out of the platform. It’s like the difference between throwing a party where lots of people show up once versus having friends who come over every weekend. By focusing on active users, Facebook could really keep tabs on how much value users were getting, which helped them make smarter decisions to keep people around longer. Social media apps today should take a page from Facebook’s book: keeping an eye on registered users is fine, but active engagement is where it’s at for long-term success.
How to determine your NSM
You need to understand the value your product provides to customers and their way of accessing it. Analyze how active and loyal users interact with your product. This will guide you in finding the metric that best represents growth in this area.
- The metric should reflect the value a user gets from the project.
- It should demonstrate the level of user engagement and activity.
- This metric should serve as the primary indicator that the business is moving in the right direction.
- Ideally, the metric should be straightforward and easily communicated across different teams.
Having North Star metrics for each stage of your key value drivers in your business
- ACQUISITION
Factors that focus on driving AWARENESS and generating more LEADS - ACTIVATION
Factors that focus on turning a lead into an actual customer/user - MONETIZATION
Factors that focus on turning SINGLE PURCHASE buyers into REPEAT customers and… - RETENTION
These ideas focus on keeping CUSTOMERS buyers and reducing CHURN
Input metrics
Input metrics are essentially the actions that help push your North Star Metric forward. Think of them as the leading indicators that either directly cause or are strongly linked to your main goals. Each area of your business will likely have its own unique set of input metrics.
You can't just keep your eyes on the North Star Metrics; they're too overarching and not something you can tweak directly—they're more like a scoreboard, telling you the score but not how to play the game.
To really drive success, you need to concentrate on the specific actions—the input metrics—that you can control and influence. These are your game plays that make the score move. While it's important to keep tabs on your North Star Metric to make sure you're on track, your strategy should primarily focus on these actionable input metrics to ensure you're making the right moves towards your ultimate goal.
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