The Intersection of Product Strategy and North Star Metrics: Building Delightful and Sustainable Products

Aviral Vaid

Hatched by Aviral Vaid

Dec 30, 2023

3 min read

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The Intersection of Product Strategy and North Star Metrics: Building Delightful and Sustainable Products

Introduction:

Creating a successful and sustainable product requires a combination of effective product strategy and the identification of a suitable North Star Metric (NSM). These two concepts may seem distinct, but they are interconnected and crucial for driving customer satisfaction and business growth. In this article, we will explore the DHM model as a framework for crafting product strategies that delight customers, and delve into the process of choosing the right NSM to measure the success of your product.

#1 The DHM Model:

Product strategy is centered around the question of how a product can delight customers in hard-to-copy, margin-enhancing ways. The DHM model provides a framework for achieving this. It emphasizes the importance of brand, network effects, economies of scale, unique technology, counter-positioning, switching costs, process power, and captured resources. By leveraging these factors, companies can create a competitive advantage that is challenging for others to replicate.

To apply the DHM model effectively, product managers can engage in a series of exercises. Exercise #1 involves reflecting on how the product currently delights customers and brainstorming ideas for further enhancement. Exercise #2 encourages product managers to explore how their product can leverage the eight hard-to-copy powers in the future. Exercise #3 focuses on considering price and business model experiments that can be pursued over the next 1-3 years.

Choosing Your North Star Metric (NSM):

The NSM is a key performance indicator that aligns the entire organization around a common goal. There are six categories of NSMs: revenue, customer growth, consumption growth, engagement growth, growth efficiency, and user experience. The choice of NSM depends on various factors such as the business model, product growth patterns, and product usage.

For marketplaces and platforms, consumption growth is often the most suitable NSM. Paid-growth driven businesses typically prioritize growth efficiency. Freemium team-based B2B products often focus on engagement and/or customer growth. UGC subscription-based products tend to emphasize consumption. Ad-driven businesses prioritize engagement. Consumer subscription products can focus on either engagement or customer growth.

It's important to consider the jobs that users are hiring the product to do when selecting an NSM. The NSM should align with what matters most to customers when fulfilling their needs. While revenue is essential, it's advisable to avoid making revenue growth the sole NSM, as it can lead to suboptimal decisions and uninspiring goals for the team.

Calibrating Input Metrics:

Once the NSM is identified, it's crucial to break it down into its component parts and determine the input metrics that contribute to its achievement. These input metrics serve as levers that can be influenced to drive the desired outcome. By focusing on actionable input metrics, teams can generate concrete ideas and align their efforts towards achieving the NSM.

Conclusion:

Crafting a successful product strategy and choosing the right NSM are integral to building delightful and sustainable products. By leveraging the DHM model, product managers can identify unique ways to delight customers. Simultaneously, selecting an appropriate NSM ensures that the entire organization is aligned towards a common goal. To apply these concepts effectively, it is important to engage in exercises that explore potential enhancements, experiment with pricing and business models, and consider the jobs that users hire the product to do. By focusing on actionable input metrics, teams can drive growth and create products that customers love.

Actionable Advice:

  • 1. Engage in regular exercises to evaluate how your product can delight customers even more in the future. Continuously strive for improvement and innovation.
  • 2. Experiment with different pricing and business models over the next 1-3 years to optimize revenue and customer growth.
  • 3. Choose an NSM that aligns with your business model and customer needs. Consider the jobs your users are hiring your product to do and focus on metrics that measure what matters most to them.

By implementing these actionable advice, product managers can enhance their product strategies and align their efforts towards achieving sustainable growth and customer satisfaction.

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