Whenever a new idea comes along a chorus of naysayers comes along with it. We saw this with Agile, Design Thinking, Lean Startup and now with OKRs. “It sounds good but we’re an enterprise scale company. It won’t work here.” “Oh yeah, we’ve heard of it, but we’re a startup. We don’t have time for that kind of formality.” And so on. In this article, I want to highlight how a human-centric application of OKRs (read: the right way) can help startups extend their runway as they search for that ever-shifting product market fit.
More learning equals better deployment of limited resources
Setting OKRs with qualitative objectives and key results that are outcomes – measurable changes in human behavior – doesn’t specify exactly what your startup is going to build. It focuses the company around a problem statement and behavior changes that tell them when the problem is being solved. Each idea, experiment, feature, a/b test or ad campaign the team puts into market is a learning opportunity. Did that activity or output help our prospective customers to better understand what we offer or, even further, start to solve their problem? Did our most recent brainstorm yield anything that was valuable to our market? The answers to these questions tell us whether we should persevere down this path, pivot to a different execution or kill the idea altogether and try something different.
Each time you make an evidence-based decision on whether the current direction is valuable you’re spending your time and resources (and funding) in a more accurate direction. The better your startup gets at deploying experiments, doing research and talking to customers the more effectively you’ll spend the runway you have left.
Tying product market fit to behavior change focuses the entire team
Years ago, Dave McClure came up with Pirate Metrics. It was a funny and memorable way to think about the product market fit funnel of customer activities. Acquisition, activation, retention, referral and revenue were the components of the framework (AARRR for short, which is how pirates talk?). It still makes perfect sense for startups today. If you can decide where in this funnel the team should focus, the key results for the team become clear. For example, let’s say you’re at a super early stage and your goal is just to start acquiring new customers. Your team is clear that all efforts should focus on the behaviors that indicate customers are being acquired:
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These are three random examples but they showcase exactly where a team should put their efforts when the OKR is clear and tied to a specific part of the product market fit funnel. Any feature ideas or efforts that don’t drive these behaviors is left for future efforts. The entire is focused on the current high-level PMF goal, acquisition in this case.
Rapid evidence collection fuels rapid course correction
Building in OKRs early in your startup enshrines learning and agility in your company culture. Startups with human-centric goals explicitly demand the entire company to build learning and evidence into their decision making. This works if you’re two people in a garage or if you’re 25 people in a WeWork. Every time new evidence comes to light that challenges the current path, the team is encouraged to raise the issue, discuss it and, if warranted, change course. This is the kind of agility that money or scale can’t buy. It’s cultural and the seeds of it can be planted early if you build in objectives and key results as company-wide goals. Every second not spent on efforts that aren’t helping you reach your customer behavior goals is a second spent on something that stands a better chance of doing that – and your runway is extended.
Startups have the innate agility to truly benefit from OKRs
Regardless of the he said, she said banter of OKR supporters and naysayers, the reality is that focusing your startup on your customers, their needs and how their behavior reflects the value of what you’re offering is the foundation to a culture of continuous improvement and learning. Setting goals, early on in the life of your startup, that allow you to make evidence-based decisions ensures that the agility you have now, as a small company, will scale with you as you grow. In addition, it makes it clear to your investors that you’re deploying their funds in a responsible way driven by your vision and the evidence the team is collecting on a daily basis.