Is your North Star Metric 🏆 or 💩?
Updated: Mar 6, 2022
Just for fun, let's do a Metrics Quiz:
If your company has a single “north star” metric, give yourself 1 point.
If every employee in the company can explain how their work moves that metric, give yourself 5 points.
If that number is a financial metric like revenue or profit… subtract 10 points.
Profit is bad?
Remember, your “North Star Metric” should align each employee’s day-to-day work. So, the problem is there are too many ways to make money that erode customer value. It can lead to "bad behaviour" that seems beneficial on the surface but is actually horrible in the long-term.
If you’re a startup, you need to focus on finding and deepening your product-market fit by delivering value to customers.
However, If your product, & marketing teams optimise for profit in the first instance, that gives light to too many bad ideas - price increases, bundling, selling to the wrong type of customer…
All of which can work for big corporate, a "cash cow” business. But if you’re a startup who wants to be a Unicorn, you need to keep your employees focused on growing revenue by delivering huge value and deepening product-market fit.
So, your North Star Metric needs to be some increment of "value delivered to customers." (Great short blog post about selecting your NSM here!)
Revenue is Bad?
Ignoring financial metrics does not mean flouting them. To the contrary… the most famous growth hacks of the most profitable companies in the world virtually eliminated CAC and made growth insanely profitable. You just have to believe those profits start and end with customer value.