Mastering KPIs: From Basics to Advanced Metrics

KPIs, or Key Performance Indicators, are everywhere in business, but they’re often misunderstood or misused. Having spent years working with teams across different industries, I’ve seen how the right KPIs can drive success, while the wrong ones can create confusion or, worse, false confidence. So, what exactly are KPIs, and how do you make sure you’re focusing on the ones that actually matter?

This post will break down what KPIs are, how they should be used, and how to structure them into a system that supports your overall goals. From the North Star Metric that guides your strategy to the granular Secondary Metrics that diagnose specific issues, I’ll walk you through not just the theory but how I’ve applied these concepts in practice—helping teams make sense of their data and turn metrics into meaningful actions.

What are KPIs?

KPIs, or Key Performance Indicators, are quantifiable measures that show how well a company, team, or individual is achieving their key objectives. I like to think of KPIs as the GPS for business—you set your destination, and KPIs tell you whether you’re on the right path or need to make adjustments.

For example, in the tech world, KPIs like User Retention or Daily Active Users (DAUs) are critical for assessing the health of a digital product. In my experience working with cross-functional teams, the ability to track and adjust to these metrics directly impacts a product’s long-term viability. But KPIs aren’t just for tech—whether it’s sales growth for a retail store or customer satisfaction for a service provider, KPIs are everywhere.

The importance of KPIs lies not just in tracking success, but in continuously improving processes. When coaching teams, I always emphasise that KPIs should be actionable. Tracking a metric is only valuable if it drives a specific decision or action.

Where and How are KPIs Used?

KPIs are used in nearly every area of a business, from marketing to finance to operations. But what’s most important is not simply using KPIs, but using the right KPIs. It’s easy to get lost in data, especially when every team has their own set of metrics. I’ve seen teams spin their wheels tracking 15 different numbers, none of which directly aligned with their goals. In my own work with digital product teams, I’ve learned the hard way that more metrics do not equal better insights.

KPIs are used to:

• Evaluate progress toward strategic goals.
• Drive focus and alignment across teams.
• Make data-driven decisions and adjustments.

But the best KPIs not only offer a snapshot of where you are today—they also guide where you need to go next.

The KPI Tree: A Structured Approach to Metrics

Here’s where things get interesting. Imagine you’re working in an organisation where each department tracks different metrics. How do you make sure that all these metrics work together to support the larger business goals? Enter the KPI Tree—a structure I’ve found incredibly helpful in aligning different metrics.

Think of a KPI Tree as a hierarchy:

• At the root: You have your North Star Metric, the ultimate indicator of your company’s success.
• On the branches: You have Primary Metrics that directly impact your North Star.
• On the leaves: You have Secondary Metrics, which give more granular insights into the Primary Metrics.

In one of my recent projects, we used a KPI tree to align the product team’s metrics with the overall business strategy. The North Star Metric was Customer Retention, and everything else—user engagement rates, marketing spend efficiency, product defect rates—had to ladder up to that core goal. It was a game-changer in clarifying priorities across teams.

North Star Metric: The Guiding Light

The North Star Metric is the single most important metric that reflects the overall success of your product or company. It’s called the North Star because, like the star itself, it should guide your team in the right direction, regardless of the chaos that may happen around you.

In my coaching experience, I’ve often asked product teams to pinpoint their North Star Metric. For a music streaming platform, it might be “Time Spent Listening” because that reflects both user engagement and satisfaction. For an e-commerce platform, it could be “Repeat Buy Rate.” The key is to find that one metric that everyone can rally around.

But here’s a pro tip from my own work: Don’t overcomplicate it. I’ve seen companies get stuck trying to perfect their North Star Metric. Start simple, test it, and iterate as needed. The important thing is to have something guiding your long-term vision.

Primary Metrics: Key Drivers of Success

Primary Metrics are the KPIs that directly impact your North Star Metric. They help break down the big-picture goal into more actionable insights. For example, if your North Star Metric is “Customer Retention,” your Primary Metrics might include:

• Customer Acquisition Rate
• User Satisfaction Score
• Product Usage Frequency

In one of my projects, we used Customer Acquisition Cost (CAC) as a primary metric to enhance marketing efforts. This allowed the marketing team to focus on improving efficiency, which in turn had a direct impact on overall retention. These are the metrics that teams should focus on day-to-day.

Secondary Metrics: Supporting the Bigger Picture

Secondary Metrics are more granular. They are still important, but their impact on the North Star Metric is indirect, often supporting the Primary Metrics. For example, if you’re tracking Customer Acquisition Rate, Secondary Metrics might include:

• Website Bounce Rate
• Conversion Rate from Trial to Paid Users

Secondary Metrics are particularly useful for diagnosing issues. When we saw a dip in customer acquisition during one of my consulting projects, Secondary Metrics like Click-Through Rates (CTR) and Landing Page Conversion Rates helped pinpoint exactly where the problem lay.

In my view, Secondary Metrics are the detective work behind the primary KPIs—they offer clues and insights that guide deeper investigation.

How to Choose the Right KPIs

Choosing the right KPIs is an art as much as a science. I often suggest teams to avoid vanity metrics—those flashy numbers that look good but don’t actually drive meaningful action. Instead, focus on KPIs that are:

• Aligned with business objectives.
• Actionable, so they can drive decisions.
• Balanced, including both leading indicators (predicting future outcomes) and lagging indicators (measuring past results).

For instance, a leading indicator like “Number of Demos Booked” can give early signals about future sales, while “Revenue” as a lagging indicator tells you how you’ve performed in the past quarter. Balancing both helps make sure you stay proactive and reactive at the same time.

Conclusion

KPIs aren’t just numbers—they are a vital tool for navigating business success. Whether you’re building a KPI Tree to align teams, choosing your North Star Metric to focus your efforts, or diving into the details with Primary and Secondary Metrics, KPIs are a powerful way to drive clarity and accountability.

From my experience working with teams, I can tell you this: The real magic of KPIs lies in their ability to simplify complexity. So, if you’re feeling overwhelmed by data, try applying these concepts to distill what truly matters. The clearer you are on your KPIs, the more effectively you’ll reach your goals.

And remember, KPIs are not static. As your goals evolve, so should your KPIs. Keep them dynamic, review them often, and most importantly, make sure they’re actionable.

What KPIs do you use in your work? Share your insights in the comments—I’d love to hear your experiences!