Creating a North Star KPI: A Guide for Product Designers and Product Managers
In the world of product design and management, having a clear, measurable goal is essential to success. A North Star KPI, or key performance indicator, is a metric that provides a clear direction for the product and aligns the team toward a common goal. This metric guides the overall strategy and decision-making for development or design.
- A North Star KPI for a social media app could be “daily active users,” as this measures the engagement and adoption of the app.
- An e-commerce website’s North Star KPI could be “conversion rate,” as it indicates the site’s effectiveness in converting visitors into customers.
Another example could be a ride-hailing service. The North Star KPI could be “rider satisfaction,” as it is a measure of the overall quality of service provided to customers and the effectiveness of the app in matching riders with drivers.
💡 It’s important to note that North Star KPIs should be specific, actionable, measurable, and directly impact the product’s core value proposition.
Why is a North Star KPI Important?
A North Star KPI is the metric that defines the success of your product. By having a clear, specific goal, you can focus your efforts and resources toward achieving that goal. A North Star KPI can also provide context for evaluating success, helping teams understand how well they perform relative to their goals and where they need to improve.
Moreover, a North Star KPI can align the entire team, from designers to product managers, around the same objective, improving collaboration and decision-making. Additionally, it provides a clear and easy-to-understand metric that stakeholders can use to evaluate the product’s success.
The North Star KPI is important for several reasons:
- Focuses efforts: By having a clear and specific metric to aim for, teams can focus their efforts and resources toward achieving a common goal.
- Aligns team: The North Star KPI helps align the entire team, from designers to product managers, around the same objective, which can improve collaboration and decision-making.
- Guides strategy: The North Star KPI can guide the overall strategy and direction of the product, helping teams make informed decisions and prioritize features and improvements that will have the most significant impact on success.
- Provides context: The North Star KPI provides a context for evaluating success, helping teams understand how well they perform relative to their goals and where they need to improve.
- Easy to understand: North Star KPIs are usually easy to understand and communicate to stakeholders, making it easier to build consensus and buy-in around the direction of the product.
With a North Star KPI in place, teams can make data-driven decisions, monitor progress toward their goals, and adjust their strategy as needed to continuously improve the product and deliver value to customers.
How to Create a North Star KPI
Here are some steps to create a North Star KPI for your product:
- Identify your product’s core value proposition: The first step in creating a North Star KPI is understanding what your product does and what it’s trying to achieve. Identify the core value proposition of your product and what makes it unique.
- Define the desired outcome: Based on the core value proposition of your product, determine the desired outcome. This is the goal you are trying to achieve with your product.
- Choose the right metric: Select a metric that accurately reflects the desired outcome and is specific, actionable, and measurable. For example, if the desired result is to increase user engagement, a metric such as “average time spent in the platform” could be a good choice.
- Make it easy to understand: Choose a metric that is easy to understand and communicate to stakeholders. A North Star KPI should be a clear and straightforward metric everyone can understand and use to evaluate the product’s success.
- Track progress: Once you have chosen your North Star KPI, start tracking progress toward the goal. Use data to make informed decisions and adjust your strategy as needed to continuously improve the product and deliver value to customers.
Having a North Star KPI is essential for product design and management success. It provides a clear direction for the product, aligns the team, and helps teams make informed decisions. By following the steps outlined above, you can create a North Star KPI that drives the success of your product.
How to communicate a North Star KPI
Communicating a North Star KPI effectively is crucial for ensuring everyone in the organization is aligned around the same goal and understands the progress. Here are some tips on how to communicate a North Star KPI:
- Keep it simple and clear: A North Star KPI should be a simple and easy-to-understand metric that everyone in the organization can grasp. Avoid using technical jargon or complex calculations; instead, focus on a metric that is easy to understand and communicates the desired outcome.
- Make it visual: Use visual aids, such as charts, graphs, or dashboards, to help communicate the North Star KPI. This makes the metric more accessible and easier to understand for everyone in the organization.
- Share it frequently: Regularly communicate the North Star KPI to keep everyone informed and aligned around the same goal. This can be done through regular updates, company-wide presentations, or one-on-one meetings.
- Use examples: Provide concrete examples of how the North Star KPI is used to drive decision-making and improve the product. This helps everyone understand the relevance of the metric and how it relates to the success of the product.
Here are a few examples of how a North Star KPI could be communicated in different industries:
- Subscription-based SaaS: For a subscription-based SaaS product, the North Star KPI could be “Monthly Recurring Revenue (MRR).” This could be communicated through a dashboard that tracks MRR over time and visualizes the progress toward the goal.
- Customer acquisition SaaS: For a SaaS product focused on acquiring new customers, the North Star KPI could be “Cost per Acquisition (CPA).” This could be communicated through a chart that shows the trend of CPA over time, highlighting any improvements or areas that need attention.
- Collaboration SaaS: For a collaboration SaaS product, the North Star KPI could be “Average Time Spent in the Platform.” This could be communicated through a graph showing how user engagement is trending over time, providing insight into the product’s success and areas for improvement.
In each of these examples, the North Star KPI is communicated in a clear, visual, and easy-to-understand manner, providing everyone in the organization with a clear understanding of the progress.
How to implement a North Star KPI
Implementing a North Star KPI in an organization involves several steps to ensure that everyone is aligned around the same goal:
- Define the goal: Start by defining the organization’s overarching goal and then determine the key result that will drive progress towards that goal. This will become the North Star KPI. The goal should be specific, measurable, and aligned with the organization’s mission and values. For example, if the goal of an e-commerce company is to increase customer satisfaction, the North Star KPI could be “Net Promoter Score (NPS).”
- Identify the relevant data: Determine the data pertinent to the North Star KPI and ensure it is tracked and measured regularly. For example, if the North Star KPI is NPS, the relevant data would be customer survey results, customer feedback, and complaint data.
- Create a tracking system: Set up a system for tracking the North Star KPI regularly, such as a dashboard or spreadsheet, and make sure that it is accessible to everyone in the organization. The tracking system should be automated to reduce manual errors and increase accuracy.
- Communicate the North Star KPI: Make sure that everyone in the organization understands the North Star KPI and how it relates to the success of the organization. This can be done through regular presentations, updates, or one-on-one meetings. Visual aids, such as charts, graphs, or dashboards, can also help communicate the North Star KPI and make it more accessible to everyone.
- Use the North Star KPI to inform decision-making: Use it to drive decision-making and prioritize initiatives to help the organization reach its goal. For example, suppose the North Star KPI is NPS. In that case, the organization may prioritize initiatives that improve customer satisfaction, such as improving product quality, enhancing the customer experience, or resolving customer complaints.
- Monitor progress: Regularly monitor progress towards the North Star KPI and adjust the tracking system as necessary to ensure accuracy and relevance. The North Star KPI should also be reviewed on a regular basis to ensure that it is still aligned with the organization’s goals and objectives.
- Celebrate successes: When the organization reaches a significant milestone or achieves its goal, celebrate the success and communicate it to everyone in the organization. This helps to reinforce the importance of the North Star KPI and keeps everyone motivated and aligned around the same goal.
North Star Key Performance Indicators are metrics used to measure a business’s overall success in achieving its long-term goals. Unlike other metrics, North Star KPIs are typically directly tied to the company’s core mission and are focused on measuring the overall impact of the business.
Other metrics, on the other hand, may focus on more specific aspects of the business, such as customer acquisition, retention, revenue growth, or operational efficiency. These metrics are usually more short-term oriented and are used to track progress towards smaller, tactical goals that contribute to the business’s overall success.
The main difference between North Star KPIs and other metrics is that North Star KPIs provide a high-level view of the company’s success in achieving its mission, while other metrics are more focused on specific aspects of the business. North Star KPIs can also serve as a guide for decision-making, as they provide a clear understanding of what the company’s ultimate goals are and how they are progressing toward achieving them.