The North Star Metric i.e., NSM is an indicator which an organization uses to focus on their growth. It is aligned with the organizational goal. But what is a counter metric or supportive metric. Simple definition that it is the metric which supports and make sure that the NSM is working as expected.
But how the organization used these two types of metrics? Generally, NSM is decided at organizational level and all the different vertical or teams inside the organization align their goal/target according to the NSM. But who will decide the supportive metric? It is important for a product manager to understand the complete ecosystem of the product and then formulate some metric to measure the success. To support the NSM also, a product manager set up some counter metric parallelly.
Let's try to understand this concept with a simple example.
I will take an example of a food service delivery company (similar to Swiggy, Zomato). At the beginning of the year the management decide to focus on the KPI --> Number of ordered delivered and took that as a NSM (This is just an example; I am not suggesting that the above KPI is the best as NSM). The NSM should be aligned with the company's vision.
At the end of the half year, company decides to review the NSM performance. Let's assume that there are 25% increase in the number of orders placed compared to last year for the same period. How do we evaluate that the company is moving towards right direction? We can do that by checking on the other linked or relevant metrics. Let's see what the other metrics are here which will be impacted.
1. Revenue - Number of order increase is not directly proportional to revenue increase. Revenue = Number of Order Placed x Value of each order. Number of orders might be increasing, but if value of per order is less then company's top line will be impacted.
2. Number of customers in the platform - Customer engagement, active customers in the platform, retaining existing customer, customer acquisition - these are very important factor. Number of orders is very much dependent upon the daily active customer on the platform.
3. Order basket size - Number of products per order is also important factor. If the basket size is less i.e., products in the cart is few then it needs introspection. Availability of the quality products, listing details of the products in the platform etc. are key contributor to basket size.
4. Average cost per delivery - If average cost per delivery in increasing then it is going to impact the bottom line of company's financial statement. If number of orders are increasing, but organization is incurring cost for each of the order - definitely that is not good for the company. From order placement to order delivery - in each step the cost needs to be optimized without impacting the value delivery to customer.
<< Note: There are other indicators also, but I have mentioned only 4 here >>
If all the above 4 parameters are showing healthy, then the NSM is definitely guiding the company towards growth and success.
So the organization also needs to decide to fix 2-3 counter metrics to put a check on the NSM. In this way, the company will know that the NSM result is healthy; and company's strategy is moving towards right direction.
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