OKRs and KPIs in Product Management: A Practical Guide

TL;DR: The job of Product Managers (or Product Owners, for instance) is to create products that deliver value to users and the business. OKRs help us define what that value looks like and how we’ll measure it. KPIs help us monitor the health of our product and identify areas for improvement.

As Product Managers, we often find ourselves in a metrics maze. Should we focus on user engagement, revenue growth, or feature adoption? Are we measuring outputs or outcomes? The confusion between OKRs (Objectives and Key Results) and KPIs (Key Performance Indicators) often adds to this complexity. Let’s demystify these concepts and learn how to leverage them effectively in product strategies.

What is an OKR?

OKRs are not just another goal-setting framework; they’re a powerful tool for aligning your product strategy with the company’s vision. Think of OKRs as your product’s GPS, guiding you towards your destination while allowing for course corrections along the way.

Objectives are your product’s ambitious, qualitative goals. They answer the question: “Where do we want our product to be?” (desired outcome).

Key Results are the quantitative metrics that measure progress towards your objective. They answer: “How will we know we’ve reached our destination?”

For example:

Objective

• Transform our product into the go-to collaboration tool for remote teams

Key Results

• Increase Daily Active Users (DAU) from 100,000 to 250,000
• Improve user retention rate from 60% to 80% over 3 months
• Achieve an NPS score of 70, up from the current 50

Notice how these KRs are specific, measurable, and directly tied to the objective. They don’t dictate how to achieve the goal but provide clear indicators if we are moving in the right direction. Moreover,

they are used to push our business to higher levels.

What is a KPI?

If OKRs are your product’s GPS, think of KPIs as the dashboard in your car. They continuously monitor various aspects of your product’s performance, alerting you to potential issues or opportunities.

Examples of common KPIs:

• User Acquisition Cost (UAC)
• Monthly Recurring Revenue (MRR)
• Customer Churn Rate
• Feature Adoption Rate
• Average Revenue Per User (ARPU)

Unlike OKRs, KPIs don’t necessarily have targets. Their primary function is to provide ongoing insights into your product’s health and performance.

OKR-KPI Synergy

Imagine you’re developing a new feature for your SaaS product. Here’s how OKRs and KPIs might work together:

OKR

• Objective: Successfully launch and drive adoption of our new AI-powered analytics feature
• KR1: Achieve a 50% adoption rate among existing users within 3 months of launch
• KR2: Increase user engagement time by 25% for users who adopt the new feature
• KR3: Generate $1M in upsell revenue from the new feature in Q4

KPI

Indicators to monitor alongside:

• Daily Active Users (DAU) of the new feature
• User feedback score for the new feature
• Load time of the analytics dashboard
• Number of support tickets related to the new feature

In this scenario, your OKR drives the strategic direction for the feature launch, while your KPIs help you monitor the day-to-day health and performance of both the new feature and your product as a whole.

When KPIs become OKRs

Sometimes, a KPI you’ve been monitoring might become critical to your product’s success, elevating it to a Key Result in your OKRs.

Let’s say you’ve been tracking the “Time to Value” KPI for your onboarding process. You notice it’s taking new users an average of 30 minutes to experience the core value of your product, leading to high early churn rates. You might then set an OKR like this:

Objective

• Revolutionize our user onboarding experience

Key Results

• KR1: Reduce “Time to Value” from 30 minutes to 5 minutes
• KR2: Increase 7-day retention rate from 40% to 70%
• KR3: Achieve a 90% completion rate for the onboarding process, up from 60%

Here, a metric that was previously just a KPI (Time to Value) has become a crucial KR in your product strategy.

Debriefing

Use OKRs to:

• Align your product strategy with company goals
• Focus your team on outcomes rather than outputs
• Drive significant, measurable improvements in your product

Use KPIs to:

• Monitor day-to-day product health
• Identify trends and potential issues early
• Inform data-driven decisions in your product development process

Remember, the goal isn’t to hit every KPI target or achieve 100% on every OKR. The goal is to create a product that delivers real value to your users and your business. Use these tools wisely, and they’ll help you navigate the complex world of product management with greater clarity and purpose.