North Star Metric: Why Should Every Consultant Know This Term
Even if you’ve only been a consultant for just a month, you’re probably aware of various consulting KPIs and know how business growth is measured.
But how many KPIs can a business focus on? Which ones are the most important? And which ones are a waste of time?
Before we move further, let’s talk about the North Star. You must have learned about it in school. It is a star that stays in the same position in the sky, and it has helped many navigators cross oceans during ancient times. The North Star has really shaped the course of history by helping ambitious people discover new lands and connect the world.
So, what is a North Star metric?
In every business, there’s always that one metric that truly guides it in the right direction for the years to come. The direction that ultimately leads to long-term success. This metric is called the North Star metric.
Of all the consulting KPIs that you should be well-acquainted with, the North Star metric is the most important one because it determines how business growth is affected over a relatively long period of time.
Attributes of a Good North Star Metric
What is a North Star metric that doesn’t have the right attributes? Just another metric that may be of no real use. Unfortunately, due to a lack of proper guidance, a lot of businesses chase vanity metrics that do not really help them grow and not focus on important consulting KPIs.
For example, a company may consider the number of social media likes to be a success metric. But the question is: Are these social media likes helping the business grow? Can a business measure how many customers it got through the picture of their office puppy that was liked by 500 people online? Probably not. And this is not how business growth should be measured.
On that note, let’s discuss what makes a metric worthy of being a North Star metric.
1. It should contain the customer’s intended result
A North Star metric is not just about the company’s goals, it’s also about the customers getting what they want from the company. For instance, an e-commerce company that delivers products to customers may consider the number of sales as a North Star metric. However, this is not always the right KPI to measure success. Why? Because it doesn’t take factors like customer complaints, faulty products, late deliveries, and returns into account.
So, in this case, the North Star metric should be the number of items delivered on time and without any hassle. Because that is the moment when the customers get what they want.
2. It should focus on the value that customers are seeking
Whether you’re a fan of music or not, you must have heard about the music streaming app Spotify. So, what is the one metric that is the most important in determining the success of this app? Normally, one may consider the number of songs downloaded as the right KPI. However, there is a better metric to truly measure Spotify’s growth.
You see, it doesn’t matter if a user downloads a hundred songs. What matters to Spotify is the number of minutes they spend using their app. A user who downloads one song and puts it on repeat is more useful to Spotify than someone who downloads many songs but doesn’t spend much time on the app. The bottom line is, customers are not getting value by downloading songs, they’re getting it by listening and enjoying them. And if Spotify keeps offering value to its users, its business will keep growing.
3. It should be measurable
Let’s consider both of the aforementioned examples to quickly understand this point. First, the North Star metric was the number of items delivered on time and without any hassle. Then, we used Spotify as an example and chose the number of minutes spent on the app to be the North Star metric.
You will come across a lot of consulting KPIs in your career. However, when you’re helping clients with growth strategy, you must guide them on how to choose a North Star metric—a single metric that will truly help the company sail in the right direction. Chasing a lot of KPIs and overestimating the value of vanity metrics may lead to wasted efforts. Keeping things simple with just one metric can prove to be much more helpful than one may think. Learn more about the North Star Metric by completing Consultport Academy’s Long Term Growth Strategy Course.