Growth Talk: North Star Indicator

The North Star Metric (NSM) plays an important role in user growth, helping companies clarify growth direction and assess the health of the business. Next, we will delve into the core concepts of NSM and its importance to business success.

When people are lost in the endless wilderness and cannot figure out the directions of east, south, west and north, they will look up at the clear sky, searching for the North Star that can help them determine their direction.

When you are lost in the wilderness of user growth and can’t find the direction of growth, you should also examine the growth indicator to see if it is the North Star or is related to it.

North Star Metric (NSM)

• The absolute core indicator related to the business strategy of an enterprise at a specific stage, which guides the company in one direction like a North Star.
• The determination of this indicator is crucial to the success of an enterprise, because it not only concerns the enterprise's macro-strategy, but also involves daily operations and decision-making.
• The selection of the North Star Metric requires balancing business goals, user value, long-term and short-term development, and the company's profit goals.
• While revenue or profit can serve as a North Star metric, they may be too lagging and not provide immediate feedback, so it may be more appropriate to choose other indicators that can reflect the health of the business more immediately.

6 Criteria for North Star Indicators

1. Can it reflect the core value users get from the product?

2. Can it lay the foundation for the product to achieve long-term business goals?

3. Can it reflect the user’s activity level?

4. If the indicators improve, can this indicate that the entire company is moving in a positive direction?

5. Is it simple, intuitive, easily accessible, and disassembled?

6. Is it a leading indicator rather than a lagging indicator?

Taking the education industry as an example

The North Star Indicator is the number of active users, which can be divided into monthly, quarterly, and annual active users.

Number of current users = Number of current users – Number of users who have received a refund – Number of users who have not received a refund and have not renewed their subscription + Number of new users