What Matters: Why Startups Should Use OKRs

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One day in the fall of 1999 after investing $11.8 million for 12 percent of Google, venture capitalist John Doerr arrived at the then young startup with a pitch. For the next ninety minutes, it was Doerr’s turn to sell Google on a simple yet powerful management tool: Objectives and Key Results.

According to Doerr’s book “Measure What Matters”, after his presentation, Google co-founder Sergey Bin responded, “Well, we need to have some organizing principle. We don’t have one and this might as well be it.”

20 years and billions of dollars later both wagers paid off. And the story of Google adopting OKRs has become a legend as popular as the garage-startups within the canon of Silicon Valley. Since then, startups across the world have turned to OKRs in the hopes of attaining Google-like performance—with various levels of success.

Naturally, startups face extra challenges than a more established organization might when adopting OKRs. Some startups may still be in the process of defining their company mission, values, or even their products and services. And if a startup isn’t fighting for financial survival, it is likely they’re still working with limited resources in advance of proof of concept. Which can make it difficult to set objectives and make even the boldest entrepreneur second guess if there’s time to invest in adopting OKRs.

“Yes you can do OKRs, but it’s super, super hard when you’re in a situation where it’s in an emergency,” warned Nuna founder Jini Kim in a 2018 panel with Doerr and Humu founder Laszlo Bock.

Other founders find OKRs critical for navigating the state of chaos that characterizes many early-stage startups.

“When you’re a startup founder you constantly have to answer the question, ‘Does your startup make sense?’” said Sweat Equity Ventures partner George Babu during a call with WhatMatters.com. Babu has co-founded startups like the AI-enhanced robotics maker Kindred, which aims to enable robots to solve valuable real world problems, and Rypple, a performance management app that was later acquired by Salesforce.

According to Babu, “When you don’t have a lot of data, OKRs are one way to talk about the value you’re going to deliver and what ‘good’ looks like.”

Regardless of size or funding, to be successful a startup needs to be agile, adaptable and focused. It needs to be able to move fast and execute with precision. OKRs assist startups to focus on what is important while allowing for flexibility.

Kim recalled her early struggles with OKRs in the panel with Doerr and Bock. Three years after founding Nuna, she landed a huge contract with the Centers of Medicare and Medicaid Services to build their first-ever data warehouse. The future looked bright. But things rarely go as planned.

“You can make up all these OKRs and the problem is that all go out the window when you’re in an emergency,” said Kim. “When you’re fighting for survival there are no best-laid plans.”

The deliverables they’d committed to were so massive she had to quickly scale her team from 15 to 75 employees. Many variables were out of Nuna’s control and her team kept pivoting which made committing to OKRs difficult. She called this period of time the “wandering in the dark phase.”

Bock argued, in the same panel, that OKRs can be a source of light that guides startups out of the dark phase. They provide a structure and clarity on priorities that an organization can continually turn to in turbulent times.

“We’re looking at OKRs as a mechanism to actually just give everybody visibility and transparency into what’s going on,” said Bock. “[and] what are the highest order things.”

Babu agreed, that pinpointing what’s essential and what’s not is critical for any company, but the process “doesn’t have to be overly complicated,” he said, “OKRs have a low barrier to entry compared to scrum or agile. Within an hour you can figure out what are the three things we want to do? Ok, how do we know we’ve done that?”

Whether a startup is made up of two people or 100, OKRs can make sure the company’s top priorities are clear to everyone. Bock said this clarity helps drive productivity.

But even when objectives aren’t met, OKRs keep track of progress and since they are reviewed regularly they provide valuable feedback to make more informed decisions. They can be the catalyst to start important conversations about where a company is headed and even what it can walk away from. When properly executed OKRs can aid a startup in balancing innovation and productivity.

When Allbirds founders Tim Brown and Joey Zwillinger [founded the no-frills and environmentally-friendly shoe company in 2016],(https://www.whatmatters.com/stories/okrs-for-r-and-d-research-development) they set an objective to be carbon-neutral. Instead of starting with arbitrary sustainability goals, one of their first key results included tracking emissions produced from their supply chain, manufacturing, shipping, and retail operations.

“Once we understood exactly down to the gram of carbon dioxide equivalent emissions we made, Zwillinger said, “we could then offset each of those, so now we have a carbon neutral promise to customers that any time you buy anything from us, it is 100 percent carbon emission neutral on the planet.”

From that starting point, they’ve been able to work at lowering both their carbon emissions and the carbon offset purchases required to stay neutral. This precise attention to detail extends to their products where they pay careful attention to sourcing sustainable materials that are economically-sound and are practical to manufacture at scale. Through a stage-gating process and the use of OKRs they’ve been able to make at least one new discovery in material sciences every couple years. Those discoveries include manufacturing shoes from Merino wool and flip-flops from Brazilian sugar canes.

By staying focused yet innovative, Allbirds has been able to sell a million pairs of shoes and reach a billion-dollar valuation all within three years.

Another example of a startup using OKRs well is the email platform company Superhuman.

In an attempt to find their product-market fit, they set an OKR to get 40 percent of their users to respond “very disappointed” when asked, “How would you feel if you could no longer use the product?” After analyzing the survey data, they found they were able to pivot their company from serving casual email users to super users who respond to hundreds of emails a day and prioritize speed. This pivot led to an additional $33 million investment and a higher valuation.

Superhuman or Allbirds are great examples of startups using OKRs like Google to be thoughtful about their goals and the metrics used to determine success.

A common statistic that gets thrown around is that 90 percent of startups fail. According to a study of over 27,000 venture-backed startups conducted by Cambridge Associates, it’s closer to 60 percent. Still, even that conservative number shows that over half of startups fail. Overcoming the odds requires more than just luck.

Doerr’s favorite definition of an entrepreneur is, “Those who do more than anyone thinks possible… with less than anyone thinks possible.”

To do the impossible, a startup must develop a team that’s focused, aligned and committed. Their resources need to be deployed efficiently. And their time used wisely.

OKRs won’t solve all of a startups problems, but they can make the impossible measurable and within reach.

Bruce Gil (@brucgl) is a Las Vegas-based writer and journalist who writes about leadership, team management, and international entrepreneurship.