North Star Metric: Guiding Businesses to Success

1. Amazon is not about the monthly revenue, it's all about the number of orders per month,
2. Whatsapp is not about the number of accounts, it's all about the number of messages sent,
3. Uber is not about about the number of app installs, it's all about the number of rides per week,
4. Best is not about the number of monthly users, it's all about the number of votes per month.

In the rapidly evolving world of business, companies constantly seek a compass to navigate the competitive landscape. This compass, often referred to as the "North Star Metric," has become a pivotal concept, especially in growth marketing. It's a single, focused metric that aligns a company's efforts towards its long-term goals. To understand its importance, let's delve into what a North Star Metric is, dispel common misconceptions, and explore its classification.

1. What is a North Star Metric?

Sean Ellis, known for coining "growth hacking" during his tenure at Dropbox, popularized the term "North Star Metric." It's a singular, overarching metric that acts as a focal point for a company's growth strategy. Here are its key characteristics:

• Singular Focus: It's not a collection of metrics but a single, clear metric that creates a unified focus across the organization.
• Clarity and Comprehension: Easily understandable, it ensures everyone in the company speaks the same language.
• Customer-Centric: Reflects the value customers derive from the product, focusing on the customer experience.
• Sustainable Value: Ideally encourages habitual use, ensuring long-term customer engagement.
• Alignment with Vision: Represents progress towards the company’s mission, aligning and inspiring teams.
• Quantitative Measure: Relies on concrete numbers, not subjective opinions.
• Action-Oriented: It's a metric that drives action and decision-making.
• Indicator of Success: Acts as a leading predictor of long-term business success.

For instance, Amazon focuses on the number of orders per month, indicating its emphasis on customer transactions. Similarly, WhatsApp's focus on the number of messages sent reflects user engagement, while Uber's emphasis on the number of rides per week highlights service usage.

2. Common Misconceptions

It's crucial to understand what the North Star Metric is not:

• Not Multiple Metrics: It’s a singular metric. Having multiple “North Star Metrics” is like having multiple North Stars in the sky – it doesn’t make sense.
• Not Purely Business-Value Focused: Metrics like Lifetime Value (LTV) or Customer Acquisition Cost (CAC) are important but don't necessarily capture customer-centric values.
• Not an OKR: While related, an Objective Key Result (OKR) is a goal-setting framework, and should not be confused with the North Star Metric.
• Not a Strategy: It should align with a company's strategy but is not the strategy itself.

3. Recommended Classification

The classification of North Star Metrics can vary, but a notable approach is provided by Amplitude, suggesting focusing on:

• Attention: Time and recurrent use of a product, indicating its value to customers.
• Transaction: The frequency of transactions made within the product, aiming to facilitate customer purchases.
• Productivity: The efficiency and effectiveness of a customer's work while using the product, aiding in task completion.

Case Study: Best App

An exemplary case of employing the North Star Metric is the Best app (https://app.best), which focuses on the number of votes per month. This metric highlights user engagement and decision-making, reflecting the core value of the app. It's not about the number of users but how actively they participate, mirroring the concept of customer-centricity in the North Star Metric.

Conclusion

The North Star Metric isn't just a trendy buzzword; it's a critical compass guiding companies towards their long-term vision and mission. By focusing on a single, clear, customer-centric metric, businesses can align their strategies, inspire their teams, and gauge their progress towards sustainable success. Whether it's Amazon, WhatsApp, Uber, or the Best app, the North Star Metric stands as a testament to the power of focused, strategic growth in the modern business landscape.