I'm surprised that "Customer Outcomes" isn't a North Star Metric category listed for B2B businesses.
For example, if you're a company in the sales acceleration/sales tech space, then your NSM could/should focused on the two most important outcomes: increasing # of Opportunities created (for SDR teams) or increasing Closed-Won $ (AE teams).
So the North Star Metric could/should be "% increase in rep productivity" or "% of customers achieving their new business goal".
This aligns with Amplitude's definition of the NSM: "This metric is a leading indicator that defines the relationship between the customer problems that the product team is trying to solve and sustainable, long-term business results... Increasing this (metric) would improve both customer value and key business results—like customer retention and, ultimately, subscription revenue."
In short, the best North Star Metrics align the success of the customer with the success of your business.
From what I've seen, this kind of metrics is really hard to apprehend as there are a lot of externalities that may impact the sales team performance. If the customer outcomes goes down because of an internal issue, you don't want it to penalise your team. That's why usage is often a good proxy to the value they are getting I think.
Loved the North Star metrics conversation. It is so important to create this metric to get the entire organization mobilized behind a clear objective. Awesome post Lenny !!
If I could add to this - From my experience in labor marketplace (gig economy), one NSM that works is "number of hours" worked on the platform. This is in contrast to "number of shifts" that most companies use.
Why "number of hours" worked?
- Atomic unit - It's the logical, unit of work that the job seeker performs on the platform. It is also the way the companies place their job requirements on the platform.
- It connects to everything else - Payments are done on an hourly basis, we can identify or extrapolate experience based on number of hours worked (more hours --> more experience, more engagement and more retention)
- Aligned with success for both sides of the marketplace - as the number of hours increases, companies and talents both have "fulfillment" and allows us to ensure matching is done easier - hours posted vs hours worked.
What do you think? Is this the right approach for labor marketplaces? Could there be another approach?
I've been thinking about this topic for months, and after I read this, boom! I now have a much better sense of what metrics we should track. This post is a game changer.
My current understanding of NSM is that it is meant to be a leading indicator of revenue that is aligned with customer value. The entire point being not to drive towards revenue directly, but via a meaningful North Star. How can the companies in your research use Revenue as a NSM?
Any more detail you can shed on how the companies pursuing a revenue NSM actually implement this?
Based on this research, NSM's are generally output metrics, and then you and your teams pick the input metrics (aka leading indicators) to focus on directly day-to-day.
I'm surprised that "Customer Outcomes" isn't a North Star Metric category listed for B2B businesses.
For example, if you're a company in the sales acceleration/sales tech space, then your NSM could/should focused on the two most important outcomes: increasing # of Opportunities created (for SDR teams) or increasing Closed-Won $ (AE teams).
So the North Star Metric could/should be "% increase in rep productivity" or "% of customers achieving their new business goal".
This aligns with Amplitude's definition of the NSM: "This metric is a leading indicator that defines the relationship between the customer problems that the product team is trying to solve and sustainable, long-term business results... Increasing this (metric) would improve both customer value and key business results—like customer retention and, ultimately, subscription revenue."
In short, the best North Star Metrics align the success of the customer with the success of your business.
Curious for your thoughts on this...
It didn't see this come up in my research, but I also wouldn't be surprised if some companies go in this direction.
From what I've seen, this kind of metrics is really hard to apprehend as there are a lot of externalities that may impact the sales team performance. If the customer outcomes goes down because of an internal issue, you don't want it to penalise your team. That's why usage is often a good proxy to the value they are getting I think.
Loved the North Star metrics conversation. It is so important to create this metric to get the entire organization mobilized behind a clear objective. Awesome post Lenny !!
If I could add to this - From my experience in labor marketplace (gig economy), one NSM that works is "number of hours" worked on the platform. This is in contrast to "number of shifts" that most companies use.
Why "number of hours" worked?
- Atomic unit - It's the logical, unit of work that the job seeker performs on the platform. It is also the way the companies place their job requirements on the platform.
- It connects to everything else - Payments are done on an hourly basis, we can identify or extrapolate experience based on number of hours worked (more hours --> more experience, more engagement and more retention)
- Aligned with success for both sides of the marketplace - as the number of hours increases, companies and talents both have "fulfillment" and allows us to ensure matching is done easier - hours posted vs hours worked.
What do you think? Is this the right approach for labor marketplaces? Could there be another approach?
Thank you for sharing Nishant! I think this makes a ton of sense for labor marketplaces.
I've been thinking about this topic for months, and after I read this, boom! I now have a much better sense of what metrics we should track. This post is a game changer.
Hi Lenny,
Thanks for this post. Can you please confirm if there is a difference between DAU and "DAU14"?
Hi Lenny, thanks for the great article.
My current understanding of NSM is that it is meant to be a leading indicator of revenue that is aligned with customer value. The entire point being not to drive towards revenue directly, but via a meaningful North Star. How can the companies in your research use Revenue as a NSM?
Any more detail you can shed on how the companies pursuing a revenue NSM actually implement this?
Thanks.
To be clear, not everyone here does it perfectly :)
Hi Lenny
Most of what is listed for those companies look like lagging indicators or product/business impact metrics.
Just wondering, isn't the NS metric supposed to be a leading indicador, specifically around user behaviours?
Really interested on your take on this. Thanks
Based on this research, NSM's are generally output metrics, and then you and your teams pick the input metrics (aka leading indicators) to focus on directly day-to-day.