What is a North Star Metric?
Drive Your Company’s Sustainable Growth with a North Star Metric
The North Star Metric (NSM) is a powerful concept that has emerged in recent years from Silicon Valley companies with breakout growth. It helps teams move beyond driving fleeting, surface-level growth to instead focus on generating long-term retained customer growth.
The North Star Metric is the single metric that best captures the core value that your product delivers to customers. Optimizing your efforts to grow this metric is key to driving sustainable growth across your full customer base.
Finding Your North Star Metric
Airbnb’s North Star Metric is nights booked. This example captures value delivered to both guests and hosts. Facebook’s NSM is Daily Active Users. With more users on the Facebook platform, the team is able to optimize everyone’s feed to deliver more value to users.
To uncover your North Star Metric you must understand the value your most loyal customers get from using your product. Then you should try to quantify this value in a single metric. There may be more than one metric that works, but try to boil it down to a single NSM.
Focusing Your Team with a North Star Metric
When growth is broken down to actual value delivered to customers it becomes clear that this is not just a marketing responsibility.
Most teams within an organization play some role in delivering value to customers. Sales and marketing attract new customers into the funnel, but the product and customer support teams play a key role in ensuring prospects and customers are able to experience the core value of a product.
Coordinating these siloed teams to work together on growth initiatives can be very challenging without a metric that focuses them around a common goal.
Using Your North Star Metric to Drive Growth
Once you understand your North Star Metric, it’s important to document the variables that work together to move this metric. These variables generally include parts of the customer lifecycle such as new user signups, new user activations, and improving engagement/retention of users.
By understanding the relationship between these interdependent variables and your current conversion rates, you’ll gain insights into potential high leverage opportunities for growing your NSM.
Your North Star Metric is a critical part of aligning your team to drive rapid and sustainable growth.
Update: People often ask me if a North Star Metric is an alternative to using OKRs or if they are somehow compatible. This article, How to Win with OKRs and a North Star Metric, by Ethan Garr does a great job answering that question.
