Why You Need Strategy, OKRs, and KPIs
How using them together creates long-term differentation and impact
“A core tenet of great leadership is the willingness to commit to and continuously communicate a set of strategic choices at the top, both in terms of what to do, as well as what not to do. With this clarity, downstream leaders, Product Managers, and their teams can finally have the necessary guardrails for decision-making and a clear foundation for prioritization.”
Welcome back to the latest edition of the Upstream Full-Stack Journal, helping you go upstream and be more effective across the full Value Delivery stack.
Here in the States, we’re officially in pumpkin spice everything season. Literally.
Starting with this edition, subscribers once again receive exclusive early access to my latest article.
In this edition:
Subscriber Exclusive: Using Strategy, OKRs, & KPIs together
Differentiating our Strategy starts with our goal-setting
Simple, everyday examples of OKRs & KPIs
Everyone fresh & ready to go?
Upstream Subscriber Exclusive:
Here Are the Key Differences Between Strategy, OKRs, and KPIs You Need to Know
When one might be better-suited than another, and how to use them together for maximum long-term success
As part of a large-scale Agile Transformation supported by one of the major global consultancies, I was coaching one particular program leader in OKRs.
In this area of the bank, the goal was to transform outreach, revamping how we connected with existing and prospective clients in radically different ways. OKRs would help us measure whether our strategy would help us achieve our goals.
Early on, powered by a well-crafted set of OKRs, the notion of growth and step change was deeply ingrained in everything the program did. Over subsequent cycles, however, the emphasis shifted from targeting innovative breakthroughs through choices and aspirational goal-setting to purely focusing on cost and efficiency.
What we missed here, and what I see every day, is how Strategy, Objectives and Key Results (“OKRs”) and Key Performance Indicators (“KPIs”) are used almost interchangeably, preventing teams from achieving success.
As a twice-certified OKR and strategy coach, I’ll share some helpful ways to understand Strategy, OKRs, and KPIs, and when and how to use each.
How do Strategy, OKRs and KPIs relate to each other?
Let’s use a simple vacation to frame examples from everyday life.
Choices vs. Planning
Let’s say you wanted to make the most of a week-long family trip.
You’ve sat down together and agreed to reconnect and spend quality time driving from the Washington DC area down to Disney World in Florida.
You’ve decided to save money and keep daily expenses to within $200 a day, eat all-day breakfasts, and stay in National Park lodges all along the way, going on hikes and making the most of being in nature.
And every night, you’ve agreed to bring the family together to play board and card games, and use downtime to read books, write, and sketch. This will help achieve your goals of family connection and creativity while also limiting screen time to no more than 30 minutes a day.
We’ve just designed a Strategy, with some OKRs and KPIs thrown in.
Vacation Strategy, OKRs, & KPIs
Your Product: the shared family experience
Winning Aspiration (Objective): Reconnect and spend quality time through a fun family vacation driving from Washington to Disney World
Where to Play: Stay in National Park lodges along the way, spend time in nature
How to Win: Go on fun family hikes during the day and play family board and card games in the evenings
Must-Have Capabilities: More than one driver with a license
Have board games you all agree to play
Have plenty of books, paper and pens
Enabling Management Systems:
Key Results:
Increase time speaking to siblings from ~5 minutes/month to ~1 hour a day
Increase family time spent in nature from 1 hour per month to 5 hours per day
KPIs:
Keep daily expenses within $200 a day
Not spend more than 30 minutes of screen time a day
Follow speed limits
Don’t let the car run out of gas (or electric charge)
Let’s dig more into each with some relevant models.
KPIs
KPIs are our “Key Performance Indicators.”
The goal with KPIs is to keep things we can measure within agreed upon ranges.
Another great way to think about KPIs is to view of them as Health Metrics– How’s the health of certain important measures we don’t want to forget about?
In a business setting, KPIs can be used to manage the efficiency of your Operational Capabilities — our Service, Support, and Customer Success teams, and our basic “keeping the lights on” operations.
But KPIs can only help us target and measure part of the story.
We definitely wouldn’t want to use them everywhere, to manage every team, in every situation. Why?
If all we use are KPIs, it means the choices of strategy are being made elsewhere, and you’re just being asked to execute.
KPIs might work well for measuring some simple “health” metrics for the operational service and support capabilities we called out above. But it becomes more problematic when they’re being tasked with lagging Business Impact goals. Further, with a focus only on numbers and efficiency, it will be impossible for people to optimize their choices to contribute to meaningful growth and achievement.
And understood, too, that your Strategic Capabilities — the teams you expect to combine Product, Tech, and UX expertise to create new experiences, and expand growth, won’t thrive in KPI-driven environments.
This is where OKRs can provide additional benefits.
Read the full story at this exclusive subscriber-only link here:
Differentiating our Strategy starts with our Management Systems
Roger L. Martin has a brilliant and extremely relevant piece on the importance of Management Systems, of which metrics and goal-setting play a key part.
Even though Management Systems are the fifth and final box in the Strategy Choice Cascade, because we toggle back and forth continuously across all the boxes, they’re just as important as the others, and need to be designed to support and continuously improve the other four choices.
As Martin writes, choosing distinctive management systems – part of which include setting better quality goals through OKRs & KPIs – is crucial to the foundation of competitive differentiation and advantage:
““..if the capabilities and management systems of an organization are entirely or nearly identical to those of competitors, its where-to-play and how-to-win choices will be replicated as soon as shown to be successful. Hence distinctiveness is a key attribute to management systems. Sameness in management systems is typically matched with sameness in capabilities which delivers competitive parity not competitive advantage.”
In other words, setting better goals can be a crucial component of a winning strategy.
Here, Roger lays out how Progressive Insurance uses this approach:
“Progressive Insurance seeks to win, in part, by getting settlements to its customers so quickly that lawyers don’t get into the middle of the process because Progressive knows that on average when a lawyer is involved, it costs Progressive more and the customer gets less due to the high fees charged by the lawyer. In order to be in a financial position to pay claims quickly, Progressive has a management system for its investment portfolio that invests disproportionately in short-term liquidity at the cost of earning higher investment returns.”
Roger shares other great examples from Southwest Airlines and Four Seasons Hotels & Resorts, among others to illustrate his points.
Read Roger L. Martin’s full piece on his Medium publication here.
Examples of OKRs and KPIs in Everyday Life
If we know what to look for, we can easily see plenty of examples of OKRs & KPIs working together around us in every day life.
Basically, anytime you see a goal and some “safety” or “status” metrics, you’re seeing OKRs and KPIs working together.
Here are a few you might have seen but not yet noticed.
In-Flight Entertainment Tracker
KPIs let us know how we’re doing as we make progress towards our Objective.
Here’s the GoGo in-flight route visualizer:
Driving the Car
Waze (again)!
Here’s a bunch of KPIs as I navigate to my destination.
During a Workout
I love doing Apple Fitness+ workouts.
The connectivity between the AppleTV, Apple Watch, iPhone, and any other Apple devices is really well-implemented.
Stats also play a big role in what you push for (intensity and time), and what you need to maintain (heart rate within a certain ranges).
I’ve been seeing those crop up everywhere, and hope they help you start to see them.
Definitely reach out to let me know if you see any unusual pairings of OKRs & KPIs in real life.
That it for this edition!
Join me next time as we continue to go upstream and use strategy, goal-setting, and product management to make you more effective.
