North Star Metric: What, Why & How
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What is a North Star metric?
A North Star metric is the one measurement that’s most predictive of a company’s long-term success. To qualify as a “North Star,” a metric must do three things:
Lead to revenue,
Reflect customer value,
Measure progress.
Examples of North star Metric:
Airbnb: Number of nights booked.
Medium: Total time spent reading.
Quora: Number of questions answered
Intercom: Number of customer interactions.
Facebook: Monthly active users.
Each of these North Star Metrics measures that rate that customers are experiencing the core value of the product.
Why is a North Star metric important?
Teams use North Star metrics to get everyone in a company focused on one goal. If each team defines goals differently, they can work against each other and duplicate effort.
When Sean Ellis coined the term “North Star metric,” he intended it to reduce administration, simplify meetings, and align teams around the singular goal of growth. The term North Star metric—drawn from the common name for Polaris, the star that lies directly above the Earth’s Northern pole. Companies with complex business models can have multiple North Stars, and any given North Star metric is composed of sub-metrics anyway.
Any company that literally foreswore all metrics in favor of just one, such as recurring revenue, would almost certainly fail. The North Star metric is, simply, an exercise in simplifying the overall company strategy into terms all can remember, understand, and apply.
Benefits of the North Star Metric
A North Star Metric helps your company in a number of ways:
Focus: Your entire company has the same focus. At the team level, you still focus on a different number, but ultimately everyone has the same goal.
Clarity: Everyone can see at a glance how well the company is doing.
Customer focus: The company is more concerned with adding value for the customer than depriving value, so you automatically make room to be busy with retention.
The end result will be that your business will grow much more efficiently because you have more focus and that focus is also focused on long-term growth.
How to find your North Star metric
Avoid “vanity metrics”numbers like page views, new signups, or total registered users. These do not indicate the core value prop of the product, and should not be your North Star (even though they are important!).
Consider these questions:
What is the exact moment customers make an emotional connection with your product?
What is the moment they experience the core value of the product?
What is the “why” of your product?
What is at the heart of your company’s mission?
Use your answers to these questions to develop a hypothetical North Star Metric. Now, test it against these parameters:
Does it reflect the moment users first experience the core value of the product?
Does it show the level of actual engagement with the product?
Can this single metric determine if the organization is moving in the right direction?
Is it easy to understand and communicate across all teams?
Can this metric guide you when evaluating pricing, potential features, plans, and other important decisions?
Can everyone in the company (marketers, sales, UX, etc.) relate what they’re doing to this metric?
Does it capture the essence of the company and the longterm value of your product?
Once you’ve defined a North Star, you should communicate it across your entire team. The North Star should guide all activities of your startup from product development to marketing, to hiring, and more.
Each time you’re faced with a decision ask yourself: will it improve the North Star?
North Star Checklist
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.
North Star metrics can be an effective strategy for aligning all teams around a singular goal, provided they’re not taken too literally, are supported by a flexible culture, and measured with analytics tools that help teams tell whether it’s still guiding the way.
Got anything interesting to add? Share your thoughts in the comment section below.