What is Your North Star Metric? Learn: Why Finding Your NSM is still Crucial in 2023
How do you track the growth of your business? Do you measure one critical metric, or do you measure all? What if you could track your company's overall growth with just one key metric? Do not be discouraged if you don’t know how; I have got you covered in this blog post. So keep reading to clear all your doubts and discover the critical metric that matters the most: The North Star Metric.
What is covered in this article
- What is the North Star Metric?
- How to Find Your North Star Metric (Step by Step Guide)
- Why Finding Your North Metric Important? (Key Benefits of it)
- Conclusion
What is the North Star Metric?
According to Sean Ellis, the author of the book Hacking Growth, a North Star Metric is the single metric that best captures the core value that your product delivers to customers. It helps you focus on the problem your product or service exists to resolve. For example, why should people use your product/service? What is in it for them? Of course, the answer to this question can vary depending on the type of service you provide.
The classic example of a well-chosen North Star Metric is Airbnb. They have chosen the metric “number of nights booked” as their North Star Metric as it encapsulates the moment when value is created both for users who want to book a stay as well as for hosts.
Further examples of North Star Metrics
Below is a list of further well-known examples of the north metric that you can use as a reference to identify your north star metric.
- Facebook: (DAU) daily active user
- Medium: total time of reading
- Quora: number of question answers
- Airbnb: number of nights booked
- Spotify: the number of time people spends listening to the music
- Amazon: purchases made per month
- LinkedIn: number of endorsements
How Can You Find Your North Metric?
Finding a perfect north star metric for any business is a daunting task. Hence, most companies never bother about it. However, Jon Butterfield (2019) highlights the importance of deciding on a north star metric even before developing a product. Furthermore, choosing which metric is suitable for your business early helps you focus on optimized user flows and product features (Butterfield, 2019). Luckily there are tons of resources and frameworks out there that help companies identify their North Star Metric, such as the 4-Step process outlined below.
The Simple 4-Step Process to Discover Your North Star Metric in No Time.
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- Keep the customer at the center and identify the value your customer gets from your product.
- Think about what (inputs) you must do daily or regularly to meet these customers' needs and how you can evaluate customer satisfaction. Then, think of one key metric you can measure to determine customer satisfaction. In other words, how would you assess the outputs? Generally, this metric can fall into one of these categories: quality, quantity, and efficiency. This can be reflected in metrics like retention rate, customer engagement, and product usefulness.
- There is one last qualifier for a good North Star Metric; it must be measurable with clearly defined inputs and output.
- Do a final check of the five critical elements of a good North Star Metric before selecting one for your business.
- It should mirror the user value.
- It should generate revenue.
- It should contribute to the overall growth of your business
- It should reflect your company's unique identity and vision
- It should be simple enough so everyone in your team can understand and work on it.
As a starting point you can use this template from the MIRO board North Star Metric workshop template.
Why Finding North Star Metric Important?
Before moving further, let me explain why setting up one key metric as your North Star Metric is essential. Why not measure any metrics or just the revenue? The simple answer is that long-term and sustainable business growth requires a robust customer-centered strategy and the North Star Metric is the one KPI that focusses solely on that..
Ward van Gasteren, the growth hacking coach, as such concludes that you should never chose revenue as your North Star Metric as you would focus on making more money in the short period and forget the value you provide to your customer. As a result, you may lose valuable customers who could help your business grow in the long run. Setting revenue as your North Star Metric is simply misleading.
Identifying the right north star metric is important because it clarifies what you do and how you can do it even better. According to Sean Ellis, the North Star Metric promotes team alignment and directs the company's focus to one common goal.
Last but not least, the North Star Metric makes it easy to manage the workflow and track the company's overall growth. Not bad for one single metric.
Conclusion
If your goal is to grow your business sustainably, finding the north star metric is the first and foremost step you should take.
An ideal North Star Metric is not just any number/metric you can measure to track a company's financial growth. In contrast, the metric aims to create a sustainable customer-centric business model. Moreover, it reflects your company's unique identity and aligns with what you do, why, and how you can do it even better. While finding the north star metric is crucial for your business, don't worry; if it seems impossible to you. We have got you covered at the Speedinvest Pirates. Our vision is to simplify the complex growth process like North Star Metrics for you and help you grow sustainably.