North Star Metric

North Star Metric: Finding the Most Important Metric That Drives Growth

A North Star Metric (NSM) is the single most important metric that captures the core value your company delivers to customers. It acts as a guiding star that directs the entire organization's efforts toward the same goal. Unlike regular KPIs, which often measure output, an NSM reflects the underlying value creation that drives long-term, sustainable growth.

What Makes a Good North Star Metric?

An effective NSM fulfills several criteria. It should reflect customer value, not just business results. It should be measurable and possible to influence through the team's work. It should correlate with long-term revenue growth. And it should be simple enough that the entire organization understands it and can rally around it.

A good NSM answers the question: "If this metric grows, does it mean we are delivering more value to more customers?" If the answer is yes, you have likely found the right one.

Examples of North Star Metrics

Different business models require different NSMs. Here are some examples from well-known companies and industries:

• Spotify: Time spent listening. The more users listen, the more value they get from the service.
• Airbnb: Number of booked nights. Captures value creation for both guests and hosts.
• Slack: Number of messages sent per team. Indicates that the team is getting value from the collaboration tool.
• E-commerce: Number of repeat purchases per customer. Signals that customers are satisfied with the product and experience.
• SaaS B2B: Weekly active paying teams. Combines activity with payment.

Note that none of these examples are pure revenue metrics. Revenue is an effect of value creation, not a measure of it.

How to Choose the Right North Star Metric

The process of choosing your NSM starts with understanding your core value. What are your customers actually paying for? What makes them come back? Work backward from customer value to a measurable metric.

Involve the entire team in the discussion. An NSM chosen only by leadership will not drive behavioral changes at the operational level. By discussing and agreeing on your most important metric, you create a shared understanding of what drives growth. It is an excellent topic for a growth session.

Test your proposed metric against the following questions:

• Does it correlate with revenue growth when looking at historical data?
• Can our teams directly influence it through their work?
• Does everyone in the organization understand what it means?
• Is it granular enough to capture changes on a weekly or monthly basis?

NSM and Input Metrics

An NSM does not stand alone. It is broken down into input metrics, the underlying drivers that you can directly influence. If your NSM is "weekly active users," your input metrics might be registration rate, activation rate, retention rate and referral rate. Each team can then own one or more input metrics.

Visualize the relationship between input metrics and your NSM in a dashboard. This makes it easy to see which efforts actually drive your most important metric and where untapped potential exists.

Common Mistakes

The most common mistake is choosing revenue as your NSM. Revenue is important but it is a lagging indicator. It tells you what has happened, not what will happen. Another mistake is choosing a metric that nobody can influence, or changing the NSM too often. Give your chosen metric at least a quarter before evaluating whether it is correct. Connect your NSM to a clear growth analysis to ensure it drives in the right direction.

Frequently Asked Questions

Can we have more than one North Star Metric?

Technically no. The whole point of an NSM is that it is a single focusing metric. However, you can have multiple input metrics that break down your NSM into actionable sub-factors. If you cannot agree on one metric, it may be a sign that you need a clearer strategy.

How does an NSM differ from a KPI?

A KPI (Key Performance Indicator) measures performance within a specific area. An NSM is the overarching metric that all KPIs contribute to. Think of the NSM as the destination and KPIs as the milestones along the way. Make sure your KPIs are visible in your measurement strategy.