Your north star metric is more like a constellation
A North Star metric is the one measurement that’s most predictive of a company’s or team’s long-term success. To qualify as a “North Star,” a metric must do three things:
lead to revenue
reflect customer value
measure progress
When choosing which North Star to focus on, differentiate between output and input metrics.
Output metrics represent results
Input metrics represent actions
Output metrics help set long term goals for the growth of the business (top line revenue, contribution margin growth, retention rate, etc.).
Input metrics represent the actions that influence the output metric (email/SMS captures, site visits, creative cycle times, etc.).
Input metrics are leading indicators and output metrics are lagging indicators. It can take time for the output to reflect positive or negative changes in the inputs. Output metrics can hide growth problems percolating under the surface. By the time the problem surfaces as poor results, and you recognize you have a problem, the damage is done.
Focusing solely on a single North Star metric is akin to evaluating the overall business health based solely on gross revenue. A single North Star metric, while providing a valuable snapshot, offers a narrow perspective, like peering through a keyhole. To truly grasp the complexities of a business, multiple metrics must be considered, each illuminating a distinct dimension of performance.
Shaun Clowes, VP of Product at Metromile and former Head of Growth at Atlassian, aptly captures this concept by emphasizing the interplay between input and output metrics:
"There's always a constellation of input metrics that we swap in and out under the umbrella of our output metrics, based on what we're learning at the time."
Input metrics, dynamic and ever-evolving, provide real-time insights into the factors influencing business outcomes. Output metrics, on the other hand, serve as the ultimate benchmarks, reflecting the tangible impact of business strategies.
By orchestrating a harmonious blend of input and output metrics, businesses can navigate the complexities of their operations with greater clarity and precision.
Three key dimensions demand attention:
Breadth of Retention: This metric assesses the ability to maintain a loyal customer base.
Depth of Engagement: This metric gauges the intensity and frequency of customer interactions.
Monetization: This metric evaluates the financial return generated from customer engagement.
By meticulously measuring these dimensions, product teams can identify areas for improvement and optimize their strategies to achieve sustainable growth.
North Star Checklist
It expresses value. We can see why it matters to customers.
It represents vision and strategy.
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.
It’s measurable. We can instrument our performance 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.