OKRs are an amazing way to manage startups. How so? Well, let’s actually take OKRs and compare with the lean startup movement, to see how these two methodologies complement each other.
We’ve already documented the OKR Payoffs in detail. They are summarized using the acronym FACTS.
Core principles of the lean startup movement
Now that we’ve had a little overview of the lean startup process, let’s look at the 5 guiding principles of the lean startup movement.
Entrepreneurs are everywhere
The idea is that you can be an entrepreneur anywhere, and breaks away from the stereotype that entrepreneurs start small in a garage and become superpowers once they are successful. We have covered this in one of our earlier posts never underestimate the spirit of a true entrepreneur.
Entrepreneurship is management
A startup starts with an idea, that needs to be transformed into one or more products, which will then need a business built around it. Entrepreneurship essentially is really a special type of management, that is tasked with getting a business built from an idea.
There is a lot of discussion between entrepreneurial management and other kinds of management. While it is true that it requires slightly different processes to take a business from 0 to $10M Vs. $10M to $100M they are both essentially management. And that is the point of this principle.
Validated learning
Validated learning is the “unit of progress” for lean startups. In the early days, you don’t have concrete metrics to go after. So, you are not measuring success by the money you make. Instead you measure them by the number of responses you get from your target customer base.
Typical steps in validated learning:
- Specify a goal
- Specify a metric that represents the goal
- Act to achieve the goal
- Analyze the metric – did you get closer to the goal?
- Improve and try again
Some of these steps look extremely similar to OKRs.
Innovation accounting
A startup has to create its own innovation accounting system. Again, think OKRs here. Innovation accounting is a way to evaluate progress when all other metrics typically used in an established company are effectively Zero. There are many KPIs that have been recommended in the lean startup world that divide them into 3 levels and go from simple customer responses such as completing a certain action on your platform to NPV.
Build-measure-learn
The build-measure-learn loop is essentially the lean startup process and is summarized using this concise flow:
- Build: Transform your ideas to code. This is in the tech parlance, but you can easily replace “code” with “prototype” to stretch this idea to other industries.
- Measure: Launch your product and gather performance data.
- Learn: Analyze the performance data and improve your ideas for the next iteration of build.
OKRs Vs. Lean Startups
Instead of going through a detailed dialog comparing the two, we’ve devised a matrix that tries to take each of the OKR Payoffs, and see how that relates to the core principles of lean startups methodology.
Entrepreneurs are everywhere
Entrepreneurs in general are very committed and very pushy (they are always stretching). You can also argue that they are very focused, but that is not necessarily true. The founding team together has 1 or 2 individuals who are tasked with the focus element.
Entrepreneurship is management
OKRs are the best way to manage anything. So, a good management methodology will benefit from all the OKR Payoffs and the lean startup process is no different.
Validated learning
Use OKRs to setup what you want to accomplish, and then what you would like to measure and get your check-ins going to track progress and recalibrate as you go.
Innovation accounting
Just use OKRs for innovation accounting. Pretty simple. Identify where you need to go, setup Objectives and Key Results. Track them periodically and move towards the next iteration.
Build-measure-learn
If we have to take one core principle of the lean startup movement and say this is completely supported by OKRs, that would be this principle. Pretty much every iteration that you go through here would have to be a series of OKRs. In a later post, we will look at some OKR examples for lean startups.
