One challenge in implementing strategy is measuring your startup’s performance against it. Ideally, the whole organization should be focused on advancing one strategic north star metric (NSM) that shows progress to all stakeholders. It helps you eliminate noise coming from reporting KPIs to investors or updating OKRs within teams.
Because it falls in line with strategy, the NSM is a leading indicator of value creation. Every strategic decision at the company should, in some way, consider driving momentum in the NSM. Once the NSM is selected methodologically, strategy just comes down to allocating resources against a mix of initiatives that push the NSM in the right direction.
You can customize your NSM in a way that suits your unique growth path and come up with fun combinations such as:
Share of Wallet (SoW) for the purposes of growing a marketplace. The more SoW of a customer, the more data the marketplace has on what is sold, which means it has the ability to better match brands to that customer’s needs.
Share of Stomach (SoS) for a meal replacement or cooking box startup looking to disrupt how people buy, cook, or eat their food. A NSM like this will ultimately tell you, on average, how many parts of the day or taste profiles you cater to. Unsurprisingly, customers with the highest SoS are the least likely to leave the service and the most likely to grow spend over time.
One common generic NSM that guides many SaaS companies’ strategic decisions is DAU/MAU (Daily Average Users / Monthly Average Users). Some say it’s a vanity metric, and that if customers are happy, DAU/MAU will follow suit as a lag indicator. But we can keep that discussion for later. There are a few ways to measure that NSM differently if it so happens to fall below what is considered a competitive score (40-50%) then try some of these workarounds:
1. Adjust for the effect of weekends and holidays, especially with B2B companies.
2. Separate Customer Engagement from User Engagement to isolate paying from non paying customers, who typically just browse to get an idea and leave.
3. Look at Customer Engagement for key accounts. You also want to zoom in on your top customers
4. Look at DAU/WAU (Daily Average Users / Weekly Average Users) as well as DAU/MAU.