North Star metric

What it means

A North Star metric is the single key measure that best captures the value a company delivers to customers while driving its long-term growth. Just as the Pole Star guides sailors, this metric is meant to give direction to every team in the company.

A good North Star metric does not measure revenue or profit directly but the customer behaviour that leads to them. For accounting software it might be invoices processed per week, for a communication platform the number of active teams, for an online shop the number of repeat purchases.

A poorly chosen metric leads to poor decisions. If a company tracks sign-ups, teams will chase sign-ups even if people do not use the product. The metric should reflect real usage and benefit, not superficial activity that looks good in a presentation.

How it works in practice

When choosing the metric, a company asks what customers do when they genuinely benefit from the product. The metric should be measurable, understandable to everyone and influenced by the teams' work. Supporting KPIs for individual departments are defined beneath it.

The North Star metric is often combined with OKRs, where teams set quarterly objectives intended to move it. Marketing influences new users, product influences activation and support influences retention, so everyone contributes to one outcome.

Cohort analysis is used for tracking, showing how the metric develops for customers acquired in different periods. Growth in the metric should go hand in hand with lower churn and higher LTV; if it does not, the metric probably does not measure real value.

What to watch out for

One metric is not enough to run a whole company. Financial health, cash flow, costs and customer satisfaction must be tracked alongside it. The North Star metric aligns direction; it does not replace accounting and financial statements.

The metric should be reviewed from time to time. When the company reaches product-market fit or changes its business model, what best expresses customer value may change too. Changing it too often confuses teams, though, so it should be the exception.