happy, healthy, and successful new year to you all!
New year, old discussions. Our first client conversations this year again were about how to increase focus and alignment. Everybody appears to have too many things on their plate (or too many new year’s resolutions to execute 😉) and at the same time struggles to improve outcomes.
Defining strategic objectives and implementing OKRs may be one way out. Another – potentially ancillary – approach is the definition of what has become known as a North Star Metric.
A North Star Metric aims to constantly record the core value your customer derives from your product or service. If this single metric can be improved, it is highly likely that your product and company will continue to grow successfully.
A North Star Metric (NSM) provides clarity and alignment. It makes the impact of actions and bets as well as the resulting progress transparent for everyone, and it holds product development and the organization at large accountable towards one agreed outcome.
Product optimization company Amplitude has a checklist for North Star Metrics:
- It expresses value. We can see why it matters to customers.
- It represents vision and strategy. Our company’s product and business strategy are reflected in it.
- It’s a leading indicator of success. It predicts future results, rather than reflecting past results.
- It’s actionable. We can take action to influence it.
- It’s understandable. It’s framed in plain language that non-technical partners can understand.
- It’s measurable. We can instrument our products to track it.
- It’s not a vanity metric. When it changes we can be confident that the change is meaningful and valuable, rather than being something that doesn’t actually predict long-term success—even if it makes the team feel good about itself.
The North Star Metric (NSM) concept was established by fast-growing Silicon Valley companies and popularized by the growth-hacking movement about a decade ago.
Ride sharing giant Uber tracks “Rides per week”. This North Star Metric captures both sides of their platform: drivers as well as riders. If there are no drivers, riders won’t be picked up; and if there were no riders obviously becoming an Uber driver would make no sense. The above NSM records Uber’s value to both sides of the ecosystem. If the organization focuses on the right things to drive and balance both, the metric improves.
Amazon chases “Number of purchases per month” – very much in line with what you would expect from an e-commerce giant. If the organization pursues the right initiatives to deliver increasing value to the customer, the NSM will continue to rise.
“Time spent listening” is Spotify’s North Star Metric. Its relevance again seems obvious. Enjoying music that matches their taste or listening to interesting podcasts is the key value Spotify has for its users.
To drive it, Spotify may try to bring users back more often and increase listening time per session. These input metrics may in turn be driven by enticing the users to create more playlists, or providing them with new recommendations, etc..
All of these initiatives create input parameters to the North Star Metric. If putting ideas and effort into them causes an increase of the NSM, “listening time”, the company focuses on the right initiatives. If not, something different needs to be tried.
In case you find the concept interesting enough to learn more, here are some reads for the remainder of the weekend:
What is a North Star Metric?
by Sean Ellis. The gist – by the man who popularized the concept.
What is a “North Star Metric”? (+ 8 steps how you can discover your NSM)
by Ward van Gasteren, possibly Europe’s most achieved growth hacker.