How do you define the success of a product?

The obvious answer for any SaaS company would be getting repeat customers, providing exceptional user experience and offering a phenomenal after purchase service to the customers.
And to break it down even further, you’ll probably work towards offering innovative and amazing features, better than your competitors.

But what if we say, none of this matters more than your north-star metric. If your north star metric isn’t aligned with your team’s KPIs; your product and your business may go downhill, big time.

In this article, we are going to cover the following things:

i) What is a north star metric?
ii) How do you find your north star metric for your product?
iii) Should (or should not) your company aim for more than one north-star metric?
iv) How can a north-star metric set your product for long-term success?
v) When to stop obsessing over your north-star metric?

Let’s deep dive!

What’s a north star metric anyway?

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The “North Star Metric” is a measurement in the company that yields results. Sean Ellis created the which allows companies to focus on one common goal for an extended period of time. This minimizes the need for frequent meetings, extensive documentation, and ultimately allows companies to focus on the metric that best indicates the value of their product or service delivered to customers and users.

If your company is a SaaS or a product company, your north star metric might be to increase the number of users using your product. Perhaps it's to increase the number of active users of your product. Or it might be to get a certain percent of your users to pay for your product.

But whatever your company does, you should have a metric that is the most important metric for your organization. Make sure that you always have your eye on that north star.

Now the next big question!

How do you find your north star metric for your product?

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With or without a compass, here’s how you can find the metric that makes all the difference for your product happen. The thumb rule being- your metrics match up with what your customers want and need. When you're working on your metrics, see if they can be measured in different ways to give you more insight in your product.

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There are two ways to reach your north star - the long route and the short route.

First up and a tad bit technical too, let’s look at the long route. Start by asking yourself what is essential to the business's functioning.

- Make a list of these factors and prioritize them
- Then, ask yourself what KPIs and metrics measure the top few, key factors
- Find a metric that encapsulates all of these factors and use it as your North Star metric
- Finally, build a metric hierarchy with the North Star metric on top of the pyramid

And finally, a more straightforward route would be this!

So when you're struggling to find the metric that affects all revenue, customer satisfaction and product likeliness among your audience, ask yourself this question: "What feature, product or process is most likely to pivot or move this important metric the most?"? If this metric moves higher, our product success goes up too.”

Once you crack this, you'll know for a long time where to focus without getting sidetracked. Getting laser-focused (and obsessed with your north star metric is what's required in this step.

For instance- Do you know Disney's Hotstar is obsessed with “increasing their audience's watch time”, and they're always looking for new ways to do so. Instead of focusing on metrics such as time spent, revenue spent, and subscriber revenue, the company is looking at ways to increase the watch time among their viewers. By doing so, they hope to improve their audience's experience and keep them coming back for more.

It's no secret that all of the most successful companies out there have one thing in common - they're all laser-focused on one main goal.

For example, Uber's north star metric is rides per week, Spotify's is time spent listening, Amazon's is number of purchases per month, Facebook's is monthly active users, and Slack's is daily active users. All of these big companies have achieved massive success by focusing on one common goal, and you can too! When you focus all of your professional efforts on one goal, you'll be amazed at what you can achieve.

This tells you only one thing: Focus on the numbers that’ll move the needle for the biggest things.

Should your company aim for more than one north-star metric?

Yes and no. Mostly no.

As a company, you ideally only have one North Star Metric. This means that you have a focus for all teams within your company. There is an exception to this rule and that is when you offer a variety of products that each provide a different outcome for your customer. This variety expects you to appeal to a wider range of customers, providing them with options to choose from depending on their specific needs.

Your north star metric is not something that you can change daily. It's a number that you want to track long term. Sure there will be short term trends for this metric, but it needs to be stable and increasing. If it's decreasing then you need to make changes.

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Simply sticking to a north star metric will benefit your product, your business, and your company. When you have a north star metric, your company's KPIs (key performance indicators) will align to your product's success. 

By tracking and aligning these KPIs to your north star metric, you're making sure your product is increasing in usage and happiness.

Now that you know how to find your north-star, let’s look at what happens when you stick to it long term!

How can a north-star metric set your product for long-term success? 

When you create a product, you have a goal that you want to achieve. It could be something relatively simple like making more sales. It could be something complex such as having a more connected relationship with your customers.

In both of these cases, you have set your metrics for success. As a product manager, it's your job to make sure that your product hits these success metrics!

There are a few benefits sticking your north-star:- 

i) Keep everybody on the same page, literally and figuratively

Be it your stakeholders, team, board of directors, product managers or whosoever, everybody knows clearly the company's success metric. Although different teams will have their own sub-goals and metrics to focus on, having a North Star metric means the whole company will be aligned around the same goal and will be able to map their team's goal to the metric everyone is obsessed with. This way, everyone is always aware of how their actions contribute to the bigger picture and the company as a whole can avoid straying off course.

ii) No space for grey areas. It's all either black, or white

A North Star metric can unify your company by giving everyone a clear perspective of the company's progress. This metric will prevent any confusion or misalignment within the internal teams, and ensure that everyone is on the same page - present and future, leading to improved employee retention and reduced turnover. 

When to stop obsessing over your product north-star metric?

The north-star metric is a great guide for decision making, but it's important not to get too fixated on it! Overusing or becoming too reliant on the north-star metric can cause companies to lose sight of other important aspects of their business.

According to Maahir Shah, Product Manager at Facebook, revealed in his podcast in “Mind the Product” that- a north star metric can become problematic when it's the primary or sole way that product managers and teams make big product decisions. This can lead to sub-optimal investments and products.

It's important to remember that not every task or project will have an immediate impact on the company's Northstar metric. But that doesn't mean that these other things are not important or shouldn't be done.

So to sum it up, it’s crucial for product managers to keep their users at the forefront of their minds. They need to think about what those users' core needs are and what the competition is offering. How can your product deliver better value and solve pain points? Once you've identified that, find a way to measure it against a Northstar metric to see if your investment is worth it.

Keep your compass ready!

Now that you’re all set, it’s time for you to go find your north-star metric!Keep in mind that your endgame is growth and prosperity. There will be times when you'll need to pivot and make changes to your North Star metric (or focus metrics) to match your company's revised mission. In other words, it's normal to have to reinvent the wheel altogether - especially if you realize you've been chasing the wrong goals. Just remember, it’s totally okay and there’s always time to catch up!

Also Read: What Does it Mean to be a Product-led Company?