North star guides product development

It can be easy to lose sight of what is important in product development as the company grows in size and the product catalogue expands. The north star metric is an aid used to redirect the focus of the product teams back toward common goals.

“The north star metric is the aggregate value that people get from your product and services,” explains Sean Ellis. It defines the relationship between solving customer problems to their advantage and the benefits for the company in doing so. The standard benchmarks, such as number of customers or profit made, cannot define this key data at all. Instead, there are other parameters more closely combined with the product vision, such as “Time spent listening to music (Spotify)” or “Number of nights booked (Airbnb)”.

A good north star metric takes several dimensions into consideration:

• It records the moment at which a value is generated for the customer.
• It represents the core of the product strategy.
• And it serves as an indicator for future company performance.

It is conceivable for the company to have a single, universally valid north star. Or to find various north stars dispersed among heterogeneous product landscapes.

Every organization needs a north star

With the (right) north star, clarity is achieved and direction given to any product development. Progress is monitored and performance responsibility ultimately established. Both have a positive impact on the commitment and understanding within the overall organization.

Outlining the overall objective

In order to make the north star more attainable for the achievement of individual team objectives, it is often broken down into easily understandable sub-KPIs (key performance indicators). These sub-KPIs may be defined in various categories, often found delicately balanced between user base, intensity of use and user experience.

It should be noted that the defined KPIs illustrate actual results and not, for example, activities. Once the sub-KPIs associated with the north star have been determined, measures can be assigned at product level.

It will be immediately clear to every team which measures are involved with each KPI and how they contribute to the north star.

This setup additionally establishes an effective basis for the prioritization of measures when resources are scarce. On an individual level, this approach is easily combined with the objectives and key results (OKR) framework: the OKR defines the process that needs to be carried out in order to achieve a desired result (sub-KPI).

Conclusion

The north star is certainly a useful tool for taking a common approach in product development. It is particularly useful for backlog prioritization and company-wide communication. However, the greatest benefit first becomes apparent when the corresponding sub-KPIs have been defined. These must be put into practice and measured regularly. It is very important that the metrics are not simply issued “from the top”, but are instead the subject of extensive debate.