So what are OKR’s?
In a turbulent world of constant change, endless potential and complex logistics, Key Results and Objectives (KO’s) offer much-needed clarity as to what a business chooses to focus and effort on over a specific period of time. Increasingly popular amongst a myriad of organisations, the OKR approach separates goal achievement from the nuts and bolts that form the bedrock of strategic planning. In this regard, OKR is often considered to be a strategic process tool or even a vehicle for delivering specific business goals. However, many believe that OKR is a much more fundamental concept and one that underpins all the key elements of business planning.
OKRs pertain to an overall methodology and specific approach to strategic planning. To put it simply, OKRs define what a business wants to achieve within a defined time frame. The beauty of the OKR is that it ties together the vision, strategy, planning and execution in a seamless manner. As such, OKRs provide key performance indicators (KPIs) that provide businesses with the ability to measure the effectiveness of their efforts both short and long term. When aligned with the framework of OKR, KPIs will offer businesses a crystal clear picture of their current performance relative to their objectives.
To illustrate the point further, consider the example of a global cosmetics giant that has an extensive marketing budget. Given the company’s strong brand name and sizeable advertising budget, any successful marketing effort would translate into increased sales and profits. What are the OKRs that the company would use to measure how successful its marketing efforts are? While it would of course be easy to measure the direct financial impact of marketing on overall revenue and profit margins, one might also want to consider the long-term impact of successful marketing campaigns on the company’s reputation in the market.
To illustrate the point further, think about how Intel would set about to evaluate how well the chip company’s new microprocessor is performing against competitor products. At face value, Intel may not even need to worry about defining its marketing objectives in the same way as does a smaller company. For instance, Intel already has a rigorous process for measuring whether a product is on par with or far superior to its competition. That is, Intel already has an internal tool for gauging how well the company’s processors are doing relative to the current market conditions.
Similarly, given Intel’s strong marketing position and the fact that it controls the majority of the chip market, it would be easy to assume that it can just focus on generating new technologies and market share rather than worry about developing key results and objectives. However, in reality, there are many processes that need to be taken into account before a marketing strategy can be fully developed and implemented. In an organization where real-world intelligence is not a simple collection of numbers, it is important for every manager to understand the distinction between a series of key performance indicators (KPIs) and other more specific yet concrete measurements. In this way, managers can ensure that the strategies they develop truly address the question that they are actually considering: how well do we measure our company’s key outcomes?
The reality is that although Intel’s recent string of acquisitions may seem to put the company in a position to compete more aggressively in the personal computer market, it may not necessarily translate into increased profits at the earliest. In many cases, it makes more sense for large companies to pursue a broader range of solutions from a number of different types of sources rather than develop one specific product and hope that it will automatically be successful. For example, by making acquisitions, a company can open up a number of opportunities at different levels of the supply chain. Yet, the strategies that these acquisitions might spawn in the future still have to be considered in terms of their relationship to each of the individual components that they are buying.
Overall, OKR’s are a great tool to be used by fast-growing startups, scale up business and strategic departments in large organisations and if this is of interest to you, then please get in touch.
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