Don't Let Your North Star Metric Deceive You

Don't Let Your North Star Metric Deceive You

This article shows how teams could think about setting their metrics with a 3-step process to built out your constellation of metrics.

4 reasons OMTM ("only metric that matters") is misleading.

1. North star metrics are an output metric. You must differentiate between output and input metrics. Output metrics represent results and help you set long term goals for the growth of your business. Input metrics represent the actions that influence the output metrics. You can’t focus exclusively on output metrics because they’re too big, too broad, and not actionable.
→ Example: Spotify’s output metrics.

2. Output metrics are a lagging indicator. Input metrics are leading indicators and output metrics are lagging indicators. By definition, it can take time for the output to reflect positive or negative changes in the inputs.
→ An analogy: the ecosystem of the Serengeti.

3. A single north star metric only captures one dimension of your business. There are multiple dimensions of a business that determine its health, and each should be measured by your key metrics. At a minimum, there are three key buckets for every product: breadth of retention, depth of engagement, and monetization.
→ Examples of output metrics: Slack and Hubspot crm.
→ A different kind of example: Pinterest’s output metric.

4. North star metrics don’t account for the tradeoffs between metrics. No metric exists in isolation. To truly understand how one metric impacts growth, you need to see its effects on other metrics downstream.
→ Example: tradeoff metrics at LinkedIn.

The right way to set growth metrics.

1. Select a constellation of metrics. Make sure they account for retention, engagement, and monetization, and then monitor the full scoreboard.

2. Break your output metrics into their input metrics. Drill down until you’ve got a set of actionable input metrics that you can impact directly, and then build your experiments to move those.

3. Understand and monitor your tradeoff metrics. Because many metrics are interdependent, for every metric you try to improve, determine where in your business you are likely to see a counter-reaction. Then, work to find a healthy balance between your opposing metrics.

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