Once, while facilitating an OKR workshop in early 2019, we were having some trouble communicating the need for balance among KRs, and also the need to bring in the customer’s perspective to one company’s strategy.
After some 40 minutes of intense discussion we projected the following image and explained the Fit For Purpose (F4P) concept of metrics.
We were scolded by the executives! Why on earth wouldn’t we start with this explanation? It would save them so much time!
At Knowledge21, we have been using F4P as support material for OKR ever since, to help companies improve their strategy and OKR-setting. We hope to share with you some of that experience below.
Defining strategy that will take your company beyond
The first thing we need to acknowledge here is that having OKR doesn’t mean having a killer strategy.
A strategy that is fitting for the company’s scenario and focuses on placing the company where it needs to be has to connect with the needs of the market, and therefore the purposes of the customers its products serve.
F4P is a framework that helps companies design strategies based on mapping the purposes and fitness criteria that lead to customer choice and exponential business growth.
Let’s take this mobility company as an example.
Mobility company
Products: toll and parking automated payment and transit, fleet management
Customer purposes:Â
- moving freely / saving time
- safety in traffic
- reliable solution
- financial control and tracking
- fleet efficiency
- fraud avoidance
Having these purposes explicitly mapped, we can design a strategy that enhances the company’s market performance by fulfilling them, while prioritizing different market segments according to the purposes we want to fulfill.
We can map pain points in our competitors’ experience to better exploit an unsatisfied market and establish marketshare leadership. Having this kind of strategic vision is crucial to create robust OKRÂ that will drive the company to a healthy and successful market stance.
Setting objectives with F4P
When setting objectives, one of the biggest challenges is to refrain from focusing solely on the business perspective. Companies that thrive even in saturated markets often do so by finding a niche of customer purposes badly attended by their competitors.
However, most OKR workshops tend to focus on what competitors are doing right (or what competitors have that we would like to have as well). This creates a follower stance that is too often more of the same, preventing the company from setting itself apart from competition. Let’s take this example!
Health insurance company
Products: corporate and individual health insurance plans
Customer purposes competitors attend well:
- financial control
- unexpected health problems
Customer purposes competitors fail in attending:
- extensive coverage
- reliable coverage
- support with difficult situations
- transparency
In this situation, if an insurance company is to set itself apart from its competitors, it can choose from the second list of purposes and start experimenting with solutions that fulfill some of them. The customers that are unhappy and willing to pay for serving those purposes will easily migrate.
This is a much healthier strategy than simply trying to best a seasoned contender in what they are already good at. In this scenario, we can set objectives related to the purposes we choose to explore in this cycle, such as “No illness left untreated” or “Support in tough times”. If the first sounds too bold, we can slice it by working on “no common illness left untreated”.
It is important to remember OKR is about learning and adaptation. They will help us cooperate towards the same strategy, but also validate how the market responds to that strategy. This is a true customer centric approach, because it connects the business strategy to the customer’s purpose in using our product.
We already see startups in healthcare picking up on these opportunities by marketing “the doctor you want, covered” and such. For each of these purposes we can devise fitness criteria that help us measure what really matters for our customers, which brings me to Key Results.
Defining strong and healthy Key Results
During OKR workshops, finding balance among key results is crucial to ensure the voracity of a company’s strategy will not end catering to vicious behavior. Let’s say, for instance that a company is focused on doubling sales over 6 months.
Does this mean they should set the course to reach that mark at any cost? Even if that means increasing churn? Turnover? Fraud? Even if said sales are so preposterously unqualified the total revenue plummets?
Obviously no businessperson in their right mind would say yes. However, this is a frequent scenario in bonus-oriented companies.Â
These are all metrics that are nested under “business health” in the F4P approach. This is important because although the business depends on them, we must understand in most cases they are a consequence. Before customers become churn or turnover, before fraud happens, we should seek to understand a customer’s motivation for our product.
If it is a discount, a financial benefit and not because the product is fit for the customer’s purpose, certainly this customer will trade it for anything that will provide a better financial return. But there are products, however, for which the customer is happy to pay more.
What causes this behavior and sets this businesses apart from its competitors is the fact they are observing of their customers’ fitness criteria. Let’s take the healthcare industry as an example:
Fitness Criteria examples
- Time it takes to receive healthcare in an emergency
- Transparency on costs (how long it takes to find out the cost)
- How affordable is the treatment (installments? co-participation?)
- Doctor availability for a regular appointment
- Duration of consultation
- Accuracy of diagnosis
And so on.
These are some of the metrics customers use to assert value, and by asserting value they will also determine if the price they pay is fair.
A Key Result is, by definition, a target based on a metric, to be achieved in a fixed timeframe. It is deeply connected to the objective and is crucial for the objective to be achieved.
Not by chance, that is the same definition of an improvement driver in F4P. Every KR is, therefore, an improvement driver. However, improvement drivers are much broader than KRs. Your company can have improvement drivers even if they don’t have OKR.
Let’s see some examples of good, balanced KRs:
- For the objective “No common illness left untreated”
There are 55,000 deseases in the International Code of Deseases. Let’s say hypothetically that 20% of those are not covered by insurance. We can set out to cover the 10% that are common and set that as our first KR, given we know there are lots of customers who feel cheated by insurance companies over coverage.
However, that might not be prudent financially-wise. In that case, we need a KR to balance that out. That’s when profit might come in. We should make sure that nor only we are serving customers in their purposes, but also that the company is still financially healthy. A margin of at least 10% from customer’s contracts who cover these illnesses might be sufficient.
Also, given we are being bold in exploring the market, it is necessary to understand if this product evolution is an improvement in the eyes of the customer. Therefore, we will use F4P Cards to better understand customer purpose and product fitness.
And there: You have your objective and your two Key Results:
- “No common illness left untreated”
KR1: +90% of illnesses covered in order of occurrence in general population
KR2: +10% margin on contracts covering diseases our competitors don’t cover.
KR3: +85 positives in F4P boxscore among customers with this coverage.
- The same can be used for “Support in tough times”
KR1: increase emergency requests initiating treatment in less than 30min from 65% to 98%
KR2: reduce ER mortality rate from 1.8 to 1.2
KR3: keep operational costs under $800MM
KR4: keep waiting time in emergency hotline under 30s
The KRs in italic are fitness criteria. Both OKR due in 6 month’s time.
Robust OKR using Fit For Purpose
As an OKR champion, facilitating the creation of bold but achievable OKR while reaching consensus is a form of art. Crafting inspirational objectives that are simple, relatable, but also challenging and connected to a defying strategy is no walk in the park, and then you have to set KRs that are balanced, easily to follow up and show that objective is reached.
One of the best ways we found to make that happen is to combine the use of OKR facilitation techniques with F4P. We hope this article helps in reaching the same results in your company.
