How to set your North Star Metrics to drive growth like the leaders at Facebook, Amazon, Uber, Salesforce, Robinhood, and Netflix
By Nikolas Vogt
Ex-Growth Lead, Google | Founder, Growth Academy | Guest speaker, Santa Clara University
Successful growth strategies of industry leading companies like Facebook, Amazon, AirBnB, Uber, Robinhood, Salesforce, and Netflix usually start with answering the question “How do we define and measure success?”. Determining the so-called “North Star Metric” (NSM) not only helps to answer this question, it also helps to bridge the gap between a high-level mission and everyday tactics.
Most growth professionals will describe the North Star Metric as the “single metric that best captures the core value that your product delivers to customers.” In other words, it’s a company-wide metric for tracking customer value, and therefore, sustainable growth. In a previous article, we curated a list of 'good' North Star Metric examples of industry leaders to give you a better idea how other firms set NSMs.
To give you a better idea on how to approach North Star Metrics let's go through our ‘Growth Academy North Star Metric Checklist’ below and discuss the most common pitfalls when setting North Star Metrics. If you want to dive deeper into the art of North Star setting and other growth strategy skills check out Growth Academy and join our growth strategy courses designed by leaders from Silicon Valley and the European Tech Scene (Google, Amazon, TikTok, Spotify, Skyscanner, and more).
I. Growth Academy - North Star Metric Checklist
- Does your North Star Metric reflect value creation over time?
Every count of your North Star Metric (NSM) should reflect the creation of customer value/solving a customer problem. This means you have to determine a meaningful company-wide proxy action that reflects just that. Tracking users downloading or opening the app is usually not meaningful enough since it does not really reflect value creation or a problem being solved.
- Does your North Star Metric include the targeted usage frequency?
Good NSMs take into account the usage frequency of the product or service. To be more precise, your NSM should include the targeted usage frequency based on the organic frequency of your existing user base. The targeted usage frequency should be ambitious but not too unrealistic so that you have enough headroom for optimization.
- Is your North Star Metric tied to financial success?
As discussed in step one, a good NSM reflects value creation. On top of that, it should also (indirectly) reflect the potential for monetization. In other words, an increase in your NSM should also increase your opportunity for monetization. But be careful with setting revenue as the single NSM. This can be misleading since it does not necessarily reflect value creation (exception: advertising products). It is usually the other way around and revenue follows value.
- Does your North Star Metric cover the majority of your customers?
The NSM should allow you to assess the health of your whole user base or at least the majority of it. We recommend avoiding a NSM that only reflects changes in a particular subset of customers. If you want a more detailed view, we recommend adding filters afterwards that allow you to drill down into different segments of your NSM versus cutting out the majority of your users beforehand.
- Do you have control over the North Star Metric?
Make sure to set a NSM that the majority of your teams can actually influence. Otherwise your North Star can be ineffective and teams can get easily frustrated. Also, make sure that your NSM is relatively independent of external or macro-factors that are out of your control.
II. Most common pitfalls when setting your North Star Metric
Here are common pitfalls that we uncovered during our Growth Academy workshops and advisory sessions with more 250+ growth professionals:
- The leading North Star Metric does not reflect value creation
For example, setting revenue as a leading NSM can be misleading since it does not necessarily reflect value creation. It is usually the other way around and revenue follows value.
- The North Star Metric is not tied to usage and retention
Many companies set NSMs that disregard the actual usage of their product (e.g. “users acquired”). Such a metric usually looks good in the short run but disregards the health of their growth since it does not factor in retention.
- The North Star Metric is too complicated
The definition and explanation of a metric has to be simple so that everyone can understand the logic and track it in a robust way. Also non-growth executives and functions have to understand the metric.
- The North Star Metric is measured in percentages
Ideally your NSM grows to the top right and should not have a ceiling. If your metric reaches 100% relatively easy you cannot optimize it properly. Additionally, percentage-based metrics might fluctuate unnecessarily since the numerator and denominator can change.
You might wonder how to apply North Star Metrics and other growth strategies or your own business. If you want to learn how, sign-up for Growth Academy. We teach the frameworks of growth leaders at Google, Amazon, TikTok, Spotify, Skyscanner, and more, and provide step-by-step guidance on how to amplify the growth of your product and business model.