You’re struggling to keep your organization focused on a single point, but you’ve heard of the North Star Metric…
Departments and people within your company have different priorities making it tremendously difficult to get all noses pointed in the same direction.
I’m going to show you how to set up one metric that will keep all of your company pointing in the same direction and provide a clear focus to grow your business.
What is a North Star Metric?
Sean Ellis coined the term North Star Metric to make meetings simpler, document less, and allow teams to focus on one common goal.
To do this, the NSM must meet 3 requirements:
You could think of the North Star Metric (NSM) as one metric that best shows the value your product or service delivers to your customer…
The idea behind this is that if your company provides more value to the customer that your company will automatically start to grow itself.
What is a One Metric That Matters?
The name kind of gives it away, but…
The One Metric That Matters (OMTM) is one metric that a (marketing) team focuses on for 2-4 months whose results contribute directly to the North Star Metric:
The differences between the North Star Metric and the One Metric That Matters are:
It is important to keep the following in mind when preparing an OMTM:
- A percentage is finer than a total number because it is often clearer. So for example, conversion rate of a particular pop-up instead of total number of signups per day.
- It is comparable to other periods, websites or segments.
- That the metric is no more complex than, say, a golf handicap, it should be easy to understand.
- The OMTM must be S.M.A.R.T.
Why use NSM & OMTMs
There have been quite a few interpretations of metrics that should be important to your business…
But what are the benefits of a North Star Metric and One Metric That Matters?
- Clear focus for everyone in your company on what really matters.
- Focus on the customer, which leads to increased sales.
- By consistently thinking about the focus point for your team you will make a big impact in the long run.
- Faster results because your team can focus on one point so they are not as easily distracted.
- People can be held accountable for the results of their work.
- Progress can be clearly charted.
Possible alternatives to the NSM & OMTMs are the vision and OKRs, the difference between them is explained in the frequently asked questions.
How to formulate the North Star Metric?
You’re convinced, the North Star Metric makes your life easier…
But, how do you find your NSM?
For the original steps see: “What is a “North Star Metric”? (+ 8 steps how you can discover your NSM)“.
I added one step that I think is indispensable, let’s start with that:
- What do customers hire you for?
Complete the Value Proposition Canvas to understand why customers adopt your product or service.
- When do your clients achieve the result?
When has the customer had their “job done”?
- Does that apply to all your customers?
The value that the product or service provides must apply to the entire target audience.
- Is your North Star Metric measurable?
Is it measurable when customers achieve the desired end result?
- What is the right frequency to measure the result?
The North Star Metric should reflect the outcome of experiments, what is the right frequency for your product or service?
- How big is the impact of external factors?
Your company should have the most influence on the North Star Metric.
- Is the growth of the NSM directly linked to growth of your business?
If your North Star Metric grows then your business should automatically grow with it.
- Does the full Pirate Funnel affect the NSM?
Each step of the Pirate Funnel should influence the outcome of the North Star Metric.
- How often does your NSM change?
Basically, the NSM should only change if your offerings to the customer also change.
Then I’m going to give you some more content now:
1. What do customers hire you for?
The Value Proposition Canvas is a good tool to really find out why customers ‘adopt’ your product or service in order to accomplish their desired task.
Tip: provide as few reasons as possible why a customer would adopt your product or service, but make sure you have a deep understanding of your customer’s motivations in those few reasons.
2. When do your clients achieve the result?
The customer purchased your product or service to get a particular ‘job done’.
When do your customers achieve this desired result? Can you make this measurable?
Suppose your customer buys an anti-algae product from you because he suffers from a green pond…
Then the result is a clear pond after using your anti-algae product.
3. Does that apply to all your customers?
The North Star Metric should be overarching for all your customers.
If it is not, something is not right in your Value Proposition Canvas, because the value being delivered must apply to the complete target audience of your product or service.
If your anti-algae product is aimed at swimming pools and fish ponds, but your product fails to remove algae from swimming pools, you have the wrong target group…
In that case your target group should be fishponds only (or improve your product).
4. Is your North Star Metric measurable?
What you cannot measure you cannot manage…
The North Star Metric must be measurable and therefore can not be a vanity metric.
Eventually, you are going to run experiments whose effectiveness you want to be able to measure, which is going to be difficult if your NSM is not measurable.
To keep it simple we’ll take the North Star Metric of Facebook, the number of monthly active users…
This is perfectly measurable, a decrease and increase can be seen within a very short timeframe.
5. What is the right frequency to measure the result?
To make progress visible it’s important that you choose the right frequency in which you want to measure your North Star Metric.
If you choose a frequency of, for example, one year, it will take far too long before you will see any progress. Instead, you should preferably see daily, weekly or monthly progress.
A webshop would not be able to show progress if they choose the number of orders per year…
On the other hand, it would not be possible to see progress if you choose the number of orders per day, since weekend days will probably have a completely different order volume than weekdays.
Therefore, it would be best for a webshop to choose the weekly or monthly amount of orders.
6. How big is the impact of external factors?
As a company yourself, you want to be able to make as big an impact as possible on your North Star Metric, because the NSM should be a reflection of the connection your customer has with your company.
If you create a WordPress plug-in that needs to be paired with another plug-in…
And you choose the number of active downloads of your plug-in as the NSM then you are completely dependent on that other plug-in’s number of active downloads.
7. Is the growth of the NSM directly linked to growth of your business?
If the NSM is growing your business should be growing too.
Facebook has the number of monthly active users (MAU) as the NSM…
If the number of MAU on Facebook grows then the ad revenue also grows making Facebook as a business itself grow.
By using the number of e-book downloads as NSM you can get a distorted view of reality:
Someone may download your e-book multiple times due to a small error or a usability flaw, increasing the NSM, but not growing your business.
8. Does the full Pirate Funnel affect the NSM?
The entire Pirate Funnel must have an impact on the NSM…
If one part of the Pirate Funnel grows, it must contribute directly to growth of the NSM.
Suppose your NSM is the number of unique website visitors…
In that case, the retention component would have no impact because a returning visitor is not a unique visitor.
9. How often does your NSM change?
Your NSM should only change if your offerings to the customer change.
Using the same North Star Metric over a longer period allows you to observe long-term changes.
Extra: North Star Metric for digital products
Research has shown that there are 3 possible areas that a digital product can be in:
- Attention Game – how much time can users spend on the product. Consider companies such as:
- Transaction Game – how many transactions can users make on the platform:
- Productivity Game – how many tasks can a user complete on a platform and how much time do they save by doing so? Think companies, such as:
How do you formulate the One Metric That Matters?
The One Metric That Matters can come from 2 possible directions:
- From a strategic point of view, for example, expansion into France…
- Or from a bottleneck, which you may have discovered through the Pirate Funnel Canvas.
Tip: Further down in the examples, you can see that it is important to look at the size of your company when choosing an OMTM.
1. Strategic point of view
Suppose your company wants to expand into France…
Then it may be the case that there was little to no marketing activity in France before, in which case you could set up the following as OMTM:
“The number of organic blog visitors from France”
2. Bottleneck research
Suppose when you fill out the Pirate Funnel Canvas it comes to light that the conversion rate from Awareness to Acquisition is too low…
And you’ve found that not enough people are converting from Facebook ads to leads then your OMTM could be, for example:
“The number of people who convert from Facebook ads to mailing list subscribers”
It is not easy to find a good North Star Metric, even scale-ups still have a lot of trouble with this.
Mistakes you often see passed:
- Taking revenue as an NSM.
- The wrong metric in combination with tunnel vision
Below I explain it briefly:
1. Revenue as North Star Metric
Revenue is not a North Star Metric…
The NSM shows the value customers get out of your product or service, revenue is the result:
A nice quote for this:
“Omzet is de prijs die je klant betaalt. North Star Metric is de waarde die je klant terugkrijgt voor die prijs.”Ward van Gasteren
2. Tunnel vision
Especially if you still have a young company it can be difficult to choose an NSM…
Don’t make hasty decisions and certainly don’t make yourself too dependent on your chosen NSM in the beginning.
Focusing completely on the wrong NSM gives tunnel vision which ultimately leads to unintentionally neglecting certain parts in your business that do not directly contribute to the NSM.
So always make sure that every stage of the Pirate Funnel affects the NSM.
North Star Metric examples
The value that Spotify provides to their users is the ability to listen to music…
Therefore a good NSM for Spotify is the number of minutes spent listening to music. Nowadays you could also say the number of minutes listened through Spotify, because Podcasts are becoming more and more important.
If you were to do a brainstorm to get people to listen more you would quickly come up with the following two answers:
- You get users to come back to the app more often
- Or you make users listen longer during a session
Then you can start brainstorming what can make users come back more often or make them listen longer:
Other well-known examples of North Star Metrics are:
Turning now to OMTM examples…
One Metric That Matters examples
For OMTMs it is important to consider the size of your business, the bigger you are the better it is to choose a specific metric.
You can think of more examples of OMTMs than I can fit into 1 article, but here are some:
Then we’ll go ahead and wrap up…
What are you gonna do?
Now I’d like to hear from you…
Will you be using the North Star Metric / One Metric That Matters or would you rather use an alternative?
I’d love to hear from you in a comment below.
P.S. if you would like additional help please let me know at [email protected]
Frequently asked questions
The North Star Metric (NSM) best illustrates the value that your product or service delivers to your customer. It allows your entire company to focus on one metric to achieve growth.
The One Metric That Matters (OMTM) is one metric that a team can focus on for 2-4 months.
If your products are very different from each other you could have more than one NSM…
Generally you should have one North Star Metric that all teams can focus on.
The vision is often a goal while the North Star Metric is ongoing. A vision is also often not as measurable as the NSM
You could use both or one of the two…. Both can work, but OKRs can be used more broadly. An NSM is primarily focused on growth.
I try to help business surpass their growth ceiling with my content.
Let’s connect on LinkedIn!