By Shoshana Collins
In a world flooded with information, there’s an increasing sense of urgency around using data – the RIGHT data – to inform better decisions. We look to data to provide a roadmap, to alert us to risks, to show us how to build, when to push, where to go next. North Star Metrics and KPIs are crucial tools to guide product development, but many teams struggle to agree on definitions and a practical blueprint for how to design their metrics.
If you're encountering similar challenges, I have some unconventional advice: the answers lie in the stars.
I don’t mean we should choose metrics based on our Zodiac signs. But there are some celestial metaphors that beautifully illuminate how we use metrics to steer in the right direction at BetterUp.
What is a North Star Metric, anyway?
A North Star Metric, or NSM, is the brightest and most consistent beacon guiding product development.
While all the other stars in the sky seem to swirl around us as the earth spins on its axis, the North Star appears fixed and constant – a cardinal anchor that has been prized by navigators throughout history.
Just like the North Star provides adventurers with one clear, overarching direction, North Star Metrics can guide an entire organization to move toward a common goal for a sustained period.
The length of time is “sustained” rather than “infinite”. Macroeconomic trends, customer preferences, breakthroughs in scientific research, and technology innovations all impact our product strategy. And when product strategy shifts, the NSMs shift with it.
That doesn’t invalidate the metaphor, though, because contrary to popular belief, the North Star also changes. The gravitational influence of the sun and the moon causes the position of the earth’s axis to shift over millennia. Today, Earth's North Pole lines up with Polaris, but in 10,000 years, it will point to Vega. Future generations will still have a North Star to guide them, but it will be a different star. So we also set NSMs with the understanding that they may change over time.
A sample BetterUp NSM
A concrete example of a BetterUp NSM is improving 12-month engagement. This metric meets the three indispensable conditions to function as a North Star:
- It is a measure of experienced customer value - If a customer isn’t experiencing value, we don’t expect them to remain engaged over 12 months.
- It aligns with our current product strategy - If our product is a valued benefit, employees will use it consistently.
- It provides a leading indicator of revenue - We bill per engagement event, so engagement is a reliable analog for near-term revenue, and 12-month engagement is also part of the value story we use to drive revenue in the longer term through renewals and expansions.
Future versions of this NSM will incorporate more tangible and immediate indicators of experienced customer value. But 12-month engagement shines a bright and consistent enough light to guide that product’s development to the next stage.
So, if we have a North Star, why do we need KPIs?
Once a team has gone through the process of identifying a North Star Metric, it can be tempting to just stop there. After all, isn’t the point of having a North Star to follow wherever it leads?
Here, the celestial analogy holds true again. Because while the North Star is a powerful directional guide, it’s insufficient for tactical navigation. For spatial context, sailors need to know their latitude and longitude. And to find those, they need the constellations and a chronometer – a really accurate timepiece.
When charting the course for product strategy, the constellations are your KPIs, and the chronometer is your analytics infrastructure.
What makes an effective KPI?
KPIs allow us to navigate with precision across the product development seascape when they have these three essential characteristics:
- Centered on outcomes — not outputs. It’s easy to commit to things within our span of control. So a lot of times, teams want their KPIs to be outputs they know they can deliver: X% increase in features shipped, X more assessments built. But that can lead to activity without desired results. Our KPIs have to hold us accountable for creating positive customer outcomes because that’s what produces a great product.
- Composable into actionable parts. Each metric should have multiple mathematical components that can serve as levers to move the overall KPI. This gives us the flexibility to adapt to changing dynamics and the ability to accurately measure the impact of specific features or initiatives.
- Counterbalanced against the cobra effect. The cobra effect is shorthand for the perverse incentives we can create when we hyper-focus on one KPI or driver. Every KPI needs at least one “guard rail” metric to keep us out of the snake pit.
A sample BetterUp KPI
To illustrate what this looks like in practice, we can use one of BetterUp’s flagship coaching product KPIs: Coaching session hours per member.
We can break this KPI down into three mathematical components:
- % of members who complete a coaching session
- Number of sessions per member with at least one session
- Hours per session
We can plan specific features or interventions to improve the overall KPI by increasing any of the three drivers. And we can counterbalance against perverse incentives.
For example, we know we could optimize the number of coaching session hours per member by reducing our member base to only the subset of our most engaged users. This might raise our KPI but would have a negative impact — not only on our bottom line, but also on BetterUp’s mission to help people everywhere pursue their lives with greater clarity, purpose, and passion. So we pair the KPI with a counterbalanced metric: we aim to increase session hours per member without negatively impacting our total member counts.
How BetterUp’s teams navigate with precision
And finally, about that “really accurate timepiece.”
At BetterUp, we navigate with precision by building an accurate, complete, and reliable analytics infrastructure to democratize data access and by embedding analysts in our core product squads. Analysts partner with the product team to identify opportunities and risks that could change our course and to identify the data we need to map out alternate routes.
At a category-defining company like BetterUp, we can’t afford to drift, or worse, sail in circles. Our analytics foundation helps us prioritize course correction, integrate it into our processes, and optimize for maximum customer impact.
Embrace the journey
Celestial navigation metaphors aren’t just for star-gazers. Every day, the practical applications of these concepts help BetterUp chart a more confident course toward our ultimate goal: Bringing the power of transformation to every person.
Want to join our grand voyage? Apply to one of BetterUp’s engineering roles to build products that give our customers greater clarity, purpose, and passion.