In this chapter, you will learn:
A good North Star Metric represents what customers value about your product.
When teams fail to connect their North Star Metric to customer value, they risk leading their business down the wrong path. This means that simple counts of users, like “Daily Active Users” or “Registered Users,” are not optimal North Star Metrics, as they say nothing about what your customers value.
The North Star Metric represents the strategy of your business and your product. Once you have determined your North Star Metric, see if you can find your product strategy and vision within it. If you’ve built a strong North Star, you should be able to—at a high level—understand your company’s product strategy and your product’s vision by looking closely at the North Star.
Each strategy we had at Netflix—from our personalization strategy to our theory that a simpler experience would improve retention—had a very specific metric that helped us to evaluate if the strategy was valid or not. If the strategy moved the metric, we knew we were on the right path. If we failed to move the metric, we moved on to the next idea. Identifying these metrics took a lot of the politics and ambiguity out of which strategies were succeeding or not.
Gibson Biddle, Former VP of Product at Netflix
We generally advise that your North Star should be unique to your business, expressing your company’s and your product’s strategy and mission. However, some businesses may have a mission that’s not particularly differentiated. That’s okay. If your business succeeds by executing well on a commoditized product, for example, don’t worry if your North Star might not feel particularly unique. Maybe your execution is what differentiates you.
Some metrics tell us what has already happened to our business; these are lagging indicators. Other metrics predict what will happen to our business; these are leading indicators.
A good North Star Metric is a leading indicator of business success. This is why metrics like “Monthly Revenue” or “Average Revenue per User (ARPU)” aren’t optimal North Star Metrics: They tell you what happened in the past rather than predicting future results. Ideally, your North Star Metric is predictive of medium- to long-term sustainable growth.
For example, if you’re running a subscription-based product, you might consider annual revenue from subscribers to be a key metric, but it’s a lagging indicator. Instead, a subscription-based business could identify characteristics that correlate with a user who is likely to renew her subscription, and then build a North Star around that. If a user frequently runs a certain report showing the status of her customers, does that correlate to renewing a subscription? Perhaps that’s a hint that your North Star may be related to the information in that report.
Your North Star should be something you believe you can influence or do something about.
Your North Star should be something you believe you can influence or do something about. This means it shouldn’t be a measure of a broader market trend or reflect real-world realities that would be true whether your product existed or not.
For example, a team building an HR app to improve companies’ employee experience and retention might consider “Customers’ Lifelong Employees” an aspirational North Star Metric, but broader trends in the economy and labor market will make it difficult for the team to influence this metric.
The North Star shouldn’t be so arcane or abstract that you can’t easily explain it to non-technical people or express it in plain language. A simple test: As you develop your North Star, describe it to someone who knows your business but lacks deep technical knowledge. If it’s a good metric, they’ll be able to quickly understand it without much trouble.
If you’ll never be able to configure your products and processes to collect the data needed to track and communicate the North Star Metric, it’s not a good metric, even if you can imagine it is a strong indicator of value to the customer.
Don’t fall into the trap of thinking that your North Star must be something you can measure with your current data and tools.
For example, the team responsible for a digital platform dedicated to producing thought-provoking short films might love the idea of increasing the number of people who silently reflect on the films as they lie in bed at night. However, it would be difficult to design processes and products that discern the thoughts of customers lying in bed. So a better North Star Metric might be customers sharing insights in a community discussion—something that can be implemented and tracked. In this example, the number of customers sharing their insights, a measurable metric, is a proxy metric for the number of customers pondering the films, which is tougher to collect.
However, don’t fall into the trap of thinking that your North Star must be something you can measure with your current data and tools. In many cases, with just some light instrumentation and investment in new tools, or even just improvements in communication and relationships, you’ll be able to measure what you want.
Some metrics might make you feel good about your team’s performance or your market in the short term, but don’t actually tell you about your product’s long-term success. Be wary of choosing these vanity metrics for your North Star Metric.
Example Vanity Metrics:
“A question I ask my workshop attendees,” explains Amplitude’s Senior Engagement Manager Parth Mistry, is “if this metric were to go up, would you be able to state unequivocally that this was a good or bad thing? And perhaps more importantly, what action can I take as a product manager or marketer based on this information?”
While it might make your team feel good to know that you had the most activity you’ve ever had on your inquiry page, or that this month your team had better development velocity than ever before, those metrics won’t actually tell you about the success of your product, and shouldn’t be used as your North Star Metric.
Example: Going Beyond Vanity Metrics with the “Happy Deliveries” North Star
A delivery app had considered potential North Star Metrics like “People Opening the App,” “Scheduled Deliveries,” or “Early Deliveries.” But there was a problem. These metrics masked the real drivers of retention and customer lifetime value (LTV).
However, the team behind the delivery app conducted research with customers which concluded that valued deliveries were neither early nor late. Instead, these transactions simply had no issues—what the team ultimately called “Happy Deliveries.” The company found that Happy Deliveries are highly correlated with retention, which drives customer lifetime value. Thus, Happy Deliveries became the North Star Metric.
As you consider what makes a good North Star, also recognize what the North Star Framework is not — though it can work alongside and inform many of these related models and concepts. See Tips on Using the North Star Framework with Related Topics for more information.
The North Star Framework is not: