Everyone talks about traction, but very few people correctly identify their right traction metric -- also sometimes called your Northstar metric. Like the Northstar, the right traction metric should serve as a reliable indicator of directionality guiding you in your journey from idea to scale.
The goal of an entrepreneur is to create a repeatable and sustainable business model so it follows that the right traction metric should align with the output of your business model. Hence, the definition above. Let's dissect further.
Traction is a rate
Traction is synonymous with growth which is why it needs to be communicated as a rate versus a single data point. Much like a stock trading at $100 a share tells you very little about performance, similarly a single metric without historical context, does little to communicate progress.
Traction measures monetizable value not revenue
Revenue is an after-effect and not actionable by itself. What is actionable is identifying the key user activities that cause them to buy from you. This is the concept of monetizable value.
Monetizable value serves as a reliable leading indicator of future business model growth which can be eventually measured as captured value -- in the form of revenue, valuation, and/or profit.
- Facebook aggregates monetizable value from its users which it monetizes through advertising from customers.
- Google does the same with search results.
- SaaS companies use engagement metrics to predict customer conversion and cancelation often before users have made a decision to upgrade or cancel.
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A Traction Model helps you identify your most significant milestone markers from idea to scale.