How to Find Your North Star Metric?

This article gives you an in-depth understanding of what a North Star Metric is, what it can mean for your company, and how to correctly identify your ideal metric. It lays down 7 simple steps to find a North Star Metric from a list of many, what could go wrong, and how to move forward with the chosen metric in the future.
North Star Metric
The North Star Metric is a powerful metric for product analytics that spread around the Silicon Valley startup environment at the beginning of the 21st century, aimed to define a single metric that would lead companies to definite, long-term success. Over the years, many companies that adopted this strategy have gone on to become huge successes and still continue to stress upon it as one of their main drivers for growth.
By definition, the North Star Metric, or NSM, is a single metric that reflects the most significant value that your product brings to the customers. It is a measure of a product’s influence on customers over a certain period of time. The impact of the NSM in product analytics in turn contributes to adding value to the company’s vision and mission, making it possible for companies to evaluate growth over time.
Hence, finding the North Star Metric is a pivotal moment for startups as well as well-established organizations.

What Does Finding the North Star Metric Mean for Your Company?

Defining the North Star Metric does not bring immediate results since it primarily serves as a focal point for future product management. It focuses on evaluating and thus increasing the value of an experience that the users are most satisfied with. Strangely, however, organizations lack an understanding of how this better user experience can power other areas of business.
Studies have long indicated that enhancing the Customer Experience (CX) leads to sustainable growth in businesses. But the North Star Metric does more than that. So, let’s look at the main advantages of evaluating North Star Metrics in your product development strategy.
Customer Retention: The more satisfied your customers are with the product, the more they will stick to your brand in the years to come. This simple logic of delivering exactly what the customer wants spreads brand awareness in ways you never before imagined.
Clarity of Business Goals: The North Star Metric aligns with every facet of the business toward a central goal, getting rid of the need for management to control intradepartmental activities. Instead, it lets individual teams take the wheel and continually bring back their focus to core ideas.
Product Development and Delivery: After defining your NSM, you will be tailoring the product development and delivery to fit into a common and shared aim of serving the customer. Making the North Star Metric a universal focus for all future development spares you the trouble of figuring out what feature or release activity is most necessary for your target customer segments.
Long-Term Revenue: While most companies focus on short-term revenue generation as a measure of success, the application of the North Star Metric proves far more effective as a long-term business strategy. This is because the North Star Metric gives more importance to the value that customers get from the business rather than how the businesses may make profits. Such an attitude fosters customer loyalty, keeping products and companies afloat for a long time.

Steps to Identify Your North Star Metric

Your North Star Metric must be a metric that accurately measures a point of success in product usage and interaction during the customer journey from one period to the other. This period may be hourly, daily, weekly, or monthly. Longer periods of measurement could adversely affect your goals since it will not be a continuous measure of the events that occur within your organization and product. Moreover, it does not allow you to sustain the focus of the teams participating in the metric analysis.
Before we begin with the steps to identify your specific NSM, here are some examples of North Star Metrics from popular companies in different industries as a guide to finding your ideal metric:
Brand North Star Metric
Airbnb Number of Nights Booked
Facebook Monthly Active Users (MAU)
Amazon Number of Purchases per Month
Spotify Time Spent Listening
B2B North Star Metrics identification could be a tough nut to crack, as it differs from B2C metrics. B2B NSM needs to be very specific, and usually requires longer periods in between analyses. They are also based on larger groups of users, such as per company account or per team of users. Now, onto the steps to finding your company’s North Star Metric:

1. Create a list of values your product offers customers

Perhaps your product offers more than one benefit to your customers. It can be hard to choose one value from many. In fact, companies may change their North Star Metric after a specified time to be more conformed to newer customer expectations. A benefit/value that you didn’t measure this time, could become your next North Star Metric.
Therefore, it is beneficial to have a list of values that you could measure and then narrow it down through the next steps.

2. Check alignment with other KPIs and OMTMs

The North Star Metric is just as much a KPI as any other. But it stands out as a core metric with which most, if not all, of the other metrics, should align. Other KPIs should be able to bring about a change in the NSM value, whether positive or negative.
The NSM is sometimes confused with OMTM (One Metric That Matters). The OMTM may be different for the various teams inside an organization, while the North Star Metric remains the same for all. There can therefore be more than one OMTM, but only one NSM. Every team’s OMTM must influence the overall NSM value in order to stay aligned with other teams and the organizational goals.

3. Evaluate its relation to the revenue generated

Though we have made our point about the North Star Metric not being a revenue-focused metric, it still needs to correlate in some way to revenue generation. For example, if you are an online delivery service, the number of positively rated deliveries could be your North Star Metric by the value it provides the customer. It is not evaluating the amount of money made from purchases and yet contributes to revenue generation by creating a customer experience. This experience can be rewarding to your brand in terms of loyalty and awareness, contributing to further revenue-generating business opportunities.
Each of the metrics that you have identified in the first step will need to be evaluated for this correlation - whether it is present or not. However, you need to be careful not to make the biggest revenue-generating metric your North Star Metric.

4. Bring it down to one metric

Now that you have a fully-formed list, with columns on the side that tell you how well-implemented each could be, it is time to narrow it down to a single metric.
The metric you choose should be well-balanced in terms of the value it brings to customers, and its potential to contribute to long-term company growth. It should also be one that can be measured for a reasonably short period of time, comparable with all previously recorded data, and aligned to the company vision.

5. Measure it against a scale

Determining the ideal period of measurement can be challenging since you need to check multiple factors before making that decision. You need to check the viability of measuring at an hourly or daily frequency according to the resources that are available at your organization.
Are there product analytics tools that allow the comparison through extended periods? Can these tools give you concise and digestible statistics for quick decision-making?
Once you have those adequate resources, you can target a set rate or degree of growth from one period to the other, or measure average growth in a quarter or during a year. You can also track progress to the point where you think the metric is no longer significant to your growth strategy.

6. Plan the minimum and maximum duration of tracking

Your North Term Metric is not a lifetime metric. As organizations and customer bases keep evolving and changing, the priorities of customers and product development keep changing.
For example, LinkedIn used ‘the number of endorsements given’ as their North Star Metric in the initial days, until they saw that it didn’t help in retaining users. Today their NSM is Monthly Active Users (MAU).

7. Be flexible to change

If this is the first time that you have experimented with the NSM, in all probability you might have second thoughts about whether the metric you chose is the right one to go ahead with. Once you have set your expectation on how long you will measure a particular metric from the above step, it is not extremely unlikely for things to change more rapidly than anticipated.
Therefore, you need to remain flexible when choosing your North Star Metric, so that you can make changes based on practical and logical conclusions.
In conclusion, the North Star Metric is a great concept that has been successfully implemented across many organizations. Today you cannot find any large organization that doesn’t have a North Star Metric.
But many organizations still need to make North Star Metrics a priority since they are instrumental in bringing the focus on company objectives through the lens of analytics in this data-driven world.
Interested in learning more about product growth and development strategies? Check out more Countly articles from our blog and academy!
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