Choosing Your North Star Metric
www.lennysnewsletter.com
Hey there,
This is just quick email to let you know I wrote a guest post for Future (a16z’s new media site) that I’m pretty excited about. It’s a guide for helping you choose your North Star Metric(s), based on a survey of current and past employees at over 40 of today’s most successful growth-stage companies. Check out the table below for a glimpse of what you’ll find. Your North Star Metric is your strategy, and your strategy is your North Star Metric. I hope this guide helps you choose wisely.
If you have any feedback, questions, or thoughts, I’d love to hear it in the comments.
Have a fulfilling and productive week 🙏
I'm surprised that "Customer Outcomes" isn't a North Star Metric category listed for B2B businesses.
For example, if you're a company in the sales acceleration/sales tech space, then your NSM could/should focused on the two most important outcomes: increasing # of Opportunities created (for SDR teams) or increasing Closed-Won $ (AE teams).
So the North Star Metric could/should be "% increase in rep productivity" or "% of customers achieving their new business goal".
This aligns with Amplitude's definition of the NSM: "This metric is a leading indicator that defines the relationship between the customer problems that the product team is trying to solve and sustainable, long-term business results... Increasing this (metric) would improve both customer value and key business results—like customer retention and, ultimately, subscription revenue."
In short, the best North Star Metrics align the success of the customer with the success of your business.
Curious for your thoughts on this...
Loved the North Star metrics conversation. It is so important to create this metric to get the entire organization mobilized behind a clear objective. Awesome post Lenny !!
If I could add to this - From my experience in labor marketplace (gig economy), one NSM that works is "number of hours" worked on the platform. This is in contrast to "number of shifts" that most companies use.
Why "number of hours" worked?
- Atomic unit - It's the logical, unit of work that the job seeker performs on the platform. It is also the way the companies place their job requirements on the platform.
- It connects to everything else - Payments are done on an hourly basis, we can identify or extrapolate experience based on number of hours worked (more hours --> more experience, more engagement and more retention)
- Aligned with success for both sides of the marketplace - as the number of hours increases, companies and talents both have "fulfillment" and allows us to ensure matching is done easier - hours posted vs hours worked.
What do you think? Is this the right approach for labor marketplaces? Could there be another approach?