The North Star Framework 101

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1. The Product Leadership Playbook

2. 17 Common Misconceptions in Product Management

3. The Ultimate List of Product Metrics

4. Product Pricing Strategies 101

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The North Star Framework 101

Growing your product can often feel overwhelming.

Every day, you and your teams - engineering, design, marketing, sales, growth, or success - must make dozens of small decisions, experiment, measure the outcomes, and adapt. If they are not perfectly aligned, it's like a body with each limb moving independently - you can't even take a step forward.

You might wonder:

• “How do we know where to go?”

• “How can we measure our progress?”

• “Are going to succeed?”

It would be great to have a compass that always points in the right direction. It would help empower your teams to make better, autonomous decisions.

A true North Star.

In this issue, you will learn:

1. What is the North Star Metric?

2. North Star Metric - common misconceptions

3. North Star Metric - recommended classification

4. 🔒 The North Star Framework

5. 🔒 North Star Metric vs. One Metric That Matters (OMTM)

6. 🔒 Practical tips and advice

7. 🔒 Recommended content

1. What is the North Star Metric?

The North Star Metric is an extremely simple, powerful concept. But it's largely misunderstood.

The term has been popularized by Sean Ellis. Sean is also known for coining "growth hacking" while being a growth marketer at Dropbox. In his talks, Sean often points out a recurring issue in product management:

It’s common for a product's revenue to continue growing rapidly while the value provided to customers doesn't follow the same trajectory. Over time, this can lead to a sudden crash in revenue.

Let's imagine you have a Substack newsletter, and you are solely focused on acquiring new subscribers. You get 50 new paid subscribers every month, which seems promising. As a result, you decide to quit your job to become a full-time content creator.

On the surface, everything seems promising as your MRR (Monthly Recurring Revenue) continues to rise. But one day, you discover that only 10% of paid subscribers read at least one article every month. Your content fails to provide value to users, and there's a significant risk that they will soon cancel their subscriptions.

This is why the most successful product companies select and optimize for a metric that truly reflects the value customers derive from their products.

Let’s take Netflix as an example:

• A possible wrong approach would be to focus solely on the number of paid subscribers. The most profitable short-term scenario would be if everyone bought a subscription but didn't watch anything. In that case, Netflix wouldn't even have to scale its infrastructure.

• Netflix's actual approach is to focus on the number of weekly viewing hours. They understood that by increasing the viewing hours, let's say, by 50% year after year, they are likely to sustain their revenue growth in the long term.

Now, let's go back to the newsletter we imagined earlier. What can be improved?

Instead of obsessing over acquisition, a better approach might be to focus on the statistics related to reading your content. The more valuable people find it, the more likely they are to continue their subscriptions. Some might even become your ambassadors.

1.1 North Star Metric definition

North Star Metric is a tool to drive your product’s growth. In the Growth Hacking world, North Star Metric:

• Is a single metric. The goal is to create focus.

• Is easy to understand, enabling everyone to speak the same language.

• Is customer-centric. Reflects how customers get value from the product.

• Ideally ensures the value is sustainable, typically by forming habits.

• Represents your progress toward vision / mission, fostering alignment among your teams and inspiring them to move in the same direction.

• Is quantitative. It relies on numbers, not opinions.

• Is actionable. Whether it increases or decreases, you will take action based on it. Otherwise, what's the point of tracking it?

• Serves as a leading indicator of your long-term business success.

1.2 North Star Metric examples

Let's consider 14 companies. For each company, I have specified a potential misconception and the actual North Star Metric (NSM). Can you justify it?

In particular, ask yourself:

• Does this metric truly reflect customer value?

• Does this metric help in forming habits?

• Does this metric inspire the teams working on the product?

• Does this metric indicate long-term business success?

2. North Star Metric - common misconceptions

The term "North Star Metric" has gained popularity, leading some to use it to label any metric they can track.

However, it is important to clarify what the North Star Metric is not:

• A few metrics. While a company may select a few key metrics, referring to them as "North Star Metrics" is a misunderstanding. After all, have you ever seen multiple North Stars in the sky?

• A metric focused on business value, like a Monthly Recurring Revenue (MRR) or LTV/CAC. This overlooks the essential aspect of being customer-centric. Besides, can your team truly get excited about solely growing revenue? Even if a company has a valid reason to prioritize MRR as a key metric, it would not qualify as a North Star Metric.

• An Objective Key Result (OKR) - OKR is a goal-setting technique. You can use OKR to express an expected mid-term change in the Nort Star Metric or one of the input metrics. However, it is important not to confuse these terms. More: Beware of OKRs. 90% of companies use them wrong.

• A strategy - A strategy is a cohesive set of choices, such as a Value Proposition, that reinforce one another and enable you to succeed in your chosen playing field. While your North Star Metric must align with your strategy, it is essential to understand that these are separate concepts. More: Introducing the Product Strategy Canvas.

3. North Star Metric - recommended classification

I've come across various attempts to classify North Star Metrics, but the best one I've found is proposed by Amplitude. The company has done a fantastic job researching products at over 11,000 companies and has identified three games companies are likely to play.

Depending on the game you are playing, you might want to focus on:

⚡ Attention - How much time do your customers want to spend in your product? The time and recurrent use of a product can indicate the value people derive from it.

🎁 Transaction - How many transactions do your customers make in your product? Your goal is to assist customers in finding the right product quickly and easily.

💼 Productivity - How efficiently and effectively can someone do their work? Your goal is to help customers with specific tasks.

Now, let's take another look at the 14 companies:

When considering Tinder, one could argue that it plays the transaction game, even though people are not products. Take a moment to reflect on the three categories mentioned earlier and determine which one aligns best with optimizing "Matches made."

Identifying the game you are playing is the first step toward finding your North Star Metric.

4. The North Star Framework