Growth hacking is a modern marketing strategy that emphasises unconventional and cost-effective methods to drive business growth. It involves using creative and data-driven techniques to reach a wider audience, improve user engagement, and drive customer acquisition.
Growth hacking is all about experimentation, iteration, and optimisation.
One of the key aspects of growth hacking is the ability to measure the effectiveness of different initiatives and tactics in real time. This is where Lean Analytics comes in.
Lean Analytics is a framework that provides a systematic approach to tracking and measuring progress towards specific goals. It emphasises a data-driven approach to building and growing a business. The goal of Lean Analytics is to help companies make better decisions based on data, rather than assumptions or intuition alone.
The Lean Analytics methodology is closely associated with the Lean Startup movement, which emphasises rapid experimentation and customer feedback in order to build a product or service that meets the needs of the market. The process involves identifying key performance indicators (KPIs) that are most relevant to the company’s goals, tracking and analysing these metrics over time, and making data-driven decisions to improve performance.
By focusing on Lean Analytics, companies can quickly identify what is and isn’t working, adjust their strategy accordingly, and iterate towards a more successful business model. The methodology can be applied to a wide range of industries and business models and has become increasingly popular in the technology and startup space.
The Lean Analytics framework is built on two types of metrics – the North Star Metric and the One Metric That Matters (OMTM).
North Star Metric
The North Star Metric is the ultimate goal of the company. It is the metric that defines success for the entire organisation and aligns with the company’s mission and vision.
It is a specific metric that a company identifies as the most important one that reflects its overall mission and goals. The North Star Metric is not just a simple metric, but rather a key performance indicator that serves as a guiding principle for the entire team.
The North Star Metric should be a long-term goal that is specific, measurable, and actionable. It should be something that the entire company can focus on and work towards. The North Star Metric should be something that is easy to understand and communicate throughout the organisation so that everyone can be working towards the same goal.
For example, let us consider a subscription service business. The Monthly Recurring Revenue (MRR) is the amount of revenue this business will expect to earn every month through its subscription-based product or service. So, for a subscription-based service, the MRR is a critical North Star Metric because it will reflect the total revenue generated by the business on an ongoing basis.
By focusing on increasing MRR, a subscription service can track the success of its growth initiatives and monitor the impact of changes to its pricing, product offerings, or marketing campaigns. This North Star Metric helps the business stay focused on its overall goal of generating recurring revenue from its subscription service.
Klipfolio is a great tool for businesses to track their North Star Metrics. It allows businesses to create custom dashboards with key metrics from multiple sources, including subscription analytics platforms, social media platforms, and more. Klipfolio’s dashboards can provide real-time insights into a business’s progress towards its North Star Metric and can help teams stay focused on achieving the company’s overall objective.
Thus, by focusing on the North Star Metric, companies can prioritise initiatives and allocate resources in a way that is aligned with the company’s overall objective. It can help streamline decision-making and ensure that all efforts are working towards a common goal.
Only Metric That Matters
The Only Metric That Matters (OMTM) is the most important metric for each team within the company. It is the metric that is specific to the team’s function and helps them focus on the key drivers of growth. It is the single metric that is believed to have the most direct impact on the company’s success.
The OMTM varies depending on the company and industry, but it typically reflects the company’s most critical goals, such as revenue growth, customer acquisition, or user engagement. The OMTM is often tied directly to the company’s mission and overall strategy, and it is frequently used as a tool for measuring progress towards these goals.
For instance, for the subscription-based service whose North Star Metric is MRR, we can consider one of its OMTMs to be the conversion rate from free trial to paid subscription.
One of the most important drivers of MRR growth is the conversion rate from free trial users to paid subscribers. This is because free trial users have already demonstrated an interest in the service, and are more likely to become paying customers if they have a positive experience during the trial period.
Tracking and improving the conversion rate from free trial to paid subscription will help the business increase the number of new subscribers and thus grow its MRR. This OMTM helps the business to focus on the key driver of growth for the acquisition team and encourages them to experiment with different approaches to improving the conversion rate, such as improving the onboarding process, providing more engaging content during the free trial, or offering limited-time discounts to new subscribers.
Baremetrics is an online tool designed to help businesses track their subscription metrics and identify the key drivers of their subscription-based business. By tracking metrics such as churn rate and customer lifetime value (CLV), Baremetrics can help businesses identify and track their OMTM for each team by providing insights into specific metrics that are critical to that team’s success.
By focusing on the OMTM, companies can prioritise their efforts and allocate resources more effectively. It enables decision-makers to focus on the most important drivers of growth and success and to make data-driven decisions that can have a significant impact on the company’s bottom line.
It is worth noting that while the OMTM is a powerful tool for guiding decision-making, it is essential to avoid becoming too narrowly focused on a single metric at the expense of other important KPIs. A comprehensive view of the company’s performance is necessary to ensure that all critical areas are being addressed and to avoid unintended consequences that may arise from overly focusing on a single metric.
The North Star Metric vs. The Only Metric That Matters
The North Star Metric and the One Metric That Matters (OMTM) are both critical components of the Lean Analytics framework, and they play different but complementary roles in driving growth for an organisation.
The North Star Metric is the ultimate goal that the entire organisation is working towards. It is a high-level, strategic metric that defines the success of the company as a whole. The North Star Metric should align with the company’s mission and vision, and it should be a clear, quantifiable goal that everyone in the organisation can work towards.
The OMTM, on the other hand, is the metric that matters most to each team’s success. It is a tactical, operational metric that is specific to the team’s function. Each team should have its own OMTM, which is the metric that the team focuses on to drive growth.
Thus, while the North Star Metric and the OMTM may seem similar, the main difference is that the North Star Metric is more focused on aligning all efforts towards a common goal, while the OMTM is more focused on a single, specific metric that drives growth and success.
By setting a North Star Metric and assigning OMTMs to each team, the entire organisation can work together towards a common goal while still focusing on the key drivers of growth for each team’s specific function. This approach ensures that every team is aligned with the overall goal of the company and is working towards the same North Star Metric, but each team also has a specific focus on the OMTM that is most critical to their success.
When a company sets a North Star Metric and assigns OMTMs to each team, it creates a clear sense of direction and focus for everyone within the organization. By doing so, it ensures that each team is working towards the same overarching goal and understands how their specific function contributes to the overall success of the business.
Furthermore, by having specific OMTMs for each team, it enables them to prioritize their efforts and resources towards the metrics that are most important for their success. This approach helps to eliminate distractions and ensures that each team is focused on the key drivers of growth for their respective functions.
Another benefit of using the North Star Metric and OMTMs is that it promotes collaboration and cross-functional communication within the organization. Each team’s OMTM is likely to be dependent on the performance of other teams, and so by working together, the company can achieve better results overall.
The North Star Metric and OMTM are not set in stone and can be adjusted over time as businesses learn more about what works and what doesn’t. It’s important to regularly review and iterate on these metrics to ensure that they continue to align with your goals and provide meaningful insights.
Thus, the North Star Metric and the OMTM are both critical components of the Lean Analytics framework.
Using Lean Analytics, companies can set specific, measurable goals aligning with their overall business objectives. The North Star Metric provides a clear target for the entire organisation, while the OMTM helps each team stay focused on the metrics that are most important to their function. This approach allows businesses to make data-driven decisions and iterate quickly to achieve sustainable growth.
In conclusion, growth hacking is a powerful marketing strategy that emphasizes creativity, experimentation, and data-driven decision-making. Lean Analytics provides a systematic framework for tracking progress towards specific goals and helps businesses make data-driven decisions efficiently. By using the North Star Metric and the OMTM, companies can align their efforts towards a common goal while still focusing on the metrics that matter most to each team’s function.
Interested in Growth Hacking? Check out this Ultimate Guide To Growth Hacking!