According to CB Insights, 42% of startups fail simply because there’s insufficient demand for their product. It’s not a lack of capital or inadequate technology. In these cases, it’s the wrong direction.
How many large companies are doing the same thing at scale? They move fast, invest wisely, hire the best. Yet each department is moving in a different direction.
When looking for new avenues to avoid dead ends, it can be helpful to talk about North Star Metric.
The North Star Metric isn’t just another framework to add to your strategy slide. It’s a tool that allows you to do something genuinely difficult: stop measuring what’s easy to measure.
What is the North Star Metric — and what is not
The North Star Metric is the metric that best captures the value your product or service delivers to customers. It’s not revenue. It’s not leads generated. It’s not monthly sessions on Google Analytics. It’s the measure of how much real value you’re creating for those who choose you—and, if it grows properly, revenue will almost automatically follow.
Why isn’t revenue a good indicator? Because it tells you what’s happened, not where you’re going. A company obsessed only with revenue tends to extract short-term value from customers, rather than generating it. The practical result? High churn, poor referrals, and growth that seems solid until the day it isn’t.
The examples that convince
Spotify doesn’t measure registered users. It measures listening minutes per user—because when people listen more, the product is truly working, whether they use the free version or pay. Airbnb measures nights booked, not ad views: it captures value for both host and guest with a single number. Uber counts trips completed per week, not app downloads.
NSM, KPIs, and OMTM: The Hierarchy Every Team Should Know
One of the most common mistakes we see in organizations is using these three tools as if they were synonymous. They aren’t—and the confusion has a real cost.
The North Star Metric is the long-term indicator for the entire company. It only changes when the value model radically changes. Departmental KPIs are medium-term operational metrics—each team has its own, and they all contribute to the NSM. The OMTM, One Metric That Matters, is the short-term focus metric for a single team on a specific tactical objective: three to six months, no more, then it is evaluated and updated.
NSM is the destination. KPIs are the paths. OMTM is the turning point you’re currently on.
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How to Find Your North Star Metric: 8 Steps to Action
There’s no one-size-fits-all NSM. It must be built on the specific value your organization generates. What follows isn’t theory—it’s the process.
Step 1 – Start with value, not metrics
Before opening any dashboard, ask this question: why customers use our product—not what we think, but what they say. 42% of startups fail due to a lack of market fit (CB Insights, 2024). Use interviews, surveys, and behavioral analysis. NSM must arise from a deep understanding of the customer’s job-to-be-done, not from internal brainstorming.
Step 2 – Identify the client’s Aha Moment
When does the customer reach their goal using your product? That moment is the heart of NSM. For Uber, it’s when the passenger arrives at their destination. Describe this moment with surgical precision, then measure it.
Step 3 – Translate the value into a measurable number
The moment of success must become a number. It’s not always immediate: if your value is “delivering insights from analytics,” NSM could be “actionable insight sessions per user per week.” It doesn’t have to be perfect—it should be the best available approximation of the value delivered.
Step 4 – Make sure it’s representative of all your customers
If your platform has two sides—marketplace, B2B2C—the NSM must capture value for both parties. Airbnb measures nights booked, not just host interest or guest demand. Both. If your NSM reflects only half of your business, you’re navigating with half the map.
Step 5 – Build the KPI tree
Every stage of the funnel—Acquisition, Activation, Retention, Referral, Revenue—must contribute to NSM. The KPI tree isn’t a bureaucracy: it’s the bridge between the North Star and the daily work of each team. Without it, NSM remains a slogan on the quarterly boardroom slides.
Step 6 – Make sure you have direct control over the metric
If you can’t influence it with your actions, it’s not a good NSM. Salesforce doesn’t measure the deals its customers close—it has no direct control—but the depth of platform usage, which it does control. Quick test: if we launch this initiative today, should the metric move within 30 days? If not, change the metric.
Step 7 – Define measurement frequency and ownership
The NSM must have an explicit owner and a defined review frequency. For high-engagement digital products, weekly monitoring works well. For B2B products with long cycles, monthly or quarterly monitoring is better. Monitoring it too frequently generates fluctuation anxiety; monitoring it infrequently slows down learning cycles.
Step 8 – Validate with data, not intuition
As PostHog demonstrated: test multiple candidate metrics on real user cohorts before choosing. The right NSM isn’t something you choose on the fly—it’s proven with data. Once validated, share it with the entire organization. A metric only the C-suite knows won’t guide anyone.
The most common mistakes — and how to avoid them
In our experience with organizations, four mistakes recur systematically.
Choosing vanity metrics—registered users, page views—that easily scale but don’t reflect real customer value.
Using revenue as NSM in the early-stage phase, when it is still too far from the behaviors that really matter.
Do not test the correlation between the candidate NSM and actual business growth on historical data.
Don’t update your NSM when your competitive model or core value proposition changes—as Facebook did, and as you will eventually have to.
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The final checklist: Is your NSM really the right one?
Before consolidating your choice, here are five questions to answer honestly:
- Does it reflect the value the customer gets — not just the activity they perform?
- And a leading indicator of future growth, not just a lagging indicator?
- Can it be directly influenced by the actions of your teams?
- Does the entire organization understand it and know how to contribute—from the CEO to the newest hire?
- Have you tested its correlation with retention, referrals, and revenue on real data?
If even one answer is “no,” go back to the step that generated it. It’s not a failure of method—it’s exactly the process that works.
Final considerations
The North Star Metric is not a new concept. But in the current context—where acquisition costs are rising, decision-making cycles are compressed, and competition is global—having it or not makes a concrete and measurable difference.
Companies that grow sustainably aren’t those with the most KPIs. They’re those that have chosen the right metric, built it on evidence, and used it to align every operational decision. From Facebook to Airbnb, from PostHog to Duolingo, the pattern is the same.
It’s not about having more data. It’s about knowing which number really matters.
Want to identify your company’s North Star Metric?
With Business Intelligence services, we build operational dashboards that monitor NSM and the KPI tree. With Predictive Analytics, we identify growth drivers and anticipate future trends. With the Digital Academy, we align the entire organization around a culture of single metrics and data-driven decision-making.
Author: Claudia Paniconi | Marketing Manager, DMBI
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