Mapping your growth model (tutorial)
How do you map your company’s growth model and create a metrics-driven culture? Today I’m sharing a tutorial, you can run these exercises with your team.
This tutorial comes from our Coaching Programme, where we always start off new cohorts with metrics, (after all, you get what you measure). It’s a two-step process — first, choose the right metrics and then align the team around them.
Choosing the right metric
Many companies overcomplicate things by focusing on the wrong metrics. People often start with a financial target (e.g. revenue or profits). That sounds quite reasonable for a business, but money is an outcome of business success, not the cause. Most employees can’t easily connect their work to a financial outcome. Either they don’t understand the business side well enough, or worse, they have an MBA and understand it too well, and start in with the financial engineering, which is usually bad for customers. Remember, happy customers cause profits, not the other way around. Therefore, we encourage companies to identify their North Star Metric, and have everyone focus on that.
The North Star Metric tracks how many happy customers you have, based on their behavior. First, you identify how a happy customer would naturally behave, and track how much of that behavior is currently happening. For example:
Amazon uses "repeat purchases"
PayPal tracks "Total Payment Volume"
AirBnB uses "nights booked"
Most SaaS companies use "weekly (or daily) active users”
If your North Star Metric goes up, you should naturally make more money. (Here's a longer article about North Star Metrics with more examples.)
Align your team around it
Once you've found a good North Star Metric, take the time to present it to everyone and explain why it was chosen. But the key to creating alignment is to ask (not tell) each employee how this work impacts their number.
Asking your team will create more work than presenting. You'll end up having a lot of conversations where you help people think through how their work fits into the broader business. That takes more time, but it's powerful because it forces everyone to think actively about their role in the business. Here's an example...
If you hire a compliance person, they probably think their job is to make sure every new customer goes through the requisite checks before they can use your product - perfect for compliance, maybe not for growth. But if they reconsider their work in terms of the North Star, they’ll look at their job as an opportunity to painlessly onboard as many new customers as possible while remaining compliant. That can lead to a much better customer experience and business outcome.
Once your team understands their impact on the North Star, they can focus on the most impactful work.
Simple Next Step:
Agree on your North Star Metric.
Ask each employee to think through how their work drives that number.
Help them decide which projects to prioritize for the biggest impact on the North Star.
For a more detailed explanation, here's a recording of the "Metrics" session from our coaching programme. I hope it helps!