Episode 7: Leading and Lagging Indicators w/Richard Eckles

Product management is a complex and dynamic field that requires constant innovation and adaptation to stay ahead of the competition. One of the critical aspects of effective product management is the ability to make informed decisions based on the right data. However, relying on lagging indicators can often lead to the wrong conclusions and harm the business. In this episode of Productbeats, we will discuss the importance of leading indicators and how the North Star Framework can help product managers make informed decisions that drive business outcomes.

Leading indicators are a set of measurable data points that can indicate future trends and performance. Unlike lagging indicators, which reflect past performance, leading indicators are forward-looking and can guide product managers in making informed decisions to improve business outcomes. As Richard Eckles, Product Analytics at Amplitude, notes, "Using the wrong data will lead to the wrong decisions! We need data to indicate the future, and that guides our behavior."

The North Star Framework is a methodology that helps product managers define the game they are playing, establish a success formula, identify key parameters, find indicators, measure and follow up. This framework provides a structured approach to creating leading indicators for your business, supporting effective decision-making to achieve success. Eckles notes, "The North Star methodology is not only a PowerPoint term. It is a concept to guide decisions and generate the right insights."

An effective North Star metric should be measurable, aligned with product strategy, and a leading indicator of revenue. In order to define the North Star metric, product managers need to identify the game they are playing, such as attention, transaction, or productivity. Each game requires a different set of North Star metrics, which should measure customer value and align with product strategy.

Product managers should also beware of vanity metrics that can be misleading and not aligned with the North Star metric. Vanity metrics can be a leading indicator of revenue but may not measure customer value or be aligned with product strategy. As Eckles notes, "Beware of Vanity Metrics, they do not measure customer value, are not aligned with Product Strategy, but are a leading indicator of revenue."

Spotify, the popular music streaming service, uses time spent by subscribers listening to music as its North Star metric. This metric measures customer value, aligns with product strategy, and is a leading indicator of revenue. To break down the North Star metric, Spotify uses input metrics such as breadth, depth, frequency, and efficiency to measure the success of its initiatives.

Amplitude, a product analytics company, uses weekly learning users as its North Star metric, which measures the value of customers sharing learnings with others. This metric aligns with Amplitude's unique strategy of enabling data democracy in companies, and as end-user adoption increases, value exchange becomes greater.

Overall, product managers need to understand the importance of using the right data to make informed decisions and how the North Star methodology can help them achieve this. By using leading indicators and focusing on metrics that truly matter, product managers can drive business success and create innovative product experiences that customers love.