A North Star is a company-level metric that is the one measurement that’s most predictive of a company’s long-term success. Many people say that it is just another name for the One Metric That Matters. I think that they are two sides of the same coin. Regardless of what you think about OMTM to qualify as a “North Star,” a metric must do three things:
- have a direct impact on the revenue,
- show the value that is delivered to the customers,
- measure company progress and growth.
Why you should carefully pick the North Star?
Determining the correct North Star is very important. The disaster caused by wrongly determined North Star is best known on the Myspace vs Facebook case.
- Registered Users – Myspace chose this metric as most important. It measures how many accounts are in the system.
- MAU – Facebook chose this one. It measures Monthly Active Users, so regardless of accounts amount they just focus on returning users.
As history shows – registered users are worthless when they don’t use service so often. That error let to Facebook domination.
What are the good examples of North Star?
I will provide some examples but remember that none of them is better than others. How good is metric depends on company specifics and unique selling points.
eCommerce
- The average value of daily purchases.
- Daily value of profit (income from purchases minus expenses on service and advertisement).
- Customer lifetime value (amount of money one customer spends in your eCommerce with all his purchases).
Mobile App
- MAU (Monthly Active Users) when you would like to grow and sustain the user’s database.
- Daily views when you are selling ads and more views mean more to sell.
- NPS (Net Promoter Score) when you value user satisfaction and count on origin spread.
Find it, sooner the better
There is never to soon to define the company’s North Star. Even if you are running a one-man business you should find and measure your metric, otherwise, you might never know if you are moving in a good direction.