OKRs vs SMART goals. Which framework drives better results? | Product management #5

Introduction

Product management is an art that requires not only technical skills but also strategic thinking. In this context, goals help focus on what is most important throughout the product lifecycle. From the first prototype to the withdrawal of the product from the market, well-defined goals show us what direction we should take.

SMART goals as a tool to support your product strategy

The SMART framework is an excellent tool for setting goals for your product strategy. SMART goals is an acronym that stands for Specific, Measurable, Achievable, Relevant, and Time-bound. But what do these words mean?

• Specific (S) – goals should be clear and specific. For example, instead of “increasing sales” a SMART goal could be “increasing sales of our product by 30% in the next 6 months.”
• Measurable (M) – goals should be measurable, which means that we should be able to assess whether the goal has been achieved or not. For example, “increasing sales by 30%” is measurable because we can track how much the sales have actually gone up.
• Achievable (A) – goals should be realistic. The creators of the SMART method believe that if a goal is too ambitious, it can lead to frustration and a lack of motivation in the product team.
• Relevant (R) – goals should be relevant to our product strategy and business objectives.
• Time-bound (T) – goals should have a deadline, so it’s easy to monitor progress and break them down into manageable subgoals.

However, the SMART approach is sometimes criticized as it can make teams deliberately set goals that are easy to achieve, as the measure of success here is completing the whole plan. The creators of the OKR method tried to fix this issue.

Using OKRs in product management

The OKR framework (Objectives and Key Results) focuses on setting very ambitious goals and tracking results that can be measured objectively. For example, an objective could be “increasing our presence in the European market,” with key outcomes like increasing traffic to our website by 50%” and “increasing the number of new customers in EU countries by 30%.”

OKRs, unlike SMART goals, aren’t created with the intention of fully achieving them. It’s enough to execute them at 80% to declare the success of a strategically defined objective.The OKR method, apart from concentrating on objectives and key results, also focuses on five key aspects that are essential to successful management and goal achievement. As John Doerr points out in an interview with Harvard Business Review, OKRs give us the following benefits:

• Focus – concentrating on the most important goals. For example, instead of trying to accomplish ten different objectives at once, we focus on two or three that have the greatest impact on our product strategy.
• Alignment – making sure that all team members’ goals are in line with the company’s overall objectives. For example, if the company’s goal is to increase sales by 20%, the marketing team’s objective might be to boost website traffic by 30%.
• Commitment – committing to meet the set objectives. For example, each team member agrees to perform certain tasks that will contribute to the achievement of the goal.
• Tracking – monitoring progress towards goals. For example, the team might hold weekly meetings to do so.
• Stretching – setting ambitious objectives that require effort and innovation. For example, instead of setting a goal to increase sales by 10%, the team might set the bar at 30%.

Each of these aspects plays a key role in successful goal management and can contribute to the success of a product strategy. According to the OKR Impact Report 2022, companies that effectively communicate and regularly review their OKRs are 28% more effective. More than 80% of companies agree that OKRs have a positive impact on their organization.

OKRs vs SMART goals in a product strategy

Both methods have many advantages. The SMART method is particularly useful when dealing with specific, short-term goals, while the OKR framework is suitable for long-term, strategic objectives that may require more flexibility. The choice between the two depends on the specifics of our product and strategy. It is worth noting that according to the OKR Impact Report 2022, companies that fully embraced the agile model before the pandemic achieved better results than those that did not.

Implementing SMART goals and OKRs in a product strategy requires thorough planning. Here are a few steps that might help in the process:

• Define your goal. Is it a short-term goal or a long-term goal? Is it a strategic or operational goal?
• Choose the right method. Is the goal more suitable for the SMART or OKR method?
• Formulate your goal. Use the chosen method to formulate the goal. Remember that the goal should be clear, measurable, and realistic.
• Monitor progress. Check regularly to see if you are on track to achieve your goal. If not, consider what you can do differently.

SMART goals and OKRs are powerful tools that can help you execute your product strategy. Regardless of the chosen method, it is essential to regularly monitor progress and be flexible in adjusting goals to changing conditions.

Summary

Goals are a key component of any product strategy. The SMART and OKR methods are two popular tools that can help you set and execute these goals. And which framework you choose, depends on the specifics of your product and strategy.

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