The North Star Metric – A Pathway to Business Growth

In this article, we will discuss the crucial next step after the success of your Minimum Viable Product (MVP) – What now? This question has undoubtedly crossed your mind. It is equally important to follow a structured plan that maximises your growth now that we have cleared the previous step. Let’s delve into analyzing the next strategy.

Every business needs a guiding light to steer it towards success. That’s where North Star Metrics (NSMs) come in. NSMs are the key performance indicators (KPIs) that help businesses measure their progress towards their goals. But with so many metrics to choose from, how do you pick the right one? In this article, we’ll explore the importance of NSMs, how to choose the right one for your business, and why revenue shouldn’t be your only NSM. Let’s get started!

Understanding the North Star Metric (NSM)

Before you decide on your North Star Metric (NSM), you should have a good grasp of the idea. The NSM is a measurement that aids in a company’s growth. It is a metric that best reflects the value that a company provides to its customers. Additionally, the NSM directs a company’s long-term growth, rather than its short-term growth. 

The NSM is different from other metrics. It’s not just a measure of performance – it’s a measure of progress towards a specific goal. It’s the metric that tells businesses whether they are on track to achieve their most important objective.

Finding Your North Star: How to Choose the Right Metric for Your Business

Customers are the lifeblood of any business. Without them, there would be no revenue, no growth, and no success. That’s why it’s crucial for businesses to focus on customer satisfaction and loyalty. In fact, customer-related metrics like NSM, Customer satisfaction , Net Promoter Score  are important to track business growth . The NSM is one such customer-centric metric which has the potential to drive business growth. By setting customer-related NSMs, businesses can ensure that they are always putting their customers first and providing them with the best possible experience.By focusing on the NSM, a company can align its resources and efforts to achieve its long-term goals. 

Building a business involves a lot of energy & it is crucial  for all the members associated with the company to have the same goal driven mindset . By using the NSM, businesses can ensure that everyone is working towards the same goal and that all efforts are aligned towards achieving that goal. 

Setting goals based on your NSM is a critical step in achieving business growth , you’ll need to identify the factors that are driving your NSM. For example, if your NSM is customer lifetime value (CLV), then you’ll need to look at the factors that are driving CLV – such as customer retention, purchase frequency, and average purchase value. Once you’ve identified the factors that are driving your NSM, you can then set goals based on those factors. 

Here look at this example: “Spotify” uses the North Star Metric (NSM) of “Monthly Active Users” (MAUs). This metric aligns the entire company around a single objective – to get more people to use the Spotify app on a monthly basis.It is a simple, actionable, and measurable metric. By tracking and analysing the factors that are driving MAUs, such as the number of premium subscriptions or the time spent listening to music on the platform, Spotify is able to make data-driven decisions and continuously improve their product.  This metric helps the company to understand how many people are using the platform each month, and it helps to guide the company’s long-term growth.

Finally, Spotify has built a culture of growth around their NSM. Spotify is able to continuously improve and iterate on their product, which has helped them achieve significant business growth.

WHY REVENUE SHOULDN’T BE NSM 

Every business needs a clear objective to work and to guide their growth.  The correct way of implementing the NSM is in a way that it creates a pathway for your business growth. By setting customer-related NSMs, businesses can ensure their customers with the best possible experience. 

One of the biggest challenges of implementing the NSM is selecting the right metric. The NSM should be directly tied to business growth. However, each business is unique, what works for one company may not work for another. Consider a specific business model, customer base, and growth goals.

Emphasising on growth culture , businesses can continuously improve and iterate on their product. This means that everyone in the company should be focused on improving the user experience and increasing engagement with the platform by using a data-driven approach. 

While revenue is an important metric for any business, it shouldn’t be the only metric that businesses use to measure their success. Instead, focus on customer satisfaction, customer lifetime value, and customer retention .Create a Positive customer experience, build brand loyalty, understand your  customers.This can help your business  improve. 

OUR THOUGHTS

The North Star Metric is a powerful framework that can help businesses to drive growth and create a culture of innovation.However, setting an NSM is just the first step. To achieve business growth, companies must also identify the factors that are driving their NSM and set goals based on those factors. By doing so, businesses can align their resources and efforts towards achieving their long-term objectives. Ultimately, the NSM is more than just a metric – it’s a mindset. By building a culture of growth around their NSM, businesses can encourage experimentation, innovation, and data-driven decision-making. Thus NSM can help companies to continuously improve and innovate , which can lead to significant business growth over time.