North Star Metrics – A detailed guide (with examples) for product managers

Having the right North Star Metric (NSM) for your product is extremely important to ensure that everyone is making progress in the right direction.

Unfortunately, most product managers don't know how to create a North Star Metric. And the main reason for that is: they don’t understand the true meaning or the purpose of an NSM. 

Let’s dive deep and understand the details with some North Star Metric examples.

For a detailed list of examples, get access to the below Notion database.  It includes all the details of NSM for the most commonly used new-age products.

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What Is A North Star Metric (NSM)?

Theoretically speaking, NSM is a 𝘴𝘪𝘯𝘨𝘭𝘦 metric that measures the single most important goal of the business, and serves as a guiding light.

But practically speaking, it is a single metric that measures the 𝙫𝙖𝙡𝙪𝙚 created for 𝗮𝗹𝗹 users AND the business.

Why Is A North Star Metric Important?

The concept of the North Star Metric is derived from the actual North Star  (aka Polaris)

The North Star has been historically used as a navigational reference point. It provides a fixed point in the night sky, helping navigators find the geographical North.

Knowing the true North allowed them to find the best path to the destination. In other words, the North Star acts as the guiding light for navigators, ensuring they’re moving in the right direction.

An NSM does the same job in the business context. It helps everyone know the true North of the company and helps them stay on the right path towards the ultimate goal.

It facilitates the following critical tasks for the product manager:

1. 𝗠𝗮𝗸𝗶𝗻𝗴 𝗽𝗿𝗼𝗴𝗿𝗲𝘀𝘀: Creating impact that moves the North Star Metric in the desired direction is a good signal that you're doing the right thing and making progress.
2. 𝗣𝗿𝗶𝗼𝗿𝗶𝘁𝗶𝘀𝗮𝘁𝗶𝗼𝗻: when choosing what to do from a list of options, prioritize the one that has the maximum positive impact on the NSM. That will guarantee you are creating an impact for the organization and product.
3. 𝗔𝗹𝗶𝗴𝗻𝗺𝗲𝗻𝘁: NSM establishes a universal true North, which allows you to ensure everyone is moving in the right direction.

How To Find Your North Star Metric? (in 4 Steps)

So now that we know what an NSM means and why it is so important for the organization, let’s understand how we can create the best NSM.

While there are different schools of thought and various approaches to create the perfect NSM, I use a very simple approach with 4 steps:

1. List all users
2. For each user, list the goal
3. List the business goal
4. Find a metric (i.e. the NSM) that measures ALL of above

Let us understand these steps with the help of an example: let’s say we’re trying to create an NSM for Instagram

Step 1: List All Users

In the case of social media or multi-sided products, it is important to think of all the users that use the platform and/or contribute to it in any way.

So in the case of Instagram, we have: 

1. Content consumers
2. Content creators
3. Advertisers

Step 2: For Each User, List The Goal

1. Content consumers: find and view the best content
2. Content creators: get more users to view their content and engage with it
3. Advertisers: get more users to view and click their ad

Step 3: List The Business Goal

At this stage, it is important to think of the business’s (in this case Instagram) goal. This step ensures that we’re balancing the needs of the users with the goals of the business.

When we think of the business goal, it’s important to start with the vision and work from that. So in this case, Instagram’s vision is: “Give people the power to build community.”

For this vision to play out, a good way to think of the goal is to get more users to spend more time on the platform. I feel meeting this goal will help the platform stay true to its vision.

Step 4: Find A Metric That Measures ALL Above Goals

Based on all the user’s and Instagram’s goal, a good metric is: Total minutes spent per week

Before we understand why this is a good metric, let’s define this metric:

Total minutes spent per week = SUM (mins spent per user per week)

Let’s break this down a little more and understand why this is a good metric:

Rationale: This metric satisfies everyone’s goals. Let's see how.

Content Consumers:

‍If the total time is increasing, it means that there are more users using IG, or users are spending more time on IG, or both. Spending more time means users are consuming more content. Hence they are meeting their goals.

Content Creators:

If overall more users are consuming more content, that means that creators’ are getting more views on their content. And hence their goals are met.

Advertisers:

‍if users are spending more time viewing content, they will see more Ads. More Ad views should lead to more Ad clicks. Hence, advertisers’ goals are met.

Business:

If all the above are happening, that is a strong signal that users are getting the tools to find relevant content, relevant people, and as a result form communities.

So as you can see, 𝘛𝘰𝘵𝘢𝘭 𝘮𝘪𝘯𝘶𝘵𝘦𝘴 𝘴𝘱𝘦𝘯𝘵 𝘱𝘦𝘳 𝘸𝘦𝘦𝘬 is a good NSM in this case as it satisfies every user’s need. It also gives us a strong signal that if this metric moves in the right direction, IG will be able to stay true to its vision.

𝗘𝘅𝗰𝗲𝗽𝘁𝗶𝗼𝗻𝘀: there are some scenarios where using a single metric to satisfy ALL goals is not possible. In such cases, we use a proxy metric

𝗘𝘅𝗮𝗺𝗽𝗹𝗲: NSM for Tinder

𝗜𝗱𝗲𝗮𝗹 𝗴𝗼𝗮𝗹: no. of successful 𝗿𝗲𝗹𝗮𝘁𝗶𝗼𝗻𝘀𝗵𝗶𝗽𝘀

𝗣𝗿𝗼𝘅𝘆 𝗺𝗲𝘁𝗿𝗶𝗰: no. of total matches

It is hard to measure "relationships" accurately (since they happen in the real-world, not on the app). The proxy metric gives a strong enough signal towards the ideal goal. The proxy metric is also something that we can accurately measure and actively improve.

Get access to the full list of examples in this Notion database.

Unlocking Company Success By Harnessing The Power Of The North Star Metric:

Once you’ve had a chance to go through all the examples in the Notion database, you might start understanding how critical it is to set the right NSM. The right NSM will enable everyone (including the product team) to make progress in the right direction and at the right pace.

Vice versa is also true. If you end up choosing the wrong North Star Metric, you will optimize for the wrong goals and lead to outcomes that do not create enough value for the users and the business. 

Lastly, a lot of startups and even mid sized companies try to use North Star Metric frameworks to pick the right NSM. And that is usually not a good approach.

Most of such frameworks are created by a specific person for a specific context with specific knowledge. It is always good to use frameworks as a starting point but not as the end output. 

The approach I shared above is slightly different than a framework – it is an approach to help you understand what an NSM should measure. Use whatever part of the above approach that makes sense for you, ignore the rest.

Can You Have More Than One North Star Metric?

The short answer is NO. 

The long answer is that it is that a single metric can almost never measure the product’s success holistically.

Therefore, it is important to have a set of metrics that complement the NSM. And these complementary metrics should measure other critical aspects of the product and the user journey. (Refer to this guide to understand how other metrics are created.)

Will Your North Star Metric Ever Change?

North star metrics don’t change very often. But, they do change at times.

NSM can change with the maturity of the company or the product. If we talk about the IG example, the 𝘛𝘰𝘵𝘢𝘭 𝘮𝘪𝘯𝘶𝘵𝘦𝘴 𝘴𝘱𝘦𝘯𝘵 𝘱𝘦𝘳 𝘸𝘦𝘦𝘬 metric works well today since IG is very mature and has a very large user base already.

However, when IG was relatively new, the primary goal at that time was getting more and more users to the platform. At that time, an acquisition based NSM would have made more sense. 

A good NSM at that time could be the Weekly Active Users (WAUs) or the no. of new accounts created per week

So as you can see the NSM can and should change when the focus of the company and product changes.

In conclusion, having a clear and meaningful North Star Metric (NSM) is crucial for product managers and businesses. It serves as a guiding light, helping everyone align their efforts towards a common goal and make progress in the right direction.

By using the right North Star Metric, companies can unlock success and ensure progress in the right direction. So, take the time to create and implement the right NSM for your product or business, and use it guide you (and the company) to achieve goals and create value for both users and the organization.