In a previous blog post, I mentioned the North Star Metric, OKRs and ICE. I said I would explain what they were later. Well, I’m a man of my word, so here it is…
If you’ve just landed on this page and want to read my previous post about Growth Hacking, you can read ‘What the hell is Growth Hacking‘ or view the video ‘What the hell is Growth Hacking‘ on my YouTube channel.
In a nutshell, Growth Hacking involves rapid experimentation with bold targets and scientific analysis of results.
The most important metric is often called the North Star Metric. So let’s begin.
North Star Metric
It’s often quoted that Airbnb’s North Star Metric is nights booked. Everything they do is driven by improving the number of nights booked.
If Airbnb were driven by the number of app installs, they might get a ton of downloads but very few bookings. As a result, Airbnb would not be maximising revenue, and customers would not be sharing their experience with friends. It’s nights booked that creates value.
To help you set your North Start Metric download my Lean Strategy template and fill in the blanks.
Objectives and Key Results (OKR)
Some people are confused by OKRs and KPIs, believing they are the same thing. They are not – well, they are a little bit.
OKRs are an outcome and KPIs are a measurement.
Here’s an example of an OKR to make things clearer (hopefully):
Objective: To become the market leader in your industry
Key Result 1: Achieve revenue of £100m
Key Result 2: Grab 35% market share
Key Result 3: Invest 10% of revenue in R&D
You can see how the Key Results help achieve the Objective.
OKRs are linked to a strategic objective. They are ‘big picture’ goals and best used in organisations aiming for dynamic growth. OKRs should include bold targets that seem almost impossible.
A 20% improvement isn’t big enough, try 2,000%.
Typically, an organization will have three to five high-level Objectives and three to five Key Results per objective
Now let’s look at KPIs to clarify the difference. KPIs should be measurable and preferably be compared to a target. For example, compared to the industry average or compared to year-on-year growth, etc. Here’s an example of some KPIs:
KPI 1: Increase sales by 80% year-on-year
KPI 2: Improve customer retention from 2 years to 3 years
KPI 3: Win at least 3 awards for R&D
If your Key Results and KPIs start to sound similar, that’s OK. You can use the same wording but not the same usage. Remember, OKRs are an outcome and KPIs are a measurement.
Impact, Confidence, and Ease (ICE)
Next, you generate ideas that can get you to your goal. Those ideas will come through an examination of the customer journey, your marketing funnel, and your product life cycle.
You’ll probably end up with a list of ideas as long as your arm. Now you need to score and prioritise them. A popular scoring method is ICE (Impact, Confidence, and Ease).
ICE was created by the same guy that is widely credited for developing Growth Hacking; thanks Sean Ellis
Because Growth Hacking is about rapid experimentation and failing fast, Sean needed a prioritisation scoring system that was equally quick and very simple.
Impact looks at how much the project will move the needle on the metric being targeted.
Confidence is the certainty the project will have the predicted impact.
Ease looks at the level of effort to complete the project.
The calculation is dead easy and will tell you which project should be tested first and which one last. Here’s an example…
7 x 3 x 5
6 x 2 x 9
3 x 8 x 4
As you can see, although Project A has the highest impact, it’s Project B that gets priority. So the first experiment will be B, then A and finally C.
From here, you test the ideas. You’ll capture and analyse data on all your tests and experiments. Dropping or adjusting the ones that fail (the majority), and implementing and improving the ones that succeed (a few). And doing it all at speed!
Read more: How to Growth Hack Your Digital Channels