Identify the unique metric to your success, the North Star Metric (NSM)

In a hyper-connected world, data abounds, multiplying indicators. That’s good, because we can make data-driven decisions in a scientific and systematic way, but it’s exhausting, because there’s too much information to take everything into account. If there were just one, ultimate metric, from which all the others flowed, it would be so much better!

The good news is that this is the case. The bad news is that it’s a tricky quest. Join me to identify this unique metric, the one that rules them all, and supports your organization’s success !

What is the unique metric?

Just as the North Star guides travelers by pointing to the North, this indicator guides your organization. Let me explain its features.

  • Predictive: it tells you in advance whether your organization will generate revenue. If you want to reduce your car journeys, the number of kilometers traveled is a reactive indicator, giving you information after the fact. A predictive indicator would be the number of unplanned trips per week.
  • The customer’s point of view: the indicator reflects the core value you provide, which sets you apart from the competition.
  • Measurable: it sounds obvious, but some things are hard to measure, like your customers’ level of happiness. Unless you have a sociologist with you, you won’t have direct access to this information.
  • Actionable: another obvious point, but if you don’t have control over the metric, you won’t be able to do anything with it. Even if it predicts your income, this indicator won’t help you achieve success. For example, the amount of snowfall for a ski resort, or the amount of sunshine for a beach hotel.
  • Understandable: since you’re going to share it with your whole organization, if you have to spend 30 minutes explaining how you measure it, your team will find it hard to follow.
  • Modest: unlike vanity metrics, it doesn’t transform reality by presenting pleasing or motivating figures. This indicator describes things as they are.
  • Aligned: with your vision and strategy. If you like to do things last minute, the number of unplanned trips won’t help you reduce your mileage. Another option would be to make your bike easier to access than your car and measure how long it takes to get ready on the bike.

Examples of North Star metrics

  • Facebook and LinkedIn: Monthly (weekly) active users
  • Spotify: Listening time
  • Amazon: Orders per month
  • AirBnB : Nights booked
  • WhatsApp: Messages sent

If your organization looks like one of these, you’re in luck, they’ve done the work for you. Just use the same indicator. You’ll notice that these indicators are predictive of the organization’s revenues. Facebook and LinkedIn do not use the amount generated by ads. Because then it’s too late to react if the results are bad. By ensuring that they maintain a high volume of active users, platforms know that advertising revenues will naturally follow.

How to identify your unique indicator

The indicators are all correlated, they have relationships. You’ll have to find out which is at the source and influences the others.

Here are three techniques. The first two are linear, while the last is freer and more creative. It’s up to you to try and see which one suits you best. Normally, you should achieve the same result with these three techniques. If this is not the case, go back to the specifications above to make sure you have the right metric.

Bottom-up from income

You can start with your income and identify what helps you forecast your income. How do you generate revenue? What is your business model? What makes the most money? What has caused earnings to rise (or fall) in recent months?

For example, for a gym, revenue is generated by monthly subscriptions. As renewals are automatic, cancellations are the main reason for the drop in revenue. People cancel when they haven’t come for 2 or 3 months. So the number of active users per week is a good predictor of revenue. If this number drops, the company needs to find solutions to bring back users and maintain interest in the subscription.

Top-down from operations

On the other hand, you can start from your processes and performance indicators. What are your operations? What tasks do your teams perform every day? What activity, if it stopped for a day, would have a dramatic impact on your organization?

Let’s take the example of a food company. It orders raw materials, processes them, ensures production quality and delivers products. To keep its customers ordering, it has to deliver on time. Their unique indicator is therefore the monthly on-time delivery rate.

Spiral on your intuition

You could also complete the following sentence: I would have confidence in our current product strategy for our long-term survival, if I saw the increase in [comportement ou caractéristique des clientes] that we could measure in [calcul ou moyen].

For a company in the construction sector that relies on word-of-mouth, this could be the referrals customers make at the end of the job, or the rate of customers who share the work they’ve done on social networks.

How to use the North Star Metric on a daily basis

For an organization, this indicator is the basis ofstrategic alignment. But this indicator can also be used at other levels, such as a sector or a project. The success of your sector or project is measured from the customer’s point of view. Using the same techniques, you can find the unique metric to simplify your monitoring.

This indicator can also be used for personal use. Your customer is then your health, your well-being or your happiness. I’ve never gone that far, but it can be a good way to understand and find an North Star Metric.

Sources: images by ijeab and rawpixel. com on Freepik