What is a north star metric?
The North Star Metric is the single metric that best captures the core value that your product delivers to customers. "North Star metric" was coined by Sean Ellis. The idea of this metric is to align the team around the common goal. From a business point of view, the NSM can be Live Time Value(LTV), Churn rate, Retention and etc. Product Manager uses the NSM to track progress and formulate product hypotheses.
How to find north start metric for engineering team?
There are many software development metrics which are used to measure the performance of engineering teams. The simplest metric to use as NPS is a number of delivered features to the customers. This is a great metric to show the progress of your team, but there are some problems associated with it. The metric pushes teams to split tasks in small low-value features. As a result, the team can deliver a bunch of tasks with no real value to the customer.
One of the widely used is velocity. Velocity was developed in the Agile community as a metric to track the complexity of a task. We can assume that the total sum of story points can be used as a proxy of the team's performance. Unfortunately, for some teams velocity is really hard to get improve or even stabilize. Moreover, the scale of velocity gets changed every time we hire a new developer for the team.
Lead time as north star metric
Software development is a process. Any process can be simplified as below:
Lead time = cycle time + queue time
Here, Lead time - total time, Cycle time - total time of processing, Queue time - waiting time.
Let's take a look at an imaginary engineering team which works on a web application. Their workflow consists of 3 stages development, testing and deploy. So for this team lead time is:
Lead time = (dev time) + (waiting for available QA specialist + testing time) + (waiting in deployment queue + deploy).
Lead time is a good candidate for the north star metric for engineering team because of its great characteristics:
Represents the whole software development process;
Easy to spot process bottlenecks;
Focuses on bringing value to customers.
How to improve lead time?
Once the team knows its Engineering North Star Metric (eNSM) it can focus on improvements. In case of lead time the team can optimize the following areas:
Reducing queue time - introduce automated testing;
Eliminating process stages - introducing continuous delivery.