Product “north star” metrics provide benefits in team alignment and product improvement. However, boiling down all stages of the user lifecycle to a single number also has the risks of lack of ownership, disempowerment, and metric “hacking”.
The concept of the product “North Star Metric” has seen a lot of buzz in the last few years. The concept means having a single metric that measures the success of the product and therefore also of a product team. Examples given of north star metrics include “nights booked” for AirBnB or daily active users (DAU) for Facebook.
Having a single metric for the entire team to rally around has obvious benefits: Firstly, it provides the ability to massively boost alignment, since everyone knows what is important. Secondly, according to management guru Peter Drucker's famous quote “you can't improve what you can't measure”, so measuring the single most important metric for the product is a necessary first step to improving it.
However, making a single metric your “north star” and using it to me measure the success of the product team also has downsides, like the following quote from “Product Leadership” (Banfield / Ericsson / Walkingshaw 2017) illustrates:
Most metrics suffer from this—a single point of measurement. Try to begin with establishing an outcome, not an output, and that outcome should be based on your customer and the problem you are trying to solve. Then use several metrics in the experience to measure that outcome so that you don’t rely on a single metric organization-wide to drive your product strategy forward. The results will speak for themselves. Actionable, measurable, and time-bound metrics that balance the short term and the long term are the best practice by the world’s best practitioners.
Expanding a bit further on the downsides of a single metric eluded to in the quote above, having a single north star metric comes with particular risks: lack of ownership, disempowerment, finger-pointing, and metric “hacking”.
A north star metric, almost by definition, needs to cover the work of all teams and the entire user lifecycle from acquisition through churn. That means no one “owns” the metric and it's hard to move for individual teams, which can feel disempowering for the teams (especially if the “success of the product team is measured with the north star metric”).
Conversely, swings in the metric could be anyone's fault, which can lead to finger pointing (or analysis paralysis, where every move of the metric is dissected). Especially metrics that are sensitive to changes in how many and what kind of users are acquired are at risk of sudden swings that have nothing to do with the product team's success in any business that isn't acquiring users purely organically. (Sales team closed a new customer? Active users go up. Marketing slowing down paid user acquisition? Growth rates of the north star metric might tank.)
Moreover, making any single metric your north star can incentivize “hacking” the metric through things that will improve it in the short term but hurt in the long term. For example, daily active users can be pushed up in the short term by sending lots of push notifications, but that tactic will almost certainly hurt in the long term. While it is possible to create synthetic metrics out of multiple underlying metrics that include early warning indicators for “hacking” (such as the number of app uninstalls), these synthetic metrics end up complex and hard to grasp, which negatively impacts being able to use the metric for team alignment purposes.
Due to all these risks, the only “north star” should be the product vision. The vision should be clear in what value the product provides to customers, and since it's qualitative and very long-term in nature, it can't be hacked. You can use metrics as a proxy for whether you are on track toward the vision as the north star, but these metrics are not the north star itself—they are perhaps a compass or a sextant.
Single metrics for strategic goals can be very effective, but they work best when they are owned by a single team that is fully empowered to impact them. At 8fit, we had a strategic goal of increasing credit card sales, but didn't make much progress on the goal until it was owned entirely by my growth team that was able to affect all relevant aspects of the product. And of course, that strategic metric was not our “north star”, nor was it the only metric we looked at: it was just a single metric with a long-term goal attached to it (covering multiple quarterly goal-setting periods).
One last thought: Some articles on the topic even advocate a hierarchy of north star metrics where individual teams have their own north stars. While that reduces the risk of disempowerment, it is also somewhat ridiculous to call these metrics north star metrics. There is only one north star, that's the whole point. All other stars are just stars.
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