Every Product Needs a North Star Metric: Here’s How to Find Yours
The product north star is easily the most powerful and misunderstood product strategy framework in use today. More product teams are dealing with the consequences of not defining it at all or defining it the wrong way and leading their team down an unintended path.
This article is our first deep dive in a series on the north star metric. We hope it serves as a guide to product leaders and managers around the world on why this metric matters, how to define it and how to use it to drive your long-term product strategy and growth. In this article we’ll cover:
- What is a north star metric and why does it matter?
- What are some examples of good north star metrics?
- Should a company only have one product north star?
- How do you select a good product north star?
- How to use the north star to drive product strategy
What is a north star metric and why does it matter?
A north star metric is the key measure of success for the product team in a company. It defines the relationship between the customer problems that the product team is trying to solve and the revenue that the business aims to generate by doing so.
This serves three critical purposes in any company:
- It gives your organization clarity and alignment on what the product team needs to be optimizing for and what can be traded off.
- It communicates the product organizations’ impact and progress to the rest of the company - resulting in more support and acceleration of strategic product initiatives.
- Most importantly, it holds product accountable to an outcome.
In most companies, product teams are measured by how much they ship, not on the impact they have on the business. Without an impact driven culture in product, you can’t influence the destiny of your business. Without a north star, you can’t have a product-led company.
There is no leadership without accountability.
If you are responsible in some way for your product’s strategy or its execution, here are three questions you need to answer about the product north star.
Question 1: What are some examples of good north star metrics?
A north star metric should consist of 2 parts:
- a statement of your product vision and
- a metric that serves as a key measure of your current product strategy.
Example: Below is a paraphrased version of Amplitude’s current product north star.
The customer value we want to drive is “easily answering questions on what drives behavior and powering a better customer experience”.
Since we are currently in rapid growth mode, our metric of Weekly Querying Users (WQUs) reflects breadth - i.e., the number of customers who get value at least once a week. This is a leading indicator of our ability to retain and expand accounts over time.
A good north star metric aligns to value
Your north star metric must be derived from a true understanding of what action provides realized value to the customer. You need to get as close to impact as possible. This means that “Daily Active Users” or “Registered Users” are not good KPIs. They say absolutely nothing about what your customers value about your product. You are missing a huge opportunity to provide clarity to your team.
When teams fail to connect customer value directly to their north star metric, they risk leading their business down the wrong path.
LinkedIn North Star Example
Data scientists at LinkedIn recently shared this fascinating case study about how improving their north star metric for the “endorsements” feature did not result in a better product experience. When their metric definition was simply endorsements being made/accepted, it didn’t actually improve their business because recruiters were concerned about misleading information in these endorsements.
Reforge also recently published an excellent note on the typical pitfalls companies face when they don’t define their key product metric well.
Your product north star should be specific to your product and what your customers value.
A good north star is a leading indicator of success
A critical aspect of this metric is that should be a leading indicator of future success. Lagging indicators like monthly revenue or ARPU don’t give you an early signal of product impact. They tell you what happened in the past rather than being predictive of future revenue. The further upstream of revenue and market capitalization you can get your metric to be, the more future impact you can drive.
eCommerce North Star Example
One of our customers, a Fortune 100 retailer, is trying to grow their mobile commerce business because they have identified that as a strategic priority for the company’s future.
That team’s north star metric might be “number of mobile orders delivered”. This metric captures someone ordering from their mobile app (their current strategy focus) and having a good experience (customer getting value) because their delivery was completed without payment issues, logistics complaints or returns.
In the world of product, this is often referred to as finding your “customer’s a-ha moment”. If you can pinpoint the early actions that lead to your customers becoming retained, you have an effective north star metric that’s a strong leading indicator. Your product north star should be a leading indicator of future business outcomes.
Facebook North Star Example: In its early days, Facebook famously chose “# users adding 7 friends in the first 10 days” as their key metric. If you are interested in how to go about identifying those critical actions - here’s a detailed guide!
B2B North Star Example
If a SaaS company has a self-serve business model like that of Dropbox or Hubspot, their metric might be “trial accounts with >3 users active in week 1 ”. This metric captures all the new, free accounts that are getting value and providing a signal of future trial conversion and subscription revenue being generated that the product team can predict and drive.
Ashley Carroll, a partner at Social Capital and previously a product leader at Docusign talks about the importance of a “non-revenue” product north star in her webinar on building better products.
Similarly, fast growing companies like Instacart often focus their product north star around metrics like new user activation, i.e., “# of weekly users completing their first order”. With the knowledge of how users retain once activated, this helps the company focus on a leading indicator of future revenue.
In summary, a good north star has three attributes:
- it measures the moment that a customer finds value from your product,
- it represents the core of your current product strategy and
- is a leading (not lagging) indicator of a future business outcome that your company cares about.
Question 2: Should a company only have one product north star?
Not necessarily. The “one key metric” idea is useful to simplify communication across the business but is often not enough. Most large companies have complex ecosystems and are trying to find the optimum balance between 1-3 core product metrics. Any more and you no longer know what matters. Just one and you might be blinding yourself to critical trade offs.
In addition to that, the metric is also used to derive goals and metrics for individual product teams. Every team needs their own specific goal that drives the product organization’s north star forward.
Without north stars, your list of KPIs can easily just become a metric soup
For example, at Amplitude our product north star is the weekly # of users who run at least one query in Amplitude. We call it Weekly Querying Users (WQUs). In addition to this, we have metrics around infrastructure performance that is owned specifically by our backend engineering team.
Every north star metric can have 4 dimensions - breadth, depth, frequency and efficiency. For Amplitude’s key metric, we have prioritized 3 of these dimensions and currently have product teams driving them forward.
Below is the example of a north star tree for a grocery ordering and delivery app. The tree ties together a dozen different product initiatives together into a single framework to drive each dimension of the north star metric forward.
Using this framework, every team knows what their own KPI is as well as how it contributes to the north star. This allows everyone to make the right trade offs and resourcing decisions.
Question 3: How do you select a good product north star?
Great, you are in the right place to learn! The most important thing you need to do to choose the right north star metric for your organization or product area is to figure out what game you’re playing. This game is your core customer engagement model. Based on our research of products at over 11,000 companies and 3 trillion user actions, we have learned that all digital products are playing one of three possible games:
- The Attention Game: How much of your customers’ time can you capture in your product
- The Transaction Game: How many commercial transactions does your user make on your platform
- The Productivity Game: How many high value digital tasks can your customer perform in your product
When we share this framework with product managers, their first reaction is often, “all three games are super important to me.”However, the product team needs to make a choice about the game they’re playing so they can focus on winning it. Focusing on one game is critical to a focused product strategy and hence a good north star.
Below are some north star examples of companies that are playing each of these three games and what their product north stars could be. You will notice that companies playing the same game can have radically different north stars because it reflects their unique product strategy.
While Facebook and Netflix both play the engagement game, their business models are radically different. Facebook’s revenue is proportional to the amount of feed engagement and hence ad revenue generated.
Netflix, meanwhile has a subscription model and a fixed (but growing) amount of content. This means that their north star should maximize subscribers rather than total time spent watching content.
Similarly, Amazon Retail and Walmart might have very different north stars despite being players in the same transaction game. Amazon is likely optimizing for # of Prime subscribers and the value they generate because the subscription model gives them loyalty and visibility into LTV. Walmart on the other hand is a cost leader likely focusing on the wallet share of their customer for every visit.
Salesforce aims to be the central source of truth for customer records in B2B companies. Their new strategy revolves around AI for decision making in sales. This means that their north star is less about user adoption and more focused on the amount of customer data they store for their accounts. Unlike that model, the Adobe Creative Cloud likely focuses on individual subscribers and driving enough engagement to ensure continued subscription.
How to use the north star to drive product strategy
Using the north star framework to drive your product strategy is an essential investment to running an impact-driven organization. It is a path towards becoming a product-led company.
In the next few articles in these series we are going to answer the following questions:
- What’s the infrastructure & culture you need in place to implement a north star metric?
- How do you optimize your north star for your product lifecycle?
- How do you map your north star tree to your customer journey?
- How do you drive accountability and ownership for different product functions - like PM, engineering and design?
If you have questions about the north star and how to build your product team, please share them with us.
If you are interested in learning more about how to analyze user behavior to drive your north star, we just released a ton of resources to help you get started!
Last Updated: 05/20/18
How I PM: David Berman, Product Manager at Amino Apps
David is a product manager at Amino, a mobile community for whatever you're into, and this is how he...
The Three Games of Customer Engagement Strategy
Every product is playing one of three games. Which one are you playing?
How I PM: Rose Yao, Director of Product for Google Maps Platform
Rose is a Director of Product for Google Maps Platform and this is how she product manages.