The North Star Metric

The North Star Metric is a term used to describe a single, core metric that a business or organization focuses on to measure its success. It is the key performance indicator (KPI) that defines the fundamental value that a company delivers to its customers.

The North Star Metric should be directly tied to the organization’s overall mission and goals, and it should be something that is easily measurable and can be tracked over time. The metric should also be aligned with the needs and goals of the company’s target audience.

For example, the North Star Metric for a social media company might be daily active users (DAUs), since this metric directly measures the value that the company delivers to its users. For a subscription-based business, the North Star Metric might be monthly recurring revenue (MRR), since this metric measures the fundamental value that the company delivers to its paying customers.

The North Star Metric is important because it provides focus and clarity for the organization. By identifying and prioritizing a single, core metric, the company can align its efforts and resources towards achieving its goals, and it can measure its progress towards success over time.

1. Airbnb – Nights Booked: For Airbnb, their North Star Metric is the number of nights booked by guests. This metric measures the fundamental value that Airbnb provides to both hosts and guests, as it represents the number of successful transactions on their platform. By focusing on this metric, Airbnb can monitor the health of its marketplace and identify areas for growth.
2. Facebook – Daily Active Users (DAUs): Facebook’s North Star Metric is the number of daily active users on their platform. This metric measures the engagement and value that Facebook provides to its users, advertisers, and content creators. By focusing on this metric, Facebook can track its user growth and engagement over time and identify areas where it needs to improve to remain competitive.
3. Spotify – Monthly Active Users (MAUs): For Spotify, their North Star Metric is the number of monthly active users on their music streaming platform. This metric measures the engagement and value that Spotify provides to its users and advertisers. By focusing on this metric, Spotify can monitor its user growth and engagement and identify areas where it needs to improve to remain competitive.
4. Uber – Completed Trips: Uber’s North Star Metric is the number of completed trips on its ride-sharing platform. This metric measures the fundamental value that Uber provides to both drivers and riders. By focusing on this metric, Uber can monitor the health of its marketplace and identify areas for growth.
5. Hubspot – Customer Lifetime Value (CLV): For Hubspot, their North Star Metric is the customer lifetime value (CLV) of their clients. This metric measures the value that Hubspot provides to its customers over time, taking into account the revenue generated by each customer and their expected lifespan as a client. By focusing on this metric, Hubspot can identify areas where it needs to improve its customer retention and increase its overall revenue.

In general, a North Star Metric should be simple, measurable, and tied directly to the core value proposition of the business. It should be something that the entire organization can rally around and work towards achieving, and it should be regularly tracked and analyzed to ensure that the company is making progress towards its overall goals.