Is Your Company's North Star Dim? A Practical Guide to Rekindle Long-Term Success

Remember staring at a compass in the woods, lost and frustrated, not knowing what to do or where to go?

That's what running a company without a North Star Metric feels like. You're chasing many data points, competitors, and profits, but never truly knowing if you're headed in the right direction.

But what if you had a single, guiding metric that illuminated your path to success?

This guide isn't just about picking a random metric and calling it a day.

It is about pinpointing the ideal strategy to identify a North Star that resonates with your company's soul, ignites your vision, and becomes the anchor in your decision-making storm.

You will learn about the two most common approaches most companies use to find their North Star, what they mean, and how to use each.

Whether you're just starting and gaining some traction or an established company, this guide applies to both.

Let's get going.

Clearing Misconceptions

First things first, it is crucial to cast away some common issues when choosing a North Star.

So many companies struggle with this because they think it is too unrealistic to attribute one metric to the overall company's success.

So they tend to factor in many data and metrics to guide their progress.

To clear the air, here is what a north star SHOULD NOT be:

1. Choosing a metric that's too focused on revenue or growth: This can lead to short-term thinking and a neglect of customer value.
2. Not having a clear definition of the metric: This can lead to confusion and misalignment within the company.
3. Not tracking the metric regularly: This makes it difficult to see how you're doing and make adjustments as needed.
4. Confusing metrics like CAC/LTV and OKR as the north star. These are important metrics but they are not a north star.

So by default, the ideal north star metric should:

?? Reflect value creation over time:?The metric should measure the value you're delivering to customers, not just revenue or growth.

???Be a leading indicator of future revenue, meaning that if you improve the metric, revenue should eventually follow.

?? Be measurable and trackable over time, so you can see how you're doing and make adjustments as needed

?? Be something that everyone in the company can understand and rally behind.

Identify What Game to Play

Now that you know the basics of choosing a north star, it is time to dive deeper and see which of the following 3 areas your business revolves around so you can focus entirely on that which dictates your best north star.

According to Amplitude and from analyzing 11.000 companies and 3 trillion user actions, there are 3 types of games most companies fall into:

• The Attention Game - How much time are your customers willing to spend on your product?
• The Transaction Game - How many transactions do your customers make on your product?
• The Productivity Game - How efficiently and effectively can someone get their work done?

In the game of Productivity, less is truly more. Your users choose your product for a reason: to get things done efficiently and flawlessly.

Their satisfaction hinges on accomplishing tasks with minimal fuss, not racking up hours spent on your product. A successful outcome might even be seeing them use your product less, but more effectively.

Contrast this with the Attention game, where captivating users and keeping them glued to your platform is more favorable. Here, dwell time and active engagement become the measuring sticks of success. The longer users stay absorbed, the better.

And then there's the Transaction game, where frictionless purchase journeys and seamless product discovery are paramount. Helping customers find what they need, finalize transactions effortlessly, and track deliveries with ease are the keys to victory.

To know which game you play at:

• The Attention Game:

Catchphrase: "More eyeballs, more wins!"

You know you're winning when: Users are glued to your platform, devouring content, and spending hours lost in the experience.

Think: Facebook, Netflix, Instagram.

North Star Metric example: Daily Active Users (DAUs) or Time Spent per Session.

• The Transaction Game:

Catchphrase: "Every click is a clinking coin!"

You know you're winning when: Customers seamlessly find and buy what they need, driving up sales and revenue.

Think: Amazon, Uber, Airbnb.

North Star Metric example: Purchase Rate or Gross Merchandise Value (GMV).

• The Productivity Game:

Catchphrase: "Less is more, done is best!"

You know you're winning when: Users efficiently achieve their goals, minimizing time spent and maximizing output.

Think: Slack, Asana, Adobe.

North Star Metric example: Tasks Completed per User or Time to Value (TTV).

Remember, the winning metric is aligned with your game. Don't chase DAUs if you're in the productivity game, and don't obsess over time spent if transactions are your goal.

Choose wisely, track relentlessly, and see where your product falls in these games.

Once you are done with this step, move to step 2.

No matter the industry you’re in, see where your product fits with the following:

1. Breadth - How many users are using your product
2. Depth - The level of engagement your customers have with your product
3. Frequency - How many times does the user engage with your product
4. Efficiency - How efficient your product is in solving or delivering value to your customers.

Let's see how Spotify and OpenTable used this framework.

You can create a simple spreedsheet to resemble this sheet for your product.

Ideally, You would want your key team members to do this exercise to see more input data and the 'why' behind choosing what they chose.

This ultimately will help streamline the process and end up with a more focused view on reaching the best North Star metric that speaks your product's and customer's value.

According to Amplitude , this exercise is better done in silent brainstorming sessions.

Brainstorming sessions often fall victim to a vocal minority effect. A handful of quick thinkers tend to hijack the conversation, leaving introverts and deliberators feeling silenced or their ideas overlooked.

This can lead to the 'first-idea-fallacy,' where teams build momentum around the initial suggestions without adequately exploring alternative approaches.

To combat this, you can implement techniques like silent brainstorming rounds, rotating facilitators, and asking specific questions to encourage diverse perspectives and generate truly innovative solutions.

Once you have the results, encourage your team to share them and have a talk.

It doesn't have to be perfect, but it is the closest you would come to finally choosing your true North Star.

The HEART Framework:

Another alternative to Amplitude's approach is the HEART framework which stands for:

Happiness: What metric reflects user satisfaction and loyalty towards your product or service?

Engagement: How do users actively interact with your product or service?

Adoption: How widely is your product or service used within your target market?

Retention: How well do you keep users engaged and coming back for more?

Revenue: While not the sole focus, it's still an important factor to consider.

Run your product against each of these initials and you should land on your ideal North Star metric.

I strive to cut to the point and avoid any fillers or unrequited fluff.

I hope this article was helpful to you!

Feel free to share your thoughts if I missed something or if you have a better solution to implement :).

Happy growth!