What’s Your Company’s North Star? - November 12, 2018
Throughout the centuries, the North Star has served as an icon of influence. As a pole star, it is one of the brightest stars in the sky, and in historic times, served as a constant guidepost. Even mariners relied on the North Star due to its angle between the sky and horizon. When they could find their North Star, they knew where they were headed.
The North Star now has a significant meaning in business as well. According to business author Abe Larsen, for your company to experience its full growth potential, you need to identify your North Star—in the form of your key metric.
In this issue of Promotional Consultant Today, we'll explain Larsen's concept of the North Star metric and how your company can track this metric and what it can mean to further business growth.
What Is A North Star Metric?
The North Star Metric (NSM) is the one metric that matters in your business. It's a specific measure that best captures the core value your product delivers to customers. Focusing on and optimizing company-wide efforts to improve your NSM is key to driving long-term sustainable growth in your company.
Here are some examples of metrics by some well-known brands:
- Airbnb: Nights booked
- Facebook: Daily active users
- WhatsApp: Number of messages a user sends
How Can The North Star Metric Influence Your Company?
Identifying your North Star Metric can be the difference between becoming a great company or one that's on its way out. This metric also helps you understand your customers and products better.
Growth advisor and investor Buckley Barlow believes a major reason the social media site Myspace failed and Facebook succeeded has to do with the NSM they focused on. Myspace focused on Registered Users—a vanity metric. At the time, Facebook focused on Monthly Active Users as their NSM. The different focus led Facebook to succeed where Myspace failed.
Your NSM needs to focus on what will cause growth, and this leads to understanding current and future customers. It's also important to understand what value your customers get from your product and how they use your product to get that value. With that information, you can engineer a better product to help customers get the value they're looking for which will increase customer lifetime value, decrease churn rates and increase revenue and growth.
How To identify Your North Star Metric
First, examine how loyal customers engage with and use your products. Understanding this will help you identify which metric best embodies positive growth in this area. That metric will be your NSM.
Keep in mind that you might not select the correct NSM for your company on your first attempt to identify it. You may have to select a few different metrics and work backward, identifying other metrics that would support it in an attempt to figure out what is the best NSM for your company at this time.
Hila Qu, the former product manager for growth at Growthhackers, shares the following five points to keep in mind when selecting your NSM:
- The metric should indicate that your user experienced the core value of the product.
- It should reflect users' engagement and activity level.
- It should be the "one thing" that indicates the business is heading in the right direction.
- Ideally, the metric should be easy to understand and communicate across teams.
- Don't fall into the trap that you have to have a perfect NSM. What you are trying to do is find a metric that makes the most sense for the entire business to focus on. It might take a few iterations to finally find the right one.
Once you've identified your NSM, seek to understand which actions each member of the company should take to get that metric trending in the right direction. Next, each department should identify its own NSM that will provide additional supporting metrics. Doing this will help each person in the company identify which metrics they should track on an individual level.
Try these tips on identifying your NSM and watch your business soar.
Source: Business author Abe Larsen creates content for the Grow blog to educate people about the benefits of business intelligence.