Choosing Your North Star Metric and Codifying the Product Discovery Process

Aviral Vaid

Aviral Vaid

Dec 31, 20234 min read

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Choosing Your North Star Metric and Codifying the Product Discovery Process

Introduction:

In the world of business, metrics play a crucial role in measuring success and guiding decision-making. One such metric that has gained prominence in recent years is the North Star Metric (NSM). The NSM is a single metric that captures the essence of a company's growth strategy and aligns all teams towards a common goal. However, choosing the right NSM and implementing it effectively can be a challenge. In this article, we will explore the different categories of NSMs, discuss how to refine the ideal NSM for your business, and delve into the importance of codifying the product discovery process.

Choosing Your North Star Metric:

There are six categories of North Star Metrics that companies typically focus on: revenue, customer growth, consumption growth, engagement growth, growth efficiency, and user experience. Each category represents a different aspect of a company's growth strategy. Revenue is the focus of approximately 50% of companies, while customer growth, consumption growth, engagement growth, growth efficiency, and user experience each have their own share of focus from different companies.

The choice of the ideal NSM depends on various factors such as the type of company and its business model. Marketplaces and platforms often prioritize consumption growth as their NSM, while paid-growth driven businesses focus on growth efficiency. Freemium team-based B2B products typically emphasize engagement and/or customer growth. UGC subscription-based products prioritize consumption, ad-driven businesses focus on engagement, and consumer subscription products commonly prioritize engagement or customer growth.

However, it is important to note that there can be variations within companies that have multiple products or goals. For example, Spotify, which has both a subscription business (music) and an ad-based business (podcasts), focuses on engagement, customer growth, and consumption. Similarly, Shopify focuses on growing customers rather than consumption, as it charges a subscription fee in addition to collecting a take-rate.

Refining Your Ideal North Star Metric:

Choosing the right NSM requires a deep understanding of your business model, how your product grows, and how it is used by customers. One approach to refining your NSM is to consider the jobs that users hire your product to do. The NSM should measure what matters most when fulfilling the job to be done for the customer or user.

It is important to avoid focusing on revenue goals too early, as it can lead to suboptimal decisions and uninspiring goals for the team. Instead, prioritize metrics that align with the mission of your company and measure the value delivered to the customer. Companies that have multiple NSMs often include a metric for quality or have different goals for different products.

Actionable Advice:

  • 1. Calibrate the input metrics: Once you have identified your NSM, break it down into its component parts and determine the metrics that contribute to its growth. By focusing on actionable input metrics, you can align teams and come up with concrete ideas to drive the desired outcome.
  • 2. Ask the right questions: Before choosing your NSM, ask yourself what jobs your users hire your product to do. This will help you identify the metrics that truly matter in delivering value to your customers.
  • 3. Emphasize discovery in product development: Codify the product discovery process in your organization by implementing training, using templates for problem briefs and definitions, establishing touchpoints for reviewing insights and learnings, and making it a part of performance evaluations and quarterly goals for product managers.

Codifying the Product Discovery Process:

Product development consists of two elements: discovery and delivery. While delivery is often well-defined and understood, the discovery process is often overlooked or skipped entirely in many companies. This is because there is no system in place that defines the discovery process, and the focus is primarily on delivering features rather than understanding what to build.

To codify the product discovery process, there are four pillars that need to be established: training, templates, touchpoints, and targets. Training product managers on conducting effective discovery is crucial to instill the mindset of innovation and experimentation. Templates, such as problem briefs and problem definitions, help structure the thinking process and ensure consistency. Touchpoints provide opportunities for reviewing insights and learnings, allowing for continuous improvement. Lastly, embedding the product discovery process into performance evaluations and quarterly goals sets expectations and reinforces the importance of discovery in driving meaningful product development.

Conclusion:

Choosing the right North Star Metric and codifying the product discovery process are essential steps in driving growth and innovation within a company. By aligning teams towards a common goal and implementing a structured process for understanding customer needs and developing solutions, companies can achieve sustainable success. Remember to calibrate your input metrics, ask the right questions, and emphasize discovery in your product development efforts. With these actionable advice, you can set your company on the path to growth and deliver value to your customers.

Resource:

  1. "Choosing Your North Star Metric", https://future.com/north-star-metrics/ (Glasp)
  2. "Codifying the product discovery process", https://medium.com/irlproduct/codifying-product-discovery-process-5e4db83a00ca (Glasp)

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