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What is a North Star Metric and why you should have one in your company

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More and more companies are using North Star metrics to focus on one goal. If the teams in the same organization set different objectives, that will make the work difficult, therefore, it is essential that all the teams in a company move forward with the same North Star Metric. Here we explain what a North Star Metric is and why your entire company should be clear about it. 

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Index of contents

What is a North Star Metric?

The North Star Metric is a concept that has emerged in recent years in Silicon Valley companies. This metric is the indicator that best captures the core value that the products and services of each business offer to customers

It is very important to optimize a company’s efforts to grow this metric and drive its sustainable growth across the entire customer base. 

To discover North Star Metric, you have to understand the value that the most loyal customers get from using a product. There may be more than one NSM that works but it is highly recommended to simplify it to one. 

All departments in an organization play an important role in delivering value to customers. In the case of marketing and sales teams, they try to attract new customers to the funnel; And, teams as a product and customer service also play a key role in ensuring that potential customers can experience the core value of the product. In order to coordinate these teams and end up working together, it is important to define a metric that unites them with a common goal. 

Once the star metric is decided, it is important to document all the variables that work together in order to move that metric. Typically, variables include parts of the customer lifecycle such as new user registrations, new activations, and many more. 

Using an NSM gives the company: 

  • Clarity and alignment on what the product team needs to optimize and what can change
  • Communicate the impact and progress of product organizations to the rest of the company. 
  • The product is accountable for a result. 

A North Star Metric is the key to success for a company. It defines the relationship between customer problems that workers are trying to solve and the revenue that the business intends to generate by doing so.

Why is it important to have an NSM?

An NSM is critical in aligning a team to drive rapid and sustainable growth. And, now that you know what a North Star Metric is, here are several reasons to establish one: 

Team approach 

When the growth of a business is measured by the real value delivered to customers, it is clear that more departments are involved and not just the marketing department. Therefore, it is important that all teams have the same approach. 

Drive growth

Once the whole team understands what the NSM is, the next step is to define the Input Metrics to continue growing.

Businesses use North Star metrics so they can focus on one goal. If within a business, the teams set different objectives, that will make the work difficult, that is why it is essential that all the teams in a company move forward with the same North Star Metric.

It is true that companies with complex business models can have multiple North Stars and all of them are made up of sub-metrics. 

The North Star Metric is basically an exercise that serves to simplify the general strategy of the company in terms that everyone can remember, understand and apply in their daily work. 

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How to find a good North Star Metric? 

In order to find a good North Star Metric, companies have to decide what is really essential for their business. Not all businesses succeed, as a metric that simply generates money without satisfying customers will end up failing in the long run, just like a company that satisfies customers without being profitable. 

It is very important that a North Star metric: 

  • Ask yourself, what is essential to running the business? It is advisable to make a list. 
  • Ask yourself, what KPIs and metrics do your top key drivers measure? 
  • Ask yourself, what metric does all of the above encapsulate? 
  • Build a metric hierarchy with the North Star Metric at the top of the pyramid. 

Companies will also need the right analytics tools to measure progress towards their North Star metric and sub-metric. Without easy-to-use analytics, companies will never be able to know whether or not they are succeeding and what to fix. 

Parts of a North Star Metric

  1. A product vision statement
  2. A metric that serves as a key measure of a current product strategy. 

A good North Star Metric has to be derived from a true understanding of the actions that provide value to the customer, it has to get as close to impact as possible. Which means that daily active users or registered users are not good KPIs since they say absolutely nothing about what their customers think and value about the product. If teams fail to connect customer value directly to their North Star metric, they run the risk of leading your business down the wrong path.

NSM Examples

Here are some examples of North Star Metric. 

Electronic commerce 

  • Number of weekly customers who complete their first order 
  • Value of daily purchases 

Media 

  • Records and Withholdings 
  • Number of daily active visitors
  • Total reading time

An NSM enables you to drive sustainable business growth, and captures the core value proposition you deliver to customers. Try to optimize and focus efforts to grow this metric and drive sustainable growth whether it is a digital product or a company.

If you still have questions about how to establish a North Metric, you can start by identifying what the fundamental metrics of your business are with this webinar.

How to define and interpret metrics and KPIs





Do you think it is necessary to have a North Star Metric? Comment and share! 

And, if you also want to specialize in the business world, take our Master of Executive MBA in Digital Transformation. You will learn from the best professionals.

Master of Executive MBA in Digital Transformation

Do you want to be the best in the business area?

Sign up!

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