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They say that setting a goal means nothing when you have no way to track your progress or measure your results. The same truth applies to business. Your company may set lofty objectives, but without a clear plan to achieve those goals or specific metrics to track and measure success, those goals will likely not be reached.
Setting Objectives and Key Results (OKRs)
When companies set goals, one way to measure, track, and communicate the success is with OKRs, objectives, and key results. The objective is to reach a certain goal, while the key results are the measurements of the key performance indicators assigned to that goal.
Here's an example of how executives can use OKRs:
State the objective: to increase the company revenue by 2025.
Indicate the expected revenue increase: allocate a defined metric, for example, to increase revenue by 20%.
By clearly setting the goal of increasing revenue by a certain percentage within a particular timeframe, the product manager can take this information, assess their product line, and determine the most effective strategy to achieve this.
Key Characteristics of an OKR
To be characterized as an OKR, the key results must be quantifiable and objectively scored on a scale of 0 to 100. It must also have a timeline for completion and should be ambitious enough to increase revenues, fuel growth, or spark innovation within the company.
Why Are OKRs Good For Product Development?
OKRs are helpful for product development as they allow product managers and their teams to be clear on the company's expectations. With OKRs, the product manager can align more quickly with the company objectives, and they can align their strategy to meet these goals.
With the key results in mind, product managers can identify ways to improve existing products and build new ones to generate the required revenue.
For example, a car manufacturer may look at their product line and identify gaps in the market to develop a new and innovative product that will generate enough revenue to meet the goal. Any projected shortfall may be met by adapting an existing product and adding new features to increase demand and generate more sales.
Examples of OKRs
A company that has the objective of becoming a market leader in the industry may define success according to the following parameters:
- Gaining a specific market share measured by a percentage
- Reporting higher revenues measured in dollars or by percentage
On the other hand, a company that wishes to increase revenue by 20% may want to do so by:
- Acquiring new customers
- Developing new products
- Adapting existing products
- Entering new markets
What Are the Benefits of Defining Your Objectives and Key Results?
There are several benefits of using an OKR framework for your organizational strategy. These include:
- Providing opportunities to assess your product line.
- Empowering teams to make changes by updating existing products and discontinuing poor-performing ones.
- Removing the problem of teams operating in silos and following a disjointed strategy.
- Promoting alignment of product teams to strategic objectives.
- Allowing more efficient use of resources to maximize the ability to meet the company goals.
- Promoting cross-collaboration between product teams to achieve key results.
Providing an outcome-focused goal has a more significant impact and offers better results for the company.
Best Practices For Setting OKRs
When setting an OKR, there are several factors that the company executives and product managers should consider.
Consult With Your Internal Stakeholders
OKRs should not be set in isolation without collaboration with teams and individual stakeholders. If you set overly ambitious goals that are unrealistic and difficult to achieve, this may result in low morale amongst your product teams.
Where Are Our Best Opportunities for Growth?
Consult with your sales and marketing team members and conduct research to find out where growth opportunities may exist. Customer success teams and user data can provide a wealth of information to inform your future product decisions. This information is helpful for building new products or adapting existing ones.
Keep Up to Date With The Market
It is essential to continually monitor the market and pivot quickly to adapt your product when the need arises. This agility will help to ensure you have the right product-market fit when your product is launched.
Adopt Agile Practices
When scaling production or defining new objectives and key results, agile practices and agile teams help support a company's ability to change and adapt quickly.
Create KPIs to Further Align with the Goals
What Is a KPI?
While OKR is a strategic framework, KPIs or key performance indicators are used to evaluate performance and measure your progress over a specified period of time against the OKR’s Key Result. Key performance indicators are quantitative values that are measurable, examples include:
- Revenue, or monthly recurring revenue in Saas companies for an OKR that has a Key Result of 10% increase in Revenue
- Number of sales for an OKR that has a Key Result of hitting 100 Sales by the end of the quarter
- Conversion rate for an OKR that wants to increase the conversions by 10%
How to Track KPIs
Product management software is useful for tracking KPIs. The high-level objectives can be broken down into smaller goals along a timeline, and roadmaps can be updated when targets are reached.
Use Custom KPIs For Different Stakeholders
Product roadmap tools are helpful when presenting custom KPIs to varying audiences. While the sales team might be more concerned about the number of units sold, company executives will likely be more interested in revenue and profit.
Best Practices When Setting KPIs
When setting KPIs for your product teams, it is crucial to consider the following factors.
Limit Your KPIs
Decide which metrics are most relevant for measuring success and use one or two KPIs for each objective. This helps to prevent confusion and keeps product teams aligned toward achieving these goals.
Set Reasonable Goals
There's a fine line between setting challenging milestones and one's that are hard to attain; set inspiring goals and motivate your teams to work harder to achieve them.
Review KPIs Periodically
It is essential to review KPIs over time to assess whether they adequately measure the desired outcome or need to be updated due to overall strategy changes.
Use OKR Methodology in Product Development for Improved Results
When setting OKRs and KPIs for your organization, it is vital to:
- Define the objective and expected key results clearly
- Align the organization to the defined goals
- Make OKRs accessible to all of your product teams
- Integrate relevant KPIs to measure success and identify if and how well the objective was achieved
If you want to learn more about how product roadmap management software can help you integrate an OKR strategy, book your free demo to find out more about Gocious Software.