Companies use North Star Metrics (NSMs) to drive their growth. In this blog, I will examine three such companies: Airbnb, Facebook, and Slack. Keep in mind, Goodhart’s Law makes NSMs a little flawed since “When a measure becomes a target, it ceases to be a good measure” because “Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes” (Internet Archive; Google Books).
Airbnb was led by nights booked (LinkedIn). Airbnb cleverly picked this metric because “every successful booking means value was created—for guests, hosts, and the platform” (LinkedIn). It is a proxy for value created, which converts to profit. A team could game it by reducing the service fee, likely increasing bookings, but collapsing the measurement by reducing margins that would lead to less profit unless the increase in bookings outweighs the decrease in margins.
Facebook’s early growth team was steered by 7 friends in 10 days (Mode Blog). This was cleverly chosen because it is a proxy for active engagement which transforms into retention. A team could game it by adding friends based on phone contacts, as it would reduce investment put into adding friends; and therefore, change the experience users have with the app and, consequently, increase the number of friends they can add in a short time frame.
Slack focused on teams that sent 2,000 messages (First Round Review). Stewart Butterfield, Slack co-founder, said “after 2,000 messages, 93% of those customers are still using Slack today” (First Round Review). So Slack cleverly chose the metric of 2,000 messages sent because it is a proxy for active engagement, which translates to retention. A team could game it by changing the ICP to larger teams, as that would collapse the metric by increasing the number of members per team.
