Many product managers have heard about north star metrics, but not every product has one.
In this article, we will dig deeper into north star metrics for product managers.
The stars can act as our lampposts.
North star metric helps us find our direction
All we need do is find a star that is directly above the place we need to get to and it will point exactly the right direction for us, from the quarter of the globe away. (Tristan Gooley)
It is a very common feeling to feel lost in start-ups. "What is our goal again?" "Does this fit our growth strategy?" "What do I want my team to focus on?"
Working in start-ups is like walking in a dark forest and not knowing what might come in your next step.
You need to find your direction towards that place which you call success.
In an ever-changing environment where you need to adapt your goals to the fast-paced changing environments, you need to define your Northern Star Metric to keep your team focused.
This north star metric will be broken down into smaller metrics. This will guide you through your day-to-day work and help you with making the right decisions during the development phase.
The most important aspect of North Star Metric is that it will give your organization clarity and alignment.
With a clear metric, every team will have a clear guide to what to compromise from and what kind of trade-offs they should do.
This will also give a clear understanding of the progress of the company with objective evaluation. Last but not least teams will be accountable for an outcome.
Even though North Star is fixed and does not change over time, it should be flexible enough to react to significant market changes.
Products go through different phases, where your goal might change.
Right after you launch the product, you might be focusing on getting as many new users as you can.
This translates to a new customer growth rate.
As your product matures, you might want to focus more on making the users come back over and over to use your product.
This translates to a retention rate.
To find your north star metric, you need to fully understand the phase your product is in and you need to set a clear goal.
In bigger organizations, the goal might be set up by the CEO, CPO, or upper-level management.
However, in some organizations product managers will be in charge of that. In case you are the one to set the goal, make sure this is fully aligned with the management and stakeholders.
If your company is focused on getting back the users that it lost during pandemics, you don't want to be the product manager who focuses on increasing the profit margin.
What makes Northern Star Metric vital for you is that you know at a glance if you succeeded or failed.
The faster you can see your success or failure, the faster you can work on your product to improve the metric.
This gives you a very clear picture if you need to rethink your product development strategy.
Being agile in that manner will then give you an advantage over your competitors.
A simple north star metric will let everyone in the organization understand clearly what brings value to the product.
It avoids misunderstanding, confusion, and long discussions. Even though this might sound trivial, you do not want teams and individuals to misinterpret the metric. A misinterpretation might result in wrong decisions in prioritization and solution building.
Different industries have different metrics that they will focus on. Below are some examples that can inspire you for your organization:
Airbnb - Number of nights booked
Uber - Rides per week
Whatsapp - Messages sent
Amazon Prime - Number of active Prime members
Spotify - Time spent listening
See? Even if you might not be working for these companies, on your first day you would know how to make decisions by looking at these north star metrics.
For more examples, you can also read Growth Hacker’s presentation.
Set your North Star Metric with the relevant individuals in your company.
If you are leading a small team, you can involve your team to define it. If you are working in a bigger organization you should rather involve the decision-making stakeholders in the process.
To make the right decisions, you need to fully understand the vision of your organization and the customer journey. This helps you to grasp how to add value to the product.
How you decide on the metric will depend on the organization, however, regardless of the constellation, it must be communicated to every single person working for the product.
You need to make this metric visible to every individual in your team. Everyone then should know the direction you are heading and what should be the source of truth for decision making.
When everyone is on board with the metric it also gets easier to identify a failure, which results in a faster reaction to act on it. Remember in the agile world, it's not about not making mistakes and avoiding failure. It's about spotting the failures early enough and being able to react fast to ensure change towards success.
A frequent question that comes from many product managers is that if there can be multiple North Star Metrics for a product. Absolutely! Any company with a complex business model can choose to have more than one north star metric. A good example of that would be Amazon. Since Amazon has multiple products that are offered under a single roof, it makes sense to have multiple metrics. While for Amazon shopping, the number of orders could be the North Metric Star, for Amazon Prime it can be the number of paying users. Always remember, North Star Metric is an exercise to simplify the company strategy, so if you think multiple metrics would work for your organization: Go for it!
If you are a small and new team and don’t want to splash money on a big display, Create an old-school communication way: On the most visible area in your office write this metric daily next to the target metric (yes pen and paper still work!)
In case you have enough money to spare for a nice big display, place it in an area where everyone passes by.
In times of remote work, which makes it not possible to have a physical dashboard, announce your north star metric in your company-wide meetings
If you want to do this more aggressively, send a weekly email/Slack message to the team
I would suggest going even more creative about how to communicate this number. In my organization, which works on providing world-class ride-sharing service, the North Star Metric is the number of rides (quarterly and yearly).
In the entrance area of our office, we have fancy custom-made Tungsten light bulbs that light up the real-time number. This is also where we make our company-wide meetings (before Corona hit), so we make sure everyone knows the number by heart and gets motivated every day.
So what's your North Star Metric?