Growth Hacks: Does a North Star Metric Oversimplify Growth?

Growth Hacks: Does a North Star Metric Oversimplify Growth?

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Does a North Star Metric Oversimplify Growth?

This blog post started as a response to an interesting article that I read this weekend Don’t Let Your North Star Metric Deceive You by Brian Balfour, Casey Winters and Shaun Clowes. The response took on a life of its own, so I decided to post it as a standalone blog post as well.

I have a ton of respect for each of the authors so it’s not surprising that they would write such a thought provoking article. Thanks guys for getting me thinking… Despite 20+ years of helping to build the early growth engines in several companies that have gone on to exceed billion dollar valuations (Dropbox, LogMeIn, Eventbrite, Lookout…), I still feel like I’m just scratching the surface in terms of truly understanding growth. Fortunately, it’s this mindset that has allowed me to keep improving my understanding of growth over time. So hopefully some discussion about the article will be welcome and beneficial for all of us.

OMTM vs NSM

In the article, the authors use North Star Metric and One Metric that Matters interchangeably. I define a North Star Metric (NSM) as the single best metric for tracking accumulated user value for a product over a time period. In other words, it is a company-wide metric for tracking sustainable growth. The concept of One Metric that Matters (OMTM), as I understand it, is not the same thing as North Star Metric. I first learned about OMTM from the book Lean Analytics by Alistair Croll and Ben Yoskovitz. They define OMTM as the “one metric that matters — right now.” In other words, what is the one metric that is most broken at this moment in the company or for a given team? I think this is a useful concept to bring focus to a team. But without combining it with an NSM it can lead to some potentially haphazard chasing of metrics. North Star Metric is important because without expanding value, growth of any other metric is unsustainable.

As a side note, I’ve always disliked the phrase OMTM because I agree that it seems to indicate that there is only one metric that matters. Again, that was not the intention of the authors of Lean Analytics.

Of course, there are many metrics that matter. But there are important benefits to using a single North Star Metric that provides enough simplicity for everyone in the business to track progress as it pertains to growth in customer value. In trying to understand and explain anything, there is always a balancing act between oversimplification and over-complication. Balfour and his coauthors worry that NSM is an oversimplification. I personally subscribe to Albert Einstein’s suggestion that “Everything should be made as simple as possible, but not simpler.” That still leaves room to debate: “What is too simple?”

So why is a North Star Metric useful? In my experience, an effective NSM improves alignment across all teams that play a role in driving growth. And the reality is that sustainable growth is a function of the cumulative actions of almost everyone in the organization. For example at most B2C companies, the product team controls new customer onboarding and builds features that drive engagement and retention in the product. Yet historically product teams did not use experimentation and metrics to improve onboarding and engagement results. I’ve found that an NSM is the first step in getting all teams to focus on the same scoreboard for success. The alternative is often conflicting functional-level metrics or even worse not using any metrics to guide execution.

But it isn’t enough to just give teams a company-wide North Star Metric. In my Jumpstart workshops I always start by asking team members why they were attracted to join their company. Most of the team members explain they were attracted by the specific mission of the company. We then figure out a way to measure progress of the mission. The goal of this exercise is to create an NSM that has meaning beyond just being a number and to help them build a culture around growing customer value. Then we break down the role that each functional group plays in moving the NSM in a positive direction.

This generally results in setting specific objectives around the best opportunities a team has for improving the North Star Metric. Without this type of an exercise, companies often use the NSM interchangeably with an objective metric (this is very common mistake I see almost daily with my free growth assessments).

I agree with the authors that an NSM is often too broad to provide much direction around the experiments a team should be running. This is where the concept of OMTM can actually be useful. Companies and individual teams should figure out their highest leverage opportunity for improving the NSM and set a specific measurable objective around this opportunity. Any experiment that the team runs should ultimately be evaluated on its impact of both the short-term objective metric and the overall NSM.

I also agree with the authors that using a North Star Metric doesn’t mean that you should ignore all other metrics. The growth role is a really about a puzzle you are solving to understand each of the elements of a business that drive sustainable growth of your NSM. The higher up the funnel you are working, the more important the use of proxy metrics for evaluating the effectiveness of your inputs (ideally most of these inputs are experiments). This is particularly true for products with a long sales cycle. But ultimately any decision that you’ve made based on a proxy metric should be reviewed later to understand its impact on your North Star Metric. I’ve had plenty of experiments that look great on the short-term metrics, but upon later review had no positive impact on the NSM for the overall business.

One last thought regarding the article is the suggestion by the authors that MRR is a typical North Star Metric. For the reasons they explained, I advise that MRR should never be your North Star Metric. Anytime a metric can be trending positive without a corresponding improvement in overall value delivered to customers, it is probably not a good North Star Metric. An extreme example to demonstrate this would be if you only offer annual subscriptions to your SaaS product. You may find that MRR looks great for the first year, but that the majority of “active subscriptions” no longer use your product. If that’s the case, the MRR growth would not be sustainable. That’s why it’s better to focus on a usage metric that suggests customers are coming back on a regular basis to get value.

Finally with all of this talk about metrics, it’s important that people don’t forget to also use common sense and intuition. For example, long before I heard the concept of North Star Metric or OMTM, I realized that we were focusing on the wrong growth metric at LogMeIn. While some board members praised us for all of the sign ups we were getting for our free service, it was obvious to me that the majority of these signups were getting zero value from our product — they never performed a single remote control session of their computer. Our hockey stick growth in the business happened when we shifted our focus from signups to people with at least one remote control session. I now understand that this was more of an activation metric than an NSM, but it does demonstrate the importance of shifting focus to value from some other metric. This shift also meant that I had to go beyond the scope of my role as VP Marketing, to working directly with the product and engineering teams to experiment to improve our new customer onboarding. Of course, metrics could have validated my intuition here. The metrics would have clearly shown that people who get no value from the product are unlikely to come back to repeat that experience. But I would start with common sense rather than always looking for answers in the metrics. Use metrics to validate or disprove your assumptions.

I believe the concept of North Star Metric is one of the most important concepts in growth. In my interview with Ed Baker last year at the GrowthHackers Conference, he explained that the first thing he did when he joined Uber was to work with the CEO to define a North Star Metric. And that he had learned the importance of an NSM in his earlier role as head of International Growth at Facebook.

But overall this was a great article. Thanks again to the authors for getting me thinking.


Does a North Star Metric Oversimplify Growth? was originally published in Growth Hackers on Medium, where people are continuing the conversation by highlighting and responding to this story.

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