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North Star Metric: Why Every Consultant Should Know This Term

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Published:
September 10, 2021
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7 minutes
Leo
Experienced copywriter who spends a lot of money at restaurants and regrets it later.

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.

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.

“To be excellent when engaged in administration is to be like the North Star. As it remains in its one position, all the other stars surround it.” - Confucius

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.

In both cases, we have an exact number! Whether it’s 500 hassle-free deliveries or 500 minutes spent on the app listening to the music, both the metrics are measurable, and hence, they qualify to be considered a North Star metric.

consulting kpis, North Star Metric: Why Every Consultant Should Know This Term

4. It should be growth-oriented

Let’s consider YouTube as an example here. It would be wrong for YouTube to consider the number of website visits as a North Star metric. Even though the number of website visits is measurable, it doesn't truly depict growth because it does not take factors like bounce rate and user retention into account.

However, the number of hours that users spend watching videos on the website can be used to measure growth. Why? Because the more time users spend on YouTube, the more ad revenue the company will generate, and this is exactly what they want.

5. It should be made known to the entire team

A North Star metric is not something that is confidential like a SWOT analysis or competitor’s research. In fact, you, as a consultant, should motivate your client to let their entire company know what their North Star metric is. This will help everyone to be on the same page and work towards achieving that one metric which will determine the company’s growth in the long run.

Final Thoughts

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.