OKRs vs. KPIs Which is Right for You?

I have witnessed a lot of confusion regarding KPIs and OKRs. In fact many big companies mistakenly use those two terms interchangeably. However understanding the difference can be key when you are setting product goals.

When it comes to digital products, setting goals and measuring success is essential to staying competitive and achieving your business objectives. There are many different frameworks for measuring success, but two of the most popular are OKRs (Objectives and Key Results) and KPIs (Key Performance Indicators). In this article, we'll explore the benefits and limitations of both frameworks, and provide guidance on how to use them effectively for digital products.

OKRs for Digital Products

OKRs are a popular framework for setting and tracking goals, particularly in the tech industry. OKRs are designed to help you set ambitious, measurable, and achievable goals, and then track progress towards those goals over time. OKRs consist of two parts: the objective, which describes the goal you want to achieve, and the key results, which are the specific metrics you'll use to measure progress towards that goal.

OKRs can be particularly effective for digital products because they allow you to set clear goals and track progress towards those goals over time. For example, if you're developing a new app, you might set an OKR to increase user engagement by 50% within the next six months. You would then identify the specific metrics you'll use to track progress towards that goal, such as daily active users or time spent in the app. Some additional examples include

• Product Development: An OKR related to product development might be to launch a new product or feature within a specific timeframe. The Key Results might include metrics such as user adoption, customer satisfaction, or revenue generated by the new product or feature.

• User Acquisition: An OKR related to user acquisition might be to increase the number of users who sign up for the company's services or use the company's products. The Key Results might include metrics such as the number of new users acquired, user engagement, or user retention rate.

• Revenue Growth: An OKR related to revenue growth might be to increase revenue generated by the company's products or services. The Key Results might include metrics such as revenue growth rate, customer acquisition cost, or customer lifetime value.

• Operational Efficiency: An OKR related to operational efficiency might be to improve the efficiency of the company's internal processes and workflows. The Key Results might include metrics such as process cycle time, time to market, or cost savings achieved.

• Innovation: An OKR related to innovation might be to encourage and measure innovation within the company. The Key Results might include metrics such as the number of new ideas generated, the number of patents filed, or the success rate of new product launches.

One of the benefits of using OKRs for digital products is that they help you focus on outcomes rather than outputs. Instead of simply measuring how many features you've released or how many bugs you've fixed, you're measuring the impact your product is having on users and the business. This can help you make better decisions about where to invest your time and resources, and can lead to more impactful products overall.

KPIs for Digital Products

KPIs are another popular framework for measuring success, particularly in the digital space. KPIs are specific metrics that you use to measure performance over time. KPIs can be used to track a wide range of performance indicators, including user engagement, conversion rates, and revenue. Some examples include:

• User Retention: This KPI measures how many users continue to use the app over time. This can be tracked using metrics such as daily active users, monthly active users, or user churn rate.

• User Engagement: This KPI measures how often and how deeply users interact with the app. This can be tracked using metrics such as session length, number of sessions per user, or screen views per session.

• Conversion Rate: This KPI measures how many users take a specific action within the app, such as making a purchase or completing a registration. This can be tracked using metrics such as click-through rate or conversion rate.

• Revenue: This KPI measures how much money the app generates, either through in-app purchases, advertising, or other revenue streams.

• App Performance: This KPI measures how well the app performs in terms of speed, stability, and user experience. This can be tracked using metrics such as app crashes or load times.

These are just a few examples of the KPIs that can be used to measure the success of a mobile application. The specific KPIs that are most important will depend on the goals and objectives of the app and the overall business strategy.

KPIs can be particularly effective for digital products because they provide a clear, objective measure of performance over time. For example, if you're running an e-commerce site, you might track KPIs such as conversion rate, average order value, and customer lifetime value. By tracking these metrics over time, you can identify areas where you're performing well and areas where you need to improve.

One of the benefits of using KPIs for digital products is that they provide a clear, objective measure of performance. This can help you make data-driven decisions about how to optimize your product and improve user experience. By tracking KPIs over time, you can identify trends and patterns in user behavior, and make adjustments to your product accordingly.

Choosing the Right Framework

When it comes to choosing the right framework for measuring success, there is no one-size-fits-all answer. The choice between OKRs and KPIs depends on your specific business goals, the stage of your product, and the metrics that matter most to your users and stakeholders.

One approach is to use both OKRs and KPIs together. You can use OKRs to set ambitious, long-term goals for your product, and then use KPIs to track performance over time. By using both frameworks together, you can ensure that you're measuring both outcomes and outputs, and that you're making data-driven decisions about how to optimize your product.

Wrapping up

In conclusion, both OKRs and KPIs can be effective frameworks for measuring success in digital products. OKRs are particularly effective for setting ambitious, long-term goals and tracking progress towards those goals over time, while KPIs are effective for providing a clear, objective measure of performance. So using this understanding can help determine how to use these two in your PM toolbox