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    Intro

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    Good morning and welcome to the future 👋

    We seem to have a ‘reaching for the stars’ theme going this week — yesterday, Richard Branson; today, company metrics …

    Today’s update is 451 words, 2.3 minutes

    Snippets

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    Micro Knowledge

    North Star Metric Concept Explained

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    Source: shoto.io

    What’s the deal: A North Star Metric (NSM) is a concept that aligns an entire company to a common goal. For startups, it is a powerful mechanism for driving sustainable growth.

    Why it matters: Alignment is critical for any organization. It’s difficult to ensure that everyone is working towards the same goals while still operating and thinking independently, especially when the organization is divided into separate teams.

    Examples of an NSM:

    Let’s look at how some famous companies define their NSMs:

    • Facebook: # of monthly active users
    • AirBnB: # of nights booked
    • Netflix: # of view hours per month
    • Uber: # of weekly trips

    We at shoto use # weekly active users as NSM.

    How to find your North Star Metric: First, understand how your most loyal customers get value from your product/service.

    Choose an absolute, aggregate metric (not a relative one like share of active users) that represents the total value your company delivers to its customers.

    Finally, to be most effective, select a NSM that has an emotional connection to the mission of the company. This will increase the motivation of teams to improve the NSM.

    Revenue is not a good NSM. Focus on value growth instead.

    • Revenue goals are not inspirational: I can tell you from my own experience that focusing too much on revenue goals can have a detrimental effect on team morale.
    • Revenue might be the wrong indicator: If your company constantly delivers value to customers, revenue will follow. On the other hand, optimizing revenue might lead to bad decisions like sub-optimal price points.

    Bottom-line: Be aware that NSM is an output metric. To increase your NSM, you need to figure out the input metrics that drive it.

    North Star Metrics are a very powerful tool to align your teams and drive sustained company success.

    But, they must be selected carefully and reviewed regularly, especially when you’re just starting out. Choosing the wrong metric could lead you astray.

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