What is a North Star?

A North Star Metric (NSM) is the ‘most critical, measurable, and actionable business outcome for your product’. It’s the key data that basically gives you the conviction: ‘Yes, we’re going at the right velocity’.

It should answer this trifecta of key questions:

• Is our product solving a customer’s pain point? (effectivity)
• Are our customers satisfied with our product? (satisfaction)
• Is this a sustainable business model? (profitability)

Your ability to measure NSM is crucial because it helps you understand whether your product strategies are bringing you closer to organizational goals. If not, it gives you the opportunity to zoom back out and reorient your resources and initiatives. At the same time, it also allows you to evaluate the other metrics that you capture (or unable to capture), and prioritize which are actually important.

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Picking the Right Metrics for your Product

Finding out your North Star Metric can be difficult. You have to consider the relevance and connection between your overall organizational goals vis a vis your product market fit, unique value proposition, and what ‘success’ means for your product, business, and customers.

A good way to identify your NSM is by working backwards. List all the critical metrics that will contribute to your customer’s satisfaction. Then connect how these feed into your current business model. The adage, ‘follow the money’, works great here. Ultimately, this is most often a group activity with your team and something you review with management. Your metrics should holistically track short-term goals and how they translate to high-lift investments.

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Comparing Facebook & LinkedIn North Star Metrics

Now let’s look at the NSMs of these social media companies:

• Facebook & Instagram: “daily active users”
• LinkedIn: “monthly active users”

Notice how Facebook (Meta) and LinkedIn are both tracking active users, but differ in usage frequency. Let’s find out why.

Meta is primarily running an ads-based business model. This means that Meta earns revenue each time an advertisement is shown to a user. Thus, it is incentivized to maximize the number of times a user comes to the platform.

Each day a user logs on, an ad can potentially be shown = Meta ad revenue earning potential

On the other hand, LinkedIn earns its revenue through marketing and networking solutions gated behind a premium monthly subscription. It does not need to measure daily active users because a single instance of utility in a month is all it takes for a user to make a purchase (subscription = earning potential).

That is why LinkedIn will often tell you:

• How many times you’ve appeared in searches
• Which jobs are available in your area
• Which job postings you are a top match in

They are incentivized to keep you on the platform, but only in sporadic high-ticket circumstances. In this case, monthly active users will be the best metric for LinkedIn to measure.

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Relating back to ESP Framework

Let’s go back to our trifecta and analyze: Daily/Monthly Active Users

Is our product solving a customer’s pain point? (effectivity)

• Facebook - users are getting news and entertainment.
• LinkedIn - users are getting job updates and networking opportunities

If not otherwise satisfied, why are they coming back? (active users)

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Are our customers satisfied with our product? (satisfaction)

• Facebook - repeated log-ins (daily) is a good indication of satisfaction
• LinkedIn - repeated log-ins (monthly) is a good indication of satisfaction

If not otherwise satisfied, why are they coming back? (active users)

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Is this a sustainable business model? (profitability)

• Facebook - daily active users = higher chances of ad revenue
• LinkedIn - monthly active users = higher chances of subscription

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Wrapping up our Learnings

Navigating the waters of product management requires a blend of strategic vision and actionable metrics. The North Star Metric (NSM) stands as a testament to this balance, acting as a barometer of your product's health.

As illustrated by platforms like Facebook and LinkedIn, the true essence of NSM lies not in its universality but in its adaptability.

It's about asking the right questions: Are we delivering value? Are our customers happy? Is our business model sustainable? By finding your unique NSM and staying attuned to its readings, you ensure that your product management journey, no matter how turbulent, always has a guiding star. Your company will never be lost again.

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