Unlocking the Power of OKRs and KPIs: A Product Manager’s Guide
As a product manager, pleasing stakeholders is no longer the only definition of success. To thrive in today’s fast-paced business landscape, you need to adopt a different mindset – one that focuses on delivering value and driving outcomes. In this article, we’ll explore how combining OKRs (Objectives and Key Results) with KPIs (Key Performance Indicators) can help you achieve just that.
The Problem with Traditional Approaches
Many product teams fall into the trap of focusing solely on delivering features, without considering the expected results. This leads to a range of problems, including:
- Implementing solutions without knowing the expected outcome
- Focusing on output rather than outcome
- Creativity dying due to unbearable pressure to deliver
What are OKRs?
OKRs is a collaborative method of setting goals and enabling teams to focus on delivering valuable results. It was first introduced by Andy Grove, former CEO of Intel Corporation, and has since been widely adopted in product management. OKRs allow product managers to:
- Keep track of multiple priorities and objectives
- Focus on the most important things
- Communicate product objectives to stakeholders
- Measure progress toward product objectives
How OKRs Work
To get the most out of OKRs, company leadership should align and set important objectives, which should be inspiring and empowering. Teams are then responsible for setting measurable key results. It’s essential to continuously evaluate results and adapt actions accordingly.
Example of OKRs in Action
Let’s say we’re an ecommerce product team, and our objective is to reach a sustainable balance between customer acquisition cost (CAC) and customer lifetime value (CLV). Our key results might be:
- Reduce general customer acquisition cost by 20% by the end of Q2
- Increase order frequency by 10% by the end of Q2
- Reduce churn rate by 15% by the end of Q2
Common Mistakes to Avoid with OKRs
When implementing OKRs, it’s essential to avoid common mistakes such as:
- Creating dependent objectives that compete against each other
- Leadership defining key results, rather than empowering teams to do so
- Focusing on solutions rather than outcomes
- Setting binary results that don’t allow for progress tracking
What are KPIs?
KPIs are used to understand the health of an organization according to predefined indicators. The most common KPI types are:
- Financial (revenue growth, profitability, cash flow)
- Customer (satisfaction, retention, churn rate, lifetime value, acquisition cost)
- Product (conversion rate, session time, unique users, new users)
- Tech (downtime, availability, response time, error rate)
Combining OKRs with KPIs
To drive value and outcomes, it’s essential to combine OKRs with KPIs. OKRs point to the future, while KPIs look at the past. By combining both, you can ensure your products are driving value and progress in the right direction.
Best Practices for Using OKRs and KPIs
Here are some best practices for using OKRs and KPIs in tandem:
- Set a valuable strategy before talking about OKRs or KPIs
- Define what matters now, and empower teams to work on key results
- Define success, and finalize key results with leadership
- Set leading metrics to continuously measure progress
- Inspect and adapt actions according to established KPIs
By following these best practices and avoiding common mistakes, you can unlock the power of OKRs and KPIs to drive value and outcomes in your product management role. Remember to keep it simple, start small, and learn from your actions to adapt and progress.