Aligning product goals with business objectives is crucial for achieving measurable success. One of the most effective ways to achieve this alignment is through the use of Objectives and Key Results (OKRs). OKRs help product managers set clear, ambitious goals and track progress, ensuring that all efforts contribute to the overarching business outcomes.
Understanding Business Outcomes
Business Outcomes are essential, measurable business goals, such as Monthly Recurring Revenue (MRR), Quarterly Profits, and Net Promoter Score (NPS). These outcomes are typically set and tracked by the executive team. It is crucial to understand these goals and how product management work impacts them.
Defining Product Outcomes
Product Outcomes refer to the actual changes in user behavior resulting from interactions with your product. These are measured using Product KPIs such as Daily Active Users (DAU), the percentage of users utilizing specific features, and the frequency of return visits. Product outcomes directly influence business outcomes.
The Role of Outputs
Outputs are the features and functionalities you create to drive both product and business outcomes. For example, releasing a new feature might increase user engagement, which in turn can boost revenue and customer satisfaction.
Creating Outputs: When developing new features, it is important to ensure they are designed to change user behavior positively. For instance, adding a new sharing feature can lead to increased user interaction and growth in user base.
Tracking Effectiveness: Measure the success of these outputs with Product KPIs like login frequency and DAU. Positive changes in these metrics often indicate that business outcomes, such as revenue and profit, will improve as well.
Connecting Outputs to Outcomes
When stakeholders inquire about new features (outputs), always connect these to the desired product and business outcomes. For example, if a new feature aims to improve user retention, explain how this will lead to higher customer lifetime value and increased revenue.
Regularly review product outcomes from recent releases to understand what is working and what needs adjustment. Ask questions like, "What does success look like for the business?" and discuss how to influence this with product outcomes.
Driving the Conversation from Outputs to Outcomes
Shift the focus from merely delivering features to driving meaningful outcomes. OKRs are an excellent tool for this purpose. They help link ambition to reality, moving from shipping features to achieving significant results.
Objectives and Key Results (OKRs)
OKRs were originally implemented by Intel founder Andy Grove and have since become a popular method for setting goals within organizations. OKRs align teams from top to bottom, linking strategic goals to measurable results.
Structure of OKRs
Objectives | Key Results |
Strategic business goal | Shared Success criteria |
Simple and memorable | Measurable, quantitative KPIs |
Ambitious and inspirational | Evaluated frequently |
Qualitative | Between 2 and 5 |
Defining Objectives and Key Results
Objective: An overarching theme of what you want to accomplish. Objectives should be qualitative, simple, and inspirational, such as "Climb the mountain." They should inspire your team and set a clear direction.
Key Results: Quantitative metrics that help determine if you have achieved your objective. Key results are measurable milestones that track progress towards the objective. They should focus on outcomes, not activities, and typically range from 3 to 5 per objective.
Example: Objective: Launch a new product that is rated top 3 in its market.
KR1: Achieve a 20% trial-to-purchase conversion rate in the first month.
KR2: Ensure users rate our product at least 8 out of 10 on average.
KR3: Achieve an average of 5 uses per week per customer.
Example OKRs for a SaaS Marketplace Delivery Solution
Objective 1: Increase Customer Acquisition and Retention
Key Results:
KR1: Achieve a 30% increase in new business sign-ups within the next quarter.
KR2: Improve customer retention rate by 15% by reducing churn through enhanced user engagement and support.
KR3: Attain a Customer Satisfaction Score (CSAT) of 85% or higher through improved delivery service quality and customer support.
Objective 2: Enhance Delivery Efficiency and Reliability
Key Results:
KR1: Reduce average delivery time by 20% across all service areas by optimizing delivery routes and leveraging real-time tracking.
KR2: Achieve a 95% on-time delivery rate by implementing better logistical coordination and predictive analytics.
KR3: Decrease delivery-related customer complaints by 25% through proactive issue resolution and improved communication channels.
Objective 3: Drive Revenue Growth through Expanded Services
Key Results:
KR1: Launch two new service offerings (e.g., same-day delivery, weekend delivery) and achieve a 10% adoption rate within the first three months.
KR2: Increase Monthly Recurring Revenue (MRR) by 25% by upselling additional services to existing customers.
KR3: Secure 10 new enterprise partnerships within the next six months to expand market reach and drive revenue.
Objective 4: Improve User Experience and Product Usability
Key Results:
KR1: Achieve a 90% user satisfaction rate with the product interface by conducting user research and implementing UI/UX improvements.
KR2: Increase the average number of monthly active users (MAU) by 20% by enhancing the overall user experience and adding new, valuable features.
KR3: Reduce the average time to complete key user tasks (e.g., scheduling a delivery, tracking a package) by 30% through streamlined workflows and intuitive design.
OKRs vs. KPIs
OKRs are ambitious goals for the future, while KPIs measure current performance. While some key results may overlap with KPIs, OKRs often encompass broader, more aspirational goals. OKRs can change as strategic priorities evolve, while KPIs typically remain consistent to track ongoing performance.
Implementing OKRs for Alignment
The primary goal of OKRs is to create alignment within an organization. Properly implemented, OKRs are set for every team and individual, ensuring that all efforts are aligned with the company's strategy. Share your team's OKRs with stakeholders and review other teams' OKRs to stay informed about their goals.
OKRs should focus on outcomes rather than outputs. Company-level OKRs are often set annually, while team-level OKRs might be set quarterly. OKRs are meant to be ambitious. If your team achieves 100% of their OKRs, the goals might not be challenging enough. Conversely, achieving less than 50% suggests goals might be too ambitious.
Best Practices for OKRs
Decoupling from Compensation: OKRs should be a management tool, not an employee evaluation tool.
Tracking KPIs: Regularly monitor KPIs to create opportunities for achieving OKRs.
Focus on Outcomes: Ensure OKRs drive meaningful business outcomes, not just activity.
By effectively using OKRs, product managers can align product goals with business objectives, ensuring that efforts contribute to measurable success. This approach helps drive growth, improve user experiences, and achieve strategic business outcomes.