The North Star Metric is a powerful, and often misunderstood product strategy framework. Growth hackers can lose themselves in their mission to grow as fast as possible. Ofcourse, rapid growth can be rewarding, but it’s not always equal to maximal growth. If you want to utilize your maximal growth potential as a startup, you will need a North Star Metric. Let me tell you why this relatively unknown term should be the center of your growth strategy.
What is the North Star Metric?
The North Star Metric (NSM) is the key measure of success and growth for the product team in your startup. It defines the relationship between the problems of the customer that the product team is trying to solve, and the revenue that your business aims to generate by doing so. It also gives direction to the growth of your startup in the long term.
Some examples of the NSM:
- Spotify: time spent listening.
- Airbnb: nights booked.
- WhatsApp: Number of messages a user sends.
The idea behind the NSM is this: if your company brings more value to your customers, it is growing. Your customers, in return to the added value, will stay with you longer and buy more. Needless to say they will refer their friends and colleagues to your product. The NSM will help you understand your customers, and build a long term relationship with them.
How the NSM will influence your startup
If you ask Buckley Barlow, the reason Myspace failed and Facebook succeeded has mostly to do with the North Star Metric they were focussing on. Facebook was quick to realize they had to focus on Monthly Active Users as their NSM. Meanwhile, Myspace was still focussed on Registered Users – a vanity metric. Now, Registered Users is not an unimportant number. It just doesn’t tell the whole story. If the customer doesn’t receive enough value from the product, he won’t continue to use the platform. By tracking Monthly Active Users, Facebook could easily monitor the changes in user numbers and see which users found value from using their platform.
The NSM will clearly help your startup in a lot of different ways. First, it creates a main focus. Every team will focus on different numbers, but the endgame is crystal clear. The NSM also makes the growth of your company easily trackable. With just this one metric, everyone can see how well the company is doing. Lastly, it puts the customer in a key position. By focussing on the NSM, you’re automatically bringing value to your customers. Results: your startup is more focussed, efficient, and ready for long term growth.
The following weeks I’ll be digging deeper into this subject, providing tools to find your own North Star Metric, and some useful do’s and don’ts to stay on track.