Hey, happy Monday!
We left off last week with a mission to locate your North Star Metric.
If you haven’t, don’t worry, you can go back to last Monday and fish out the previous note from your inbox, or visit this link to read the first part.
You are reading the second in a series of 3 notes that, in detail, perhaps for the first time, will enable you to understand what exactly and practically the expression “driving a strategy by numbers” consists of. What I call: Real Time Numbers Management.
Why now?
Because no business plan survived 2020. Although some saw results far exceeding expectations, most Italian companies had to scale back their growth ambitions.
Regardless of the results, the lesson we take home is to have realized that the pace at which things can change is incredibly rapid and that nothing can ever go back to the way it was. You will not be able to do CTRL+Z to resume creating value for our customers as you did before the pandemic simply because those customers no longer exist.
The rules, those will return as before: restaurants will reopen, we will be able to go back to traveling, to perhaps attend some events etc. etc… But what will never return as before will be the behaviors of us as people, our needs, our priorities, our purchasing decisions.
In 2020 we no longer simply bought products, we bought experiences instead. To rebuild at home, or in the office, a part of the world that is difficult to experience for the moment. The experience of grocery shopping, restaurants, movies, concerts, the gym…
And who are the companies that, better than anyone else, base their business model on constantly improving the customer experience?
That’s right: the tech companies.
And if it’s true that people didn’t buy more products but experiences, the tech companies on the other hand, have increased their sales precisely because they use products as a means of evolving the experiences people want to have.
I am not just talking about software. I am talking for example about spin bikes, the bicycles for training at home.
In Italy it has not yet arrived but in the United States there is PELOTON. Imagine Technogym, Netflix, and Zoom in one product. Apparently they sell Spin Bikes and luxury treadmills with a tablet and proprietary app included.
What is so special about them? If you visit the site you’ll know right away. On the homepage it says: “get unparalleled motivation with only $49 a month.”.
It doesn’t say “buy on installment an amazing exercise bike with interactive screen, live and pre-recorded classes that you can do whenever you want.” That one if you want you can buy it from Technogym.
In September, PELOTON had reported that it had recorded 90 million completed workouts (their NSM). Its subscribers exercise on average 20 times a month, 5 times a week! It is more of a drug than a spinning session.
Those people didn’t buy an exercise bike, they bought a better version of themselves.
Peloton is Experience as a Service.
Also, whatever you sell, in 2021 you are Experience as a Service.
New engineers
Companies like PELOTON, achieve extraordinary results using a technique that is surprisingly inexpensive and affordable, including yours and mine.
They basically allow these products to constantly teleport data, from the user to headquarters, so troops of new engineers of human behavior and of corporate growth, whom we call designers, can win the battle for attention every day.
These new designers, sitting on the shore of their own data lakes, clearly see the star of their organization reflected and, with numbers, know how to draw the fastest path to success. Today we can do it too.
We can simplify processes and focus only on what matters.
How to use North Star Metric to draw and guide strategy
I’ve never been in Spotify’s offices, but I’ve been in the offices of a few forward-thinking companies, and I can imagine, without then being so wrong, that they, too, have in the center of the open space, a monitor where they show a large, fast-moving number. That number for Spotify is the sum of all minutes spent listening to songs on the platform. A very big number!
All the teams are focused on making sure this number grows steadily. Each in their own area of influence: engineers on technology, designers on ux, marketing on acquisition…
I want to make it clear that this story has nothing to do with the famous agile culture of Spotify, which everyone wants to copy but which view from the inside doesn’t seem to work… In this April 2020 article, Jeremiah Lee, a former employee of the company, tells the behind-the-scenes story of a model they don’t use either. “Failed #SquadGoals”.
NSM is not simply a number: it is a function of 3 dimensions.
- Breadth
How many active users are doing that significant action - Depth
How deep is the extent of the interaction - Frequency
How often does this action occur
Let’s take a practical example.
Spotify’s NSM is the total listening time on the platform per week which is given by the # number of active users (amplitude) × duration of sessions (depth) × # number of sessions per week (frequency)
Here are the statistics should you want to try your hand at the exact calculation according to 2020 data. Business of Apps.
To, as they say, unload on the ground, these numbers, it is important to understand which numbers are the result of changing other numbers, and that is, which are the inputs, the leading (anticipating) and lagging (directly resulting) metrics.
Here is a diagram to show you what I mean.
Total listening time is a consequence of users coming back to the app (wherever it is, smartphone, TV, smart speaker, car…) and extending the playing time because, you might guess, more music means more commercials or more loyal users who will keep paying.
And what needs to be done to keep users coming back and increasing their listening time? For example, have users interact with more relevant notifications or have interesting playlists (one-third of time is spent listening to algorithmically generated or team-curated playlists).
What is here for us?
Most of the activities we do do not move the bar.
Having a handful of numbers to look at in real time makes it incredibly easy to manage tasks, stop getting distracted, and start focusing on the things that matter, day in and day out.
When you are focused on changing one issue, you have all you need to draw the path for faster to grow.
Where are you on this journey?
Click reply, let me know how it’s going or if you’re stuck on anything.
Good work!
Make yourself heard.
