Do you really need a North Star Metric?
Do you really need a North Star Metric?
+ Substack’s Product Growth Strategy
It’s so hard to choose a North Star Metric.
Some believe we must pursue revenue-based one’s. “Cash is king,” they say. Others explicitly focus on DRIVERS of the flywheel. “Revenue is uninspiring and premature,” they say.
There are great companies on both sides of the aisle, as well.
In the revenue camp:
Amplitude
Notion
Figma
In the flywheel driver camp:
Airbnb (nights booked)
Roblox (hours played)
Lyft (rides)
There doesn’t seem to be consensus.
In addition, once you decide, some team feels undervalued. If you choose a usage metric, the monetization focused teams feel stiffed. And vice versa.
These points form the case NOT to choose a north star metric (NSM). Instead, it is tempting for teams to each have their own.
Often, this is done by aligning based on step of the funnel, eg:
The home page team might take visit to checkout conversion
The checkout team might take checkout to purchase rate
The core team might take retention rate
The monetization team might take revenue per user
This is not fool-proof. The biggest problem is: How do you manage tradeoffs? Changes at one step of the funnel often impact other parts of the funnel.
For instance, what if we got more users to checkout on the home page by offering a hidden discount?
Users might go to checkout just to see the discount. Say it increased visit to checkout rate 10%, but decreased checkout to purchase rate 5% & revenue per user 6%.
It’s increased the homepage team’s goal at the expense of the checkout and monetization teams’. Then what?
THIS is why a north star metric is so important for product teams.
Let’s say the NSM is # of purchasers. Then the overall 5% increase means you graduate. On the other hand, if the NSM is revenue, the overall negative 1% means don’t graduate. The NSM clarifies tradeoffs.
If there isn’t a north star metric, one of two undesirable situations arises:
Either, the experiment is escalated to leadership. This slows down decision making.
Or, the home page team makes a decision that hurts checkout & monetization teams. This creates conflict.
So, not having a north star metric tends to be problematic.
The best of both worlds is what I call the NSM-OMTM framework. OMTM refers to the one metric that matters for a team.
In this framework, the teams focus on the metric they most directly control: OMTM. However, the NSM also offers guidance on the right guardrail metrics for the teams, so they can clarify tradeoffs, based on current strategy.
So - the challenge really exists for product leadership.
Great product leaders empower their teams. A well-justified NSM is how. It is up to product leadership to build company-wide consensus on a metric.
This means it might change over time. As I suggested in “How to reinvent your product growth strategy for the tech downturn,” most companies should have recently shifted from top-level to efficient growth.
The NSM is an evolving reflection of the current strategy.
Substack’s Product Growth Strategy
Social media creates attention monsters. Instead of the most original thoughts, creators pursue the strongest hooks. Substack wants to change that.
When the incentive is to seek attention and get likes, behavior follows.
But compare social media to podcasts. The incentives are totally different. With a podcast feed, the creator is directly sending content to fans who have subscribed. So, instead, the incentive is for high QUALITY content.
Is it possible to create the same dynamic for writing? This inspired Chris, Hamish & Jairaj (pictured) to found Substack.
Their mission? “Make it simple to start a publication that makes money from subscriptions.” If they could create a new market of content, by making it economical for writers, they could create a new media.
So far, it’s been working. The last time we got subscriber numbers from Substack, they had over 1M paying subscribers. That was up ~100% from the year prior. At an average cost of $7 per month, and 10% take rate, that’s a yearly revenue of $8.4M. Not bad for a company <6 years old.
It’s working out for its content creators, too. The top 10 writers make over $20M a year combined. Lenny Rachitsky shared he makes more on Substack than he did as a PM at Airbnb. Substack is set to be the next Twitch or YouTube, each of which have 10K+ creators living on them.
What product strategy and positioning has allowed Substack to get to this point?
1. Substack offers true independence for writers.
You own your email list. So, you can always walk away. This is totally different from Twitter, LinkedIn & Facebook’s options.
2. Substack focuses on making the experience easy & simple.
Time to publish is super low. Compared to competitor ConvertKit, Substack offers less customization, analytics, and advertising monetization features. It just makes writing super simple.
3. Substack gets the fundamentals, like SEO & deliverability really right.
My 1 year old Substack crushes my Wordpress blog of 10 years on SEO. Others have measured the same for email deliverability vs other providers. Substack is #1 in the 2 most important areas.
Substack can pursue this focused positioning because it is built for one persona:
Not for social media personalities. They might prefer Twitter or LinkedIn’s offerings
Not for techies. They might prefer Wordpress or ConvertKit
For writers who wants to focus on writing.
What can we learn from Substack’s phenomenal product growth?
You can create wholly new markets, instead of competing in saturated one’s.
Simpler is better, especially if you have a focused persona.
Getting the basics really right, instead of just ok, is a great wedge.