How established companies drive new innovations with OKR

Nowadays, more and more established organizations are choosing to OKR as an effective tool to develop new innovations, stay competitive, and expand market share.

OKRs (Objectives & Key Results) is a popular management framework that has been used by startups and tech companies for many years. OKRs have been successfully used by Google, Intel, LinkedIn, Twitter, Zynga and Zalando, to name just a few.

Nick Stanforth is a management consultant and progress coach who works with SMEs and large corporate clients across Europe and the US. Focusing on performance enhancement, team engagement, and innovation, he has introduced OKRs to many companies.

Perdoo:

Why are new innovations so important in today’s economy?

Nick:

The world keeps turning and current technology means things are changing more rapidly than ever. Whilst a pessimist might be concerned by this rapid rate of change, new innovations thrive off it, and this rate of change opens up so many opportunities.

A common misconception is that new innovations are about changing for change’s sake, but nothing could be further from the truth. Innovation is all about learning to recognize valuable opportunities, whilst being able to predict dead-ends before you hit the wall.

Innovation happens when two existing solutions combine for the first time to create a new or better solution to an existing problem. The world around us will carry on changing and, without an innovative approach, you will simply miss the boat.

Perdoo:

Many established companies struggle with developing and maintaining new innovations. What is holding them back?

Nick:

There is no such thing as a complex solution, only complex workarounds, but as companies grow and rise to new challenges, people naturally become proud of their new complex processes. They think mastering this complexity is a measure of their success, so they can no longer imagine a simpler solution exists.

Whilst OKRs help start-ups to know what to do and to define their business model, OKRs help established companies to find opportunities hidden in existing processes and harvest that potential.

The important thing is to maintain a direct connection between actions and results. If people know how they have contributed, everyone will feel valued, avoid wasting time and will stay open to new ideas.

Perdoo:

How did you identify OKR as a method that fits your approach as a consultant?

Nick:

OKRs are a perfect combination of Strategy, Project Management, and the Lean philosophy. I first read the name OKR a couple of years back, but instantly recognized them as a good description of three things I strongly believe in. First, sharing knowledge and getting everyone involved motivates teams and nurtures self-confidence. Second, delivering to a non-negotiable deadline and focusing on the few important things avoids waste and enhances productivity. Third, setting objectives, which we believe in, but until now have only dreamed of, then daring to chase after them and using that experience to grow and learn is an incredibly rewarding experience.

OKRs are so simple and flexible, yet structured enough to ensure delivery. Unlike many other MBO and Agile methodologies, OKRs keep the value of your work in focus instead of confusing us with long foreign words and fancy titles.

Perdoo:

What are the top 3 things you would recommend companies looking to become more innovative?

Nick:

Harvest, harvest, and harvest again. Farmers always harvest their work, but how often do we forget to do so in the office?

So our first harvest should be to make sure whenever we join a meeting, decisions get made. Everything we do at work should deliver a result, even if that result is knowledge.

The second harvest is to never introduce an optimized process without removing something old. For instance, introducing a 15-minute daily team meeting is a great way to drive progress, but don’t forget to shave an hour off a different weekly meeting’s agenda.

The third harvest, and this is where OKRs come in, is break big steps into little ones, so that you can benefit from the first changes after just 3 months. Waiting for the next big thing at the end of a three-year project is a good way to slow down progress and inevitably see all your projects get canned in budget cuts.

I like to apply the author of the The Lean Startup, Eric Ries’ Build-Measure-Learn approach to my OKR work. This means we make an assumption called a Hypothesis of Growth, define how we can measure our success on day 1, then test this assumption, and apply the knowledge learned to accelerate progress.

Perdoo:

How can OKR help companies unlock their potential?

Nick:

Without exception, every team I have introduced OKRs to now deliver way better results than before, so it can’t be down to individual capability or talent.

I recently held an interactive workshop with a whole department of 180 people. Everyone used their smartphones to give answers to an online poll.

Question one was whether realistic or unrealistic goals create the most stress at work, and as could be expected, almost everyone agreed that realistic goals are good. Then I asked them what the difference was between a realistic goal and a task, and we soon realized that chasing after our dreams is a lot more fun and delivers a lot more useful results than negotiating for months about what we believe to be realistic.

Perdoo:

Can you share some success stories from companies you helped implementing the OKR framework?

Nick:

To take a recent example, I worked with a team which has had been struggling with their delivery performance for years. They were all engaged, but the deliveries kept leaving the plant too late. We spent the first quarter training OKRs and getting to grips with the methodology. Then something special happened, the teams set the Objective to get to 100% delivery performance in the next three months.

Within just three months they were up to over 95% target achievement (over 30% improvement) and we had an amazing all-hands workshop where everyone was buzzing to tell their story.

In another example, an internal software department set the definitely impossible goal of reducing their ticket support work to zero within 3 months. Their Key Results looked ambitious on day one, but within about 4 weeks, they had found out that other departments within their group had already solved many of their issues. For example, their HR department knew how to make e-learning FAQ-style films and a sister department had an almost fully functional system to perform automatic testing.

The motto of this tale is simple: OKRs did not teach the first team how to manufacture. Nor did OKRs force the second team to work longer. Both teams were already very capable. However, setting a scary goal and committing to see what can be done by a fixed date made them approach their challenge in a structured way. Most importantly, it made them re-think their boundary conditions.

Perdoo:

What is the most common misunderstanding regarding goal setting that hinders new innovations?

Nick:

I’m a big fan of Peter F. Drucker, who invented Management By Objectives, and setting SMART Goals is a great way to manage tasks and deliver project goals.

Once you have got your head around the similarity of tasks and realistic goals, however, you start to see what is missing in most organizations today.

I recently presented the benefits of OKRs to a board member responsible for around 15 international production sites.  He challenged me about the way Google targets a 40-70% OKR achievement corridor. “So I should be happy with 40% delivery rate?“, he asked.  My answer helped him to get his head around OKRs: Delivering 100% right-first-time, on-time is a realistic task, which can be expected of every production site (believe me, I’m also a lean consultant—it’s not that difficult). Delivering on time and making 40%-70% more profit, on the other hand, would be like achieving a dream goal and is, therefore, an OKR-relevant success.

If you want to get 10% better, work 10% harder. If you want to get 100% better, challenge your boundaries and work smarter.

About Nick

Born in the UK and having lived in Germany since 1999, Nick Stanforth helps people to love their job. Since 2009, he advises both large PLC and family-owned SMEs on how to deliver their targets.

Nick consults Strategy, Project Management, and Lean, and has set himself a personal stretch goal every year of his business life. He has learned that new innovations are to be found in approaching new subjects and thus challenging one’s own limits, so the move to teach OKRs and accompany OKR transitions was a natural next step for Nick.

You can find out more about Nick’s approach by visiting his free advice App at www.PocketProgressCoach.com, which he programmed and wrote himself as part of one of his yearly objectives. Or see his newest stretch goal results on his Vimeo Channel.