In many organizations, product teams are measured by how much they ship, not by how much impact they have on the business overall. But overall business impact is a much better measure of success. That’s why companies are defining and referring to their North Star Metric (NSM).

The North Star Metric is one key metric that quantifies the business impact of the product team. When the right NSM is chosen, it pairs the product team’s progress with tangible revenue and business growth.

A North Star Metric should do three things: measure customer value, represent the current product strategy, and be a leading indicator of revenue.

What does this look like at a company? At Amplitude, our NSM is Weekly Learning Users. This is the number of active Amplitude users who have shared a learning that was consumed by at least two other people in the previous seven days.

We recently held a webinar to discuss how three different product teams found their North Star Metric. John Cutler, coauthor of the North Star Playbook and product evangelist at Amplitude, hosted Pedro Clivati, head of growth at GrowthHackers; Inessa Lurye, VP of product at Yesware; and Sam Ahn, principal product manager at LogMeIn.

The webinar was chock-full of useful information for product leaders and left us with many takeaways. Here are seven things every product leader should know about the NSM, based on insights from our panel.

THE NORTH STAR PLAYBOOK

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1. A great North Star Metric tells a story.

A North Star Metric may seem like a simple metric, but the best ones tell a compelling story that brings teams together. When a NSM is working, it’s a guiding light for all team members. It provides a clear goal that everyone can work toward.

“Everyone is working on many different things, everyone is busy, and everyone has their own story,” Ahn said. “The North Star Metric helps us unify all of our stories so that they relate and become part of the same story. As a result, we find meaning in our work as we contribute to this shared story.”

Lurye echoed a similar sentiment, describing how Yesware began thinking about product delivery in terms of business outcomes rather than outputs.

“For example, we would have a team work to improve the number of meetings customers are able to book, as opposed to having the team deliver a meeting-scheduling product,” Lurye said. “Through this framing, the team has a lot of opportunity to consider how they can move the needle on this outcome, as opposed to being tied to a product delivery schedule.”

A North Star Metric forces teams to crystallize vision into a cohesive story. Ultimately, the NSM becomes a rallying story for the product team. It represents a focal point, linked to inputs that the team can impact.

2. The North Star Metric brings organizational alignment.

Many executive teams think about business impact from a financial perspective. This makes sense. In order to grow, a business needs to bring in more revenue. However, “make more money” is a very general goal that doesn’t account for what teams are doing day-to-day to create more value for the users.

At any given company, there are many teams with disparate goals and initiatives. Clivati talked about how there’s a common misconception that growth marketing is only about marketing, when, to grow a company, you also need to think carefully about the product itself. “One of the biggest misconceptions is that a growth team only focuses on acquisition, but these teams can have a much bigger impact when they have the flexibility to apply their knowledge to areas like onboarding and retention.”

A North Star Metric gives everyone a metric that they can rally around. Each team can then figure out a way to move the needle on the inputs that factor into the North Star Metric.

“A North Star Metric means that every person, every team, and every department are all headed in a common direction,” Lurye said. “We are not only looking at revenue or growth or signups but also the value that we’re providing to our users.”

3. The North Star Metric can help with ambiguity and help you say “no.”

As a company grows, teams often begin pulling in different directions. There can be a lot of ambiguity about which direction to take. Without a specific metric to chase, product teams can struggle to make progress. “We were dealing with a lot of ambiguity,” Ahn said. “It made me have a feeling of emptiness in my heart.”

Ahn cited the example of LastPass. “People were thinking and talking about improving ‘digital wallets’ and other vague terms, but there was no real direction for what actions we could take. This ambiguity started creeping up and exacerbated the feeling of disparate work.”

The NSM can also help you say no when new ideas pop up. It makes the team much more focused, which makes it easier to make decisions when things are ambiguous. “Although there can be a lot of tension to get down to this level of focus, it ultimately helps drive the level of change organizations need,” Lurye said.

By having one metric to improve, teams can begin strategizing on the different inputs that will help them reach their goals. They can much more easily discard things that won’t help.

4. The North Star Metric is a guide, and it’s not the only metric that matters.

Although the NSM is a powerful force within a company, it is not a be-all and end-all. “The North Star Metric is not the only metric that matters,” Cutler said. “It’s certainly a guiding metric, but it’s not the only one teams should look at. Teams should always be considering a constellation of metrics.”

Ultimately, a product team needs to make sure that other metrics are being considered. A company is complicated, and relying exclusively on the North Star oversimplifies the work that needs to be done to help the company grow.

“A North Star Metric has to flow into how you measure performance at your organization as a whole,” Lurye said. “It’s not the only metric, but you also can’t have a bunch of different systems that are tracking and measuring because this is overwhelming,” she continued. “At Yesware, we’re still early in the process, but all of our teams have different outcomes that they’re striving towards. These outcomes funnel into the North Star, but they’re also outcomes in their own right.”

5. Executive buy-in is essential.

Because a North Star can align an organization, you need to get executive buy-in. After all, a North Star Metric goes hand in hand with overall business direction. A NSM needs to take revenue growth into account, which is important to executives. At the same time, it should signify business impact and overall value.

A North Star Metric will guide a company’s strategic vision. The executives on board need to be willing to share, promote, and make decisions based on this metric. They need to take it as seriously as the product team.

How to do this? “Have one-on-one conversations with key stakeholders in every department so that you can introduce the concept, rationale, and value before going very broad,” Lurye said. Ahn echoed the sentiment, explaining that you need to show people, including executives, why the North Star Metric should matter to them.

6. Visibility is a priority.

A NSM is great in theory, but if no one sees it, no one is going to care. That means the North Star Metric needs to be reported everywhere, whenever possible. Once people realize they’re all responsible for this metric, it generates buy-in.

“Integrating the North Star Metric into other artifacts—such as kickoffs, OKRs, decision reviews, strategy planning—is essential,” Cutler said. “If it’s not visible, it loses steam pretty quickly.” The North Star Metric should be peppered into emails, presentations, and should be visible throughout the organization.

Clivati suggested tracking the North Star Metric via Amplitude, as well as reporting it weekly throughout the organization. “We currently report our North Star Metric through every single department,” he said. “This shows teams that everyone is responsible. It’s not only a metric for the product team.”

This packs even more of a punch if the updates are coming directly from the CEO. At GrowthHackers, the CEO includes the North Star Metric with each weekly email that she writes.

7. Choosing a North Star Metric can take time.

Although it’s amazing to have a North Star Metric, it can take time to land on the right one. It can also be a messy process.“I lead workshops with companies, and sometimes they’re disappointed that they don’t have a clear North Star Metric after leaving our two-hour meeting,” Cutler said.

So how can you choose a North Star Metric that brings organizational alignment? According to Lurye, Clivati, and Ahn, you should hold workshops with different groups and collect notes from various stakeholders.

“After I read the North Star Playbook, I held small workshops over a period of a few months,” Ahn said. “These workshops were small with just four people, coming from all different areas of the organization. Each group was very different, but they allowed me to formulate ideas about what our North Star Metric could be.”

A workshop is often the best way to get buy-in because it gets team members thinking a lot about inputs, outputs, and outcomes.

North Star Metric: The key to product team success

Your team needs to be working in the same direction in order to effect meaningful change. That’s why a North Star is so essential. Your North Star Metric should be easy to understand, actionable, and represent value as well as business impact. If you’d like to hear more about how product experts approach this metric, watch our webinar.