Andy Grove, helped Intel become among the most valuable companies by 1997. In his years at Intel, he conceived a management and goal-setting system, called OKR, standing for “objectives and key results.” Venture capitalist and early investor in Google, John Doerr, systematized in the book “Measure What Matters.”
- A glance at the OKR system
- How is OKRs different from MBOs?
- The OKR cycle
- OKR scoring system
- OKR vs. KPI
- OKR vs. SMART Goals
- OKR vs balanced scorecard
- OKR and 10x: Moonshot thinking as a way to renew your business model
- Other Goal-Setting Frameworks And Theories of Motivation
A glance at the OKR system
Back in the 1970s, Intel was among the most respected and admired companies in Silicon Valley. During that time Intel’s CEO, Andy Grove, was the man who managed to drive organizational change.
Andy Grove did that via a goal-setting process called OKRs or objectives and key results. Where the objective is the direction, toward which the organization needs to be in the medium term.
And the key results are milestones, things that allow the company to get there. Those key results need to be easily trackable, understandable and shared across the company.
In its purest form OKRs consists primarily of four superpowers:
Focus and Commit to priorities
This superpower focuses on making clear what matters and what doesn’t. More precisely it allows whole teams and departments to decide where the focus is and dispel any confusion
Align and connect for teamwork
One essential ingredient of the OKRs is its transparency and the fact that it needs to be openly shared across the organization, from the CEO down to each team and member of the organization. OKRs is not a siloed process but rather a transparent goal-setting tool
Track for accountability
OKRs are data-driven. It doesn’t stress though on a countless number of metrics that help to increase the level of noise. OKRs instead focuses on a few critical metrics to measure the impact on the business
Stretch for amazing
Objectives set in OKRs aren’t conservative, those are aggressive, hard yet possible and attainable. From this balance, OKRs brings the organization forward
Those superpowers are kept together by continuous improvement and corporate culture.
How is OKRs different from MBOs?
For those that know Management by Objectives or MBO, it might be easy to confuse it with OKRs. However, there are a few key differences. At its core, the MBOs focused on what while it was primarily top-down and risk-averse.
By converse, OKRs focuses on the “what” (direction) and “how” (key results). Rather than an annual review process which might make it too complicated and formal OKRs follow a quarterly or monthly schedule which is public and transparent and usually bottom-up.
Where MBOs’ goals are risk-averse, OKRs goals are aggressive and aspirational.
OKRs objectives have a few key elements such as:
- Actionable by the team
While OKRs key results are primarily:
- Measurable and quantifiable
- Make the objective achievable
- Lead to objective grading
- Difficult but not impossible
The OKR cycle
- Brainstorm: in this phase, the top senior leaders set the company-wide OKRs
- Communicate: the OKRs can be communicated to everyone. At the same time teams develop their own OKRs to be shared
- Share: contributors share their OKRs but also negotiate them with their managers
- Track: employees track and share their objectives with managers
- Reflect: at the end of the cycle employees perform a self-assessment and what they have accomplished
OKR scoring system
How do you score the success of the OKRs?
There are two ways to score OKRs:
The simple way
Andy Grove would use a very simple approach of “Yes/No” to understand whether the key results would be achieved, so whether the main objective also got accomplished.
Objective: Reach $100K in revenue this year:
- KR: build a newsletter with a thousand subscribers to sell $33K worth of products
- KR: attend three events where to find 10 clients worth $33K in contact value
- KR: publish 10 articles to share to sell $33K worth of products
Track the results with the simple method:
- Build a newsletter with a thousand subscribers to sell $33K worth of products? Yes
- Attend three events where to find 10 clients worth $33K in contact value? No
- Publish 10 articles to share to sell $33K worth of products? Yes
The advanced approach
Each key result can be scored on a scale. “0” meaning failure and “1.0” meaning the objective was achieved.
Therefore, you can score each result against its outcome and evaluate whether you failed, made progress, or achieved them.
It’s important in this phased to be honest about the self-assessment as the OKR itself requires self-reflection.
OKR vs. KPI
It is important also not to confuse OKR with KPIs. KPIs (Key Performance Indicators) performance metrics for a specific activity. OKRs are aggressive and aspirational. They drive the key objectives underlying the plan. Where KPIs are a set of more objective standards to measure activity and operating plans. OKRs are set to achieve extraordinary goals.
OKR vs. SMART Goals
SMART goals are very similar in nature to the way objectives are defined within the OKR framework. The key difference is that OKR is a company-wide exercise, which target is to align an entire, potentially large company, to achieve goals and move fast, nonetheless size. SMART goals instead, might be more suited for individuals.
Another core difference is that OKR’s objectives, even if achievable, they are very ambitious, often connected with 10x targets. Where SMART goals might and might not be as ambitious.
OKR vs balanced scorecard
A balanced scorecard’s main aim is to track, control, and improve the execution of activities that can be monitored by executives and managers within an organization. The balanced scorecard differs in scope and aims with the OKR which is set to achieve an ambitious growth plan.
OKR and 10x: Moonshot thinking as a way to renew your business model
In 2010, Google founded its research and development lab, called X, or Google X. As pointed out by Google “while almost every corporate research lab tries to improve the core product of the mother ship, X was conceived as a sort of anti–corporate research lab; its job was to solve big challenges anywhere except in Google’s core business.“
This connects with Google’s founders 10x mindset, which we can apply back to the business world as it makes us switch from an incremental growth mindset to a 10x mindset.
What are some of the key elements? As I highlighted in the moonshot thinking guide, the key principles are:
- Create exigency
- Context is king
- Give up on incremental changes
- Embrace the 10X attitude
- It all starts by reasoning from first principles
- Target the impossible but make it actionable
- Fail most of the time
- Do the hardest thing first
- Take massive actions
- Forget T-shaped; it’s all about X-shaped people
- Why 10X thinking is cheaper than incremental thinking, in the long-run
When you apply this sort of mindset, while it might seem way more difficult to implement in the short-term. In reality, over time, once the proper context has been developed it becomes cheaper and more effective.
It’s important to align part of the team around 10x goals, as it enables the company to look for opportunities that are outside the core business model.
Just like in Google, where most of the organization is focused on maintaining and incrementally growing the core business model, Google is also invested in other bets, a strategic set of initiatives that could change its whole business model.
Where Google is the most powerful advertising machine, with the cash invested in new bets, it might become something else in the future decades.
This is at the core of reinventing your business model.
Other Goal-Setting Frameworks And Theories of Motivation
Resources for your business:
- Successful Types of Business Models You Need to Know
- The Complete Guide To Business Development
- Business Strategy: Definition, Examples, And Case Studies
- What Is a Business Model Canvas? Business Model Canvas Explained
- Blitzscaling Business Model Innovation Canvas In A Nutshell
- What Is a Value Proposition? Value Proposition Canvas Explained
- What Is a Lean Startup Canvas? Lean Startup Canvas Explained
- What Is Market Segmentation? the Ultimate Guide to Market Segmentation
- Marketing Strategy: Definition, Types, And Examples
- Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
- How To Write A Mission Statement
- What is Growth Hacking?
- Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas
Handpicked popular case studies from the site:
- The Power of Google Business Model in a Nutshell
- How Does Google Make Money? It’s Not Just Advertising!
- How Does DuckDuckGo Make Money? DuckDuckGo Business Model Explained
- How Amazon Makes Money: Amazon Business Model in a Nutshell
- How Does Netflix Make Money? Netflix Business Model Explained
- How Does Spotify Make Money? Spotify Business Model In A Nutshell
- The Trillion Dollar Company: Apple Business Model In A Nutshell
- DuckDuckGo: The [Former] Solopreneur That Is Beating Google at Its Game