Regardless of whether you are an incumbent big bank of a startup in search of product-market fit, organizational and team focus is critical. Rallying your company, your department, or team around your strategy and a set of objectives is table-stakes. A strategy deployment framework that has been popularized by Google and others is the Objective and Key Results (OKRs) framework whose origins date back to Peter Drucker's Management by Objectives.
Proven by many
Beyond Google, the OKR framework has been widely adopted and helps many of the best companies today achieve incredible growth. Let's understand not just the framework but also how to implement it.
1a. Starting with the Company's Why
Before we define a product strategy we must ensure there is a company strategy. While there may be a ton of overlap company and product strategies are different.
- The mission is infinite and defines why the company exist and its purpose eg Our mission is give people the power to build community and bring the world closer together (Facebook)
- Company Strategy (or vision) describes the plan for the next 1 to 3 years to bring your company's mission into being eg where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices (Amazon)
1b. On to defining the Product Why
Now that we've understood the context and therefore the link to our product, let's understand the stack defining product strategy to goals. While there are many product strategy stacks out there, their value is in the linking between objective and organization mission. An objective not created in the service of a company's mission is obviously not desirable and hence before we get to operationalizing OKRs, we must understand the why, and what they serve.
- Product Strategy describes the plan (again for the next 1-3 years) for how the product will drive its part to accomplish the company strategy are the steps you will take, or challenges you will have to solve, to get your product closer to the vision eg increase revenue
- Product Roadmap is how you sequence features over time that implement the product strategy eg Netflix going from 1,000 streaming titles to many more to creating their own content.
- Product Goals are where product teams the majority of their time. Goals and Objectives should be thought of as interchangeable. These goals, taken from the roadmap, would allow us to progress against the product strategy
2. Constructing the Objectives and Key Results
There are Output and Outcome OKRs can be defined, here we will focused on defining outcome OKRs, as they are closer to the origin and leave teams with the most freedom to explore a solution. Let us explore OKRs.
- SMART: A framework defined by Peter Drucker it stands for Specific (provides clarity), Measurable (is quantified), Ambitious (must challenge the team), Realistic (achievable) and Time-bound (quarter, half or yearly).
- Objectives: An aspirational short statement that explains the intent of where we want to be. Ideally the statement should define a change in behavior such as "increase the number of teachers that post a second online course". As Tim Herbig points out in his OKR Workshop, the objective should stand "How Might We <change a behavior>" test. So for example how might we improve the the satisfaction of mobile users from 50% to 90%.
- Key Results: A set of data points that are leveraged to measure progress against the objective. They provide clear definition of success. There are typically 3 to 5 key results per objectives. There can be three types of key results, they are impact (lagging indicators), outcome (leading indicators) and output. Ideally, our key results should be rooted in outcomes, that is metrics that change as a direct result of a team's contribution. The change can be detected quickly. Determining which user behavior
Checking In Regularly and with Focus
Each OKR should have a clear ETA. While most companies set them quarterly, there are examples of companies setting OKRs for 6 months or even yearly. Whatever the timeline, teams should be checking in on progress on a regular cadence. A regular short-interval cadence allow teams to diagnose issues or blockers quickly and swarm on a problem if needed. Christina Wodtke recommends a weekly check-in.
While the list of companies that have leveraged OKRs to market and segment-leading positions is long, OKRs are easy to misuse or abuse. It might take a few months or quarters for the companies to truly see the value. Here are some anti-patterns to avoid:
- Using OKRs to define output: For example, defining the objective as becoming a leader in the social media with a key result of launching V3 of the mobile app, and perhaps throwing in another key result defined as moving to the new version of the onboarding flows. While many companies think building, launching, and promoting features as goals, they are not. They are not. The goals are the value and benefits we expect to gain from these actions. When confronted with output goals, ask them why. Why launch v3 of the mobile app? Towards what end? Launch v3 of mobile app —> why? —> grow mobile WAUs ≥ 500K
- Non-Smart Key Results: Key results must measure an action your team has control over or is trying to influence. It needs to be specific and above all else measurable numerically.
- Too Many OKRs: As hinted above, for OKRs to be successful, companies must be focused and limit their priorities. As hard as it must be, there should not be more than 6 strategic objectives for the entire company. As a team, you may want to keep it simple and leverage 3x3 or 2x2, that is 3 objectives and 3 key results per. Like most habits that we try to incorporate, being flexible, and simplifying will go a long way into making OKRs successful on your team and within the organization
OKRs are incredibly useful but it takes a long time for OKR usage to become effective. Shortcut your company's learning process by understanding and implementing the following ten ideas
Learn how to measure real progress as a Product Team by utilizing Outcome OKRs from this free workshop recording from my session at one of Workpath's Quarterly Event.
"Radical Focus is a must-read for anyone who wants to accomplish out-sized results. Christina does a great job showing both the why and the how of OKRs. Avoid the all-too-common mistakes by reading this book first." (Teresa Torres, author Continuous Discovery Habits)
In this condensed book Itamar shares what he considers the most important factors to OKR success, based on their experience at Google and other companies. You'll find battle-tested principles, practices and tips for how to get OKRs right without the overhead and pain.
To stay competitive in today's market, organizations need to adopt a culture of customer-centric practices that focus on outcomes rather than outputs. Companies that live and die by outputs often fall into the "build trap", cranking out features to meet their schedule rather than the customer's needs.
OKRs are a great way to set goals and measure progress. They’re a good way to keep your team focused on the right things. But they’re not a silver bullet.
While OKRs have gotten a lot of attention, this book introduces us to their birth at Intel and subsequent evolution at Google.