The North Star is positioned almost directly above the North Pole. At one point in human history, the North Star served as a reliable navigator. Taking inspiration from the idea, the North Star Metric has emerged as a powerful concept in recent years with some of the most successful Silicon Valley companies using it as a cornerstone to drive long-term sustainable growth.
The North Star is known for holding nearly still in the sky, while the entire northern sky moves around it. And so being true to its astronomical origin, the North Star Metric (NSM) has become a critical yardstick for organizations to stay on track while they navigate through rapid changes, and to help them to find their way home when lost.
To enable your product or company to realize its full growth potential, you need to find your North Star, and follow it.
Why you need a North Star
Focus can make or break companies. In the absence of focus, you can waste critical time and resources on aimlessly testing out new tactics, stressing over tiny details that hardly matter, and ultimately lead yourself and your team astray.
But with a clear focus, you can provide your team meaningful guidance and build a hyper growth product or business. It is your North Star Metric that helps you to achieve this level of focus.
Understand your North Star
So what is your true North Star Metric? Before you try to find it, you must know what to look for. Now, here’s an interesting fact. You might expect the North Star to be one of the brightest stars in the sky, but it isn’t. So why is the North Star important?
The North Star is positioned almost directly above the North Pole, and therefore, it is a reliable measure of the north—essentially making it your gauge to help you navigate on your way forward.
So your North Star Metric isn’t the flashiest number, but the number that has sustainable value.
Define your North Star
It’s very easy to get carried away by vanity metrics (such as Twitter followers, or Facebook likes or sign-ups for a product trial) but these metrics are hardly a good measure of long-term growth. Essentially, these flashy numbers that might appear tempting on the surface are actually far from representing your true North Star. If you focus on the wrong North Star, it could potentially lead you south.
Here’s a simple example.
- A B2B SaaS company offering a data visualization platform creates a marketing campaign to promote its product. They use a variety of channels and outreach methods of promotion.
- Let’s consider they send out an email blast to a list of pre-qualified prospects (contact data collected from sponsored events organized for the product’s promotion, plus from inbound inquiries on the website).
- They combine this with social media marketing—running a LinkedIn sponsored ad campaign and sponsored InMails (the platform being specifically for a B2B target audience), and using non-paid social media streams for creating mass awareness with Twitter and Facebook.
There would be a bunch of straightforward metrics that would stem from these campaigns:
- X emails sent to X contacts
- X% open rate with X% CTR from emails
- Impressions, clicks, average CTR, CPM and CPC from LinkedIn InMails and ads
- X sign-ups for 30 day trial
Let’s say you sent your email campaign using Hubspot, and your Facebook and Twitter blasts using Hootsuite, with LinkedIn as your third channel for paid social media marketing.
Now, you could spend many hours with these metrics. For example, analyzing your marketing email campaign performance in Hubspot, measuring your social media results in Hootsuite, and monitoring your LinkedIn InMail campaign and ads performance.
But are these representative of your true North Star Metric? Not entirely.
This isn’t to discount the value of performance analytics from your various campaigns, but these are simply your vehicle and not your destination. The true North Star Metric is one that helps you to look beyond short-term traction and focus on creating sustainable, long-term customer growth.
Twitter followers, re-tweets, Facebook likes, CTRs or even free trial sign-ups for that matter don’t represent growth, because unless the users coming from these sources stick around and become paying customers, these are simply vanity metrics.
That does not mean that your social media mentions, likes or free trial sign-ups don’t count. A social media mention from an influencer has a definite impact; free-trial accounts with active users is a positive signal for a potential conversion. But your North Star Metric is a much bigger play.
What leads your prospects toward becoming paying customers, and even better, becoming your brand’s advocates, is what best represents the moment that will truly drive growth for your product or company. And the metric that corresponds to that moment, where your buyers make an emotional connection with what you offer, is your true North Star Metric.
In the above case, it could be:
- the number of users that decided to convert to a paid-license at the end of their trial,
- the number of users that helped you to get new sign-ups by endorsing your product using your referral link
- the number of users that influenced potential new trial users through social media, better if those trial users subsequently converted to paying users, and even better, further recommended your products to net new users
Find your North Star
Companies that compete with each other in the same industry vertical may have different North Stars. For example, YouTube and Netflix both play in the media streaming space, but they may have different North Stars. YouTube would focus on increasing the amount of time users spend on their platform, as it ultimately to contribute to the user engagement, and proportionately, their ad revenue. Netflix, on the other hand, relies on growing their subscriber base because that is where they make their revenue.
So can there be more than one North Star for a product or business?
There have been debates on this subject, and I don’t want to add a third dimension to this. Well, I don’t have to. I always think of the North Star Metric as the one, organization-wide metric for measuring long-term, sustainable growth. As I have tried expressing earlier, you cannot undermine the value of the widely accepted KPIs businesses have focused on for years, but they’re only a means to the end and not the end itself.
For a company still trying to find out product’s fit in the market, one of the main KPIs could be getting its first 10 sign-ups, but should they consider that as their North Star Metric? Certainly not.
As a matter of fact, especially at early stages of its growth, a product or company is not even ready to define its North Star Metric. I firmly believe that every company should have a North Star Metric, because that is what defines a clear goal for it to create a path towards sustainable growth. But to try to define a North Star Metric when you haven’t even figured your product/market fit is to put the cart before the horse.
The point is that in the early stages of your new product launch, when you’re still figuring out your product/market fit, you’re not quite ready for growth. And so, essentially, you’re not quite ready to define that one metric that will measure your long term growth—your North Star Metric.
It’s not uncommon for start-ups to launch a new product or even MMP and get carried away into thinking that they’ll start getting users to sign up, convert and become paying customers; while they’re yet to find a sustainable product/market fit.
Before you are ready to define your growth roadmap, it’s critical that you clearly define the relationship between your product, your marketing and your growth. GrowthHackers refer to it as “Product Before Growth” and put it into a very logical equation:
Image source: “How To Build A Growth Model (Part 2)”
“The goal of marketing is to communicate the value of the product and distribute it to as many users as quickly as possible, hence accelerating the growth curve, but before growth, the product has to create value in the first place.”
The article further talk about how, for any growth to be sustainable, the product has to solve a real problem for a group of users; and the time spent thinking about growth or a growth model, until your product passes that core value test, might end up completely wasted.
Source: “How To Build A Growth Model (Part 2)”
At the initial stages of your product journey, your goal should be to focus on key metrics that matter most, it could be trial sign-ups, trial conversions and so on. Over time, narrow down those metrics to one, long-term North Star Metric as you progress toward to early traction phase, and reassess your goals as you expand and enter your growth phase, and continue.
Here are some examples of North Star Metrics of brands we’re all familiar with:
Source: “METRIC OF THE WEEK: NORTH STAR METRIC”
So how do you find your North Star Metric?
Here’s what you should be asking yourself to know your North Star Metric:
- Does it capture the user’s experience of your product’s core value?
- Does it measure the level of actual engagement with the product?
- Does it capture the WHY of your product?
- Is it easy to understand, communicate and relate to for teams across the organization?
- Can this metric be your guiding factor when making critical decisions about your product?
Focus On Your North Star Metric
Once you’ve identified your North Star Metric, never lose sight of it and follow it like sailors followed the North Star in the sky. Your North Star Metric is not vanity metrics such as page views, registrations, user base, or even your growth rate as some of your users will churn, some of the trial users will become inactive and so on. The North Star Metric measures the value you deliver to your customers. It focuses on the moment your customers make an emotional connection with your product and experience the core value of your product. It is the reason “why” your product exists.
“Your North Star should be central to the WHY of your product or company”
There is no one North Star Metric that can fit all. What your product or business offers to your customers is unique in terms of value, and so your North Star will also be unique. Your North Star should always be your one guiding factor for all of your critical decisions—your product’s UX, pricing, marketing, sales, hiring and so on.
Focus makes or breaks companies. Your North Star Metric is what helps you to stay focused. This is what makes your North Star Metric the one metric that matters most.