Entrepreneurs set audacious goals to change the world. When they have ambitious ideas they throw their money, time, and their life behind those ambitious ideas. With their relentless pursuit and persistent effort, they build a solution to a problem and deliver it to the marketplace. But have you ever wondered how many of them succeed in this pursuit?
According to the Bureau of Labor Statistics, only 56% of startups make it to their fifth year.
Why do startups fail?
Top reasons why startups fail:
- Ignoring the importance of validating ideas.
- Over-engineering the minimum viable product.
- Failing to pivot at the right time.
- Lack of alignment between teams towards the vision.
Most of the time, founders tend to lose focus and stray from their plans too often, burning too much cash in the process and inadvertently burying their startups. This is why startups need OKRs.
Businesses should also manage their OKRs on an intuitive OKR software. You can get started on Profit.co completely free today!
How does using OKRs for startups improve focus?
Objectives and key results have focus built into their DNA. It’s one of the five main benefits of OKRs. Because objectives are limited to between three and five per quarter, with only three to five key results per objective, each sector of the business only has the bandwidth to focus on their top priorities.
The OKR framework is self-regulating and forces you to narrow down your to-do list. Furthermore, the to-do list is not even a to-do list, but instead a to-accomplish list.
There is a subtle difference here. To-do focuses on outputs, whereas to-accomplish focuses on results. OKR allows founders and their teams to forecast outcomes, pursue them, and track them relentlessly.
How does using OKRs for startups help teams validate ideas?
Founders have to validate their idea before they roll up their sleeves and plunge into developing the product. They have to be sure whether or not customers will happily pay for using their product or the service. Ignoring idea validation will lead them to build something that nobody wants.
Without this, start-ups are in danger of wasting time, energy, and other resources developing a solution around an idea, only to find that it’s not useful, or doesn’t have space in the market.
A simple OKR can help validate product ideas. This OKR is time-bound and will guide the founders to focus on the metrics and work towards achieving the numbers. It will also cut out the execution of new ideas that will pop up in their mind and focus on what matters to reach the Objective.
If the founders achieve these key results, then they could go to the next step of building their prototype. What if they don’t meet those numbers? They can reiterate with appropriate modifications based on the feedback that is received from the campaign. If they don’t get to their thresholds after multiple iterations, then you can conclude that the market is not ready for the idea and decide that it’s not worth pursuing it. Using an OKR for your startup is a great way to prioritize testing ideas and quickly pivoting if ideas aren’t viable. Leaders can review OKR examples to help them develop well-structured goals for their company to achieve.
Did you know that Dropbox didn’t have a real product in the beginning?
Dropbox is a file storage service used to save and share files across different platforms and operating systems. To create this product, it required specialized expertise and a vast amount of resources.
Drew Houston, the founder of Dropbox, created a simple video demonstrating Dropbox in action. It demonstrated how seamlessly it works across different operating systems and uploaded the video to the website. It drove thousands and thousands of people to the website, and their beta waiting list went up from 5000 to 75000 overnight. Anyone who watched the video assumed that the video was a product demonstration, while in reality, there was no real product in existence.
As you can see, it’s a lot easier, and much less expensive to test a concept rather than a real product.
How can OKRs help you to build the right MVP?
After testing your idea, you create a minimum viable product. MVP is a prototype of the product, built with minimal features to test the product and to see how customers interact with it.
In traditional product development, developers tend to pick up any good idea that strikes them. Sometimes these ideas are misconceived to be useful features, and the development team might as well want to incorporate these into the MVP.
This act of adding a new feature out of the blue to the planned modules will push the release dates further away from the scheduled time. If startups consume more time, only to produce trivial features, you are giving an edge to your competitors. It takes discipline to narrow down the objectives.
To understand this a little deeper, it’s important to understand the Big Rock Theory. This theory suggests that to have significant results, individuals must prioritize and give importance to critical activities before dealing with less important activities.
When you use OKRs to develop an MVP, you can create a focused list of features and execute them. OKRs can prove very handy for startups at this stage, as long as you know how to write a good OKR. OKRs for startups can help in the following ways:
- Help all the teams to focus on the customer problem and your solution to that problem.
- Provide guardrails in the process of creating the prototype with minimal, but completely necessary features
- Avoid those features that are helpful and useful, but need not make the cut for the MVP. You can easily sell them as roadmap items.
Here is an example of how a startup can set up their OKR:
This OKR, or some version of it, will help the team deliver an MVP to the marketplace at the earliest possible date. It will keep the team laser-focused on essentials and avoid doing activities that may arise out of their own perceptions and preferences.
How can OKRs help startups pivot at the right time?
The main goal of MVP is to test how the market reacts to your product. You should gauge customers’ behavior, analyze your MVP’s performance, and measure the results.
MVP results could be measured as:
- New sign-ups
- New premium users sign up
Or any other measure through which you can measure the success of the MVP.
Comparing the results against your expectations will provide confidence and direction to your next iteration of the product. It will not only save your startup from building something that nobody requires, but it can actually guide you on the critical path to something that everyone wants, without wasting time or resources.
Measuring outcomes coupled with customer feedback will help in deciding whether to continue to scale the project or to pivot. Assuming you build your MVP and pivot at the right times using OKRs, you’ll be well on your way to running your startup in the most effective and efficient way possible.
In Summary
Using OKRs for startups can help these businesses get a better grasp of their product, priorities, and execution style. Learning when to pivot your product plans, and how to narrow down focus to only the most important items is an important lesson for any start-up if they want to grow their business.
Want to learn how Profit.co can help you set and achieve your ambitious goals? Schedule a free demo with the OKR experts at Profit.co today!