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Strategic planning and OKRs (in times of crisis)

Francisco Homem de Mello

OKRs do not come out of nowhere. Managing with OKRs starts with strategic planning, which serves as a backdrop for OKRs. Therefore, strategic planning and OKRs go inextricably together.

In this article we will discuss what strategy is, what strategic planning is, and how you can derive OKRs (and projects) from the output of your strategic planning. And rest assured: we are a technology startup and live in constant change. When we say “strategic planning” we are not referring to a super long process like the one done in big companies. Wait and trust ????

First, we will address what strategy is and what strategic planning is. Then we will discuss how this strategy unfolds into the organization’s OKRs and projects, which lets everyone in your company know what their priorities are and how they contribute to the whole.

Let’s go!

Some of what I have (hopefully) learned about strategic planning and OKRs

We have been reading obsessively about strategy and strategic planning to be able to inform our management process with OKRs (I will point out some content throughout the article).

After much reading, today, our definition of what strategy is, which is a pot-pourri of

various definitions, is “the logic behind the series of steps and choices that the leadership of an organization plans to take to get from where the organization is today to where the organization’s leadership expects it to be at a point in the future.

Let’s go into the detail of this definition.

Strategy is a logic, or a rationale. It is an explanation of the steps that the leadership plans to take, and why those steps are the optimal combination (where optimal means “that maximizes the chances of success”).

This logic has to be defined primarily by the company’s leadership, although with a lot of collaboration from those in the trenches. The leadership is able to see the organization and its surroundings in a more complete way. Of course, it is worth remembering that strategy is only effective when it is correctly communicated to the entire organization and transformed into OKRs and projects to be executed by everyone in the organization. If nobody does anything, the strategy becomes just a document or a collection of ideas, with no practical impact on the direction of the company

My best definition of strategy is “the logic behind the series of steps and choices that the leadership of an organization plans to take to get from where the organization is to where the leadership of the organization expects it to be at a point in the future.”

Example: SpaceX’s strategy

Let’s take an example: SpaceX, the company founded by American billionaire Elon Musk. What is SpaceX’s strategy?

Quite simply: SpaceX’s strategy has been, since soon after its formation, to establish itself as the leading private company in the transportation of cargo from Earth to its low orbit, where, among other things, are satellites and the International Space Station. If SpaceX were to win (and it looks like it is winning) this first stage, the company would have the technological base and financial resources necessary to increase its chances of achieving its 20-year vision of helping humanity colonize the planet Mars.

I said simple, but I didn’t say easy to execute ϩI said simple, but I didn’t say easy to execute ????.

From strategic planning to OKRs: an overvie

Strategies involve a plan for a series of steps and choices. This plan is much more concrete in the near future (which is why, among other things, we can derive OKRs and projects from it), and more abstract in the long term. But it is a plan nonetheless.

In the short term the company is concerned with its OKRs and projects, which are essentially the articulation, on the one hand, of the gaps it needs to close between the

current situation and the 1-year vision, and on the other hand the efforts and experiments it needs to execute to get there.

The map of the terrain ahead of the company (between the current state, today, and the 1-year vision) is given by the SWOT matrix, which we will talk about quite a bit later. The SWOT matrix articulates the opportunities and threats ahead of the company that can help or hinder the company in achieving its 1-year vision, and the company’s strengths and weaknesses relevant to exploiting those opportunities and neutralizing those threats.

In the medium and long run, these are choices concerning the markets (geographies) in which the company will operate, the products and services it will offer, the clients it will focus on, among other things. An excellent reading on this subject is the book Playing to

Win, by A.G. Lafley, former president of P&G. This series of choices (which can, of course, change) should aim to maximize the chances of the company fulfilling its mission, which is, to put it simply, synonymous with reaching its 10-year vision.

It is worth emphasizing this last point: The goal of all this is to increase the chances of the company reaching its 10-year vision. It is at the service of this vision that the strategy, the 1-year vision, the SWOT matrix, the OKRs, and the projects are

Why strategic planning (and OKRs)?

As we saw up here, strategy and strategic planning exist for the organization to increase its chances of success, which is defined by the journey between point A (where the organization is today) and point B (where the organization wants to be in the future).

A good strategy, among other objectives, has to maximize the chances of success by balancing short-term threats and opportunities with what the organization will encounter further down the road, as competitors and new entrants also deal with their threats and opportunities.

Strategic planning: How strategy is articulated and communicated

Strategies, which are the result of strategic planning work, live on in strategy plans (or strategic plans). These are slide presentations or text documents that explain the key findings of the planning process. An excellent book on the subject is The Executive Guide to Facilitating Strategy by American author Michael Wilkinson.

A good strategy plan (or strategic plan) contains at least the following:

  • Why the organization exists (its “why”, mission or purpose)
  • The terrain immediately in front of the organization and the company’s strengths and weaknesses in getting through that terrain, products of the SWOT analysis and the learnings the company may have from the last few management cycles
  • Where the organization wants to be in the future (the “where we want to be”), represented by 1-year and 10-year visions, and finally
  • The strategy, which is a narrative of choices and moves on the board that the company will make to increase the chances of achieving its visio

The main product to be derived from the plan naturally consists of the OKRs and projects, which are the immediate consequence in the plan in people’s lives. But it is crucial that the organization properly communicates what is behind the OKRs and projects, i.e. the strategic plan, which makes people really understand what is behind their work.

Now, let’s talk a bit about the main parts of the plan and how they are created ????

The SWOT matrix

As we have seen, an important part of strategic planning is to determine where the company is now and its strengths and weaknesses on the one hand, and what is the terrain immediately in front of it, given by its opportunities and threats on the other hand.

“Strategies exist to maximize the chances of an organization getting from point A to point B, where point A, ideally, is where the organization is, and point B is where the organization wants to be in the future.”

My story with the SWOT matrix

The first time I saw a SWOT matrix was in a marketing course at the School of Business Administration at Fundação Getulio Vargas, where I went to college. The subject was essentially taken as a load of rubbish by my classmates, who were much more interested in finance and investments. (Curiously, this was the only subject I was invited to be a monitor for in the whole college, but anyway). ) After so many years of being discredited since those days, I have recently come to fully appreciate the tool, which seemed so harmless.

SWOT analysis aims to map the opportunities and threats that a company has in front of it, and the strengths and weaknesses that can help the company exploit such opportunities and neutralize such threats. In English, the acronym SWOT is formed from the initials of

Strengths, Weaknesses, Opportunities, and Threats.

The SWOT matrix is built in a two-way street

The SWOT matrix is generally constructed in two parallel efforts: on the one hand, the entire organization working from the bottom up in articulating its strengths and weaknesses; on the other hand, the company’s most senior leadership working with its board and eventual consultants in articulating its opportunities and threats.

Opportunities and threats

Senior leadership begins the process by focusing on the opportunities and threats ahead of the organization. Usually the company’s board of directors and eventually external consultants participate in this type of work.

Good opportunities and threats must be external to the company, that is, they must exist independently of the organization. The question we use to filter external opportunities and threats is “would this opportunity/threat exist even if our organization did not exist?” The answer should be yes.

Getting down to business, the working team gathers in a room and begins brainstorming

opportunities and threats. The team then sorts the opportunities in one quadrant and threats in another according to their potential impact on the organization, which is a product of the size of the potential impact and the likelihood that it will materialize. The final product looks something like this:

The importance of SWOT analysis in strategic planning.

This is also an excellent opportunity for leaders, advisors, and consultants to take advantage of the fact that they are together and in the same “mind band” and review the company’s 10-year vision, the company’s 1-year vision, and the company’s mission.

Key hint: the final matrix should contain at most 3 opportunities and 3 threats.

If we follow with the examples of SpaceX, we could have the following opportunities and threats:

Opportunities

  • Demand for Low Earth Orbit Flights by US and Russian Telecommunications Companies
  • Availability of aerospace engineers in India, where a competing startup failed

Threats

  • Economic crisis in the U.S. could lead to lower shares, which could frustrate the stock offering scheduled for the quarter
  • Competition from France and China’s space agency

Strengths and Weaknesses

In parallel with the efforts of the senior leadership, the entire company builds the organization’s strengths and weaknesses map, from the bottom up.

The effort starts with the work areas, such as management, chapter squads, etc. Each team gets together and spends 90% of its time in these meetings defining its strengths and weaknesses. It’s also worth spending 10% of the time thinking about what opportunities and threats the team sees ahead of the organization as a whole, which can serve for senior leadership to adjust their opportunities and threats based on the knowledge of those in the operation.

Strengths and weaknesses come from a variety of sources. One of them is debriefing of past OKR cycles, where you learn what worked and didn’t work and what the company does and doesn’t do well. Strengths and weaknesses also come from benchmarking with other companies, competitor analysis, customer and employee

feedback, and the reflection of teams and leadership. Finally, a very important source of strengths and weaknesses comes from a very realistic and cold analysis of the

A test that helps teams understand if their strengths and weaknesses are really strengths and weaknesses is to imagine if a competitor, in possession of the matrix, would agree with them, or would have a good laugh?

Having done all this, the strengths and weaknesses portion will look like this:

The importance of SWOT analysis in strategic planning.


As the work teams make their strengths and weaknesses, the materials are consolidated for the higher teams in the organization, until the CEO and his and her men and women leaders are able to consolidate all the organization’s strengths and weaknesses into a single matrix with a maximum of 10 strengths and 10 weaknesses.

The criterion for prioritizing the organization’s ultimate strengths and weaknesses is clear:

strengths and weaknesses should be prioritized based on their impact on the most important opportunities and threats to the organization.

With this, the organization comes up with a complete SWOT matrix, with its most relevant opportunities and threats in relation to the 1-year vision and the strategy, and most relevant strengths and weaknesses in relation to the opportunities and threats.

In the SpaceX example, the strengths and weaknesses prioritized based on opportunities and threats would be:

Forces

  • SpaceX rockets are uniquely positioned to carry Russian communication satellites (because of their diameter)
  • SpaceX’s sales force speaks English and is based

in the US, so it is better equipped to meet the demand from US companies (versus French and Chinese companies)

Weaknesses

  • No senior executives are willing to live in India to take advantage of the supply of engineers; migration to the US is stalled due to the pandemic
  • Company figures in the next earnings release will probably come in worse than expected by the market, further complicating the possibility of a stock offering

The purpose of the SWOT matrix

As we talked about earlier, the SWOT matrix aims to map the opportunities and threats that a company has in front of it, and the strengths and weaknesses that can help the company exploit such opportunities and neutralize such threats.

The SWOT matrix should help the organization to see the terrain in front of it more clearly, as if from a high-altitude view…

You should be going from this:

The importance of SWOT analysis in strategic planning.

To this:

The importance of SWOT analysis in strategic planning.

Where we want to be

As we’ve also seen before, the more into the future we get, the more fuzzy things get, so we don’t really know where we want to be in the future except for some general metrics and statements. In an ideal world, our view of the mountain that represents our company’s journey would look something like this:

Vision as part of strategic planning.

Instead, the future is much fuzzier, so that it looks more like this:

Vision as part of strategic planning.

Anyway, there has to be some articulation of where the company wants to be in the future. That’s what we call a vision. Visions usually have due-dates and are as concrete as possible without being stupid. They should read like you describing how the company looks like at the due date, let’s say 10 years, as if you were there, seeing it yourself. An example:

It is now 2030, and we:

  • Are leaders in market share on all 5 countries we operate in
  • Have made our IPO and have solid stock performance since then
  • Have the most satisfied customers among our top 3 competitors
  • Etc.

But beware: a vision is not a mission.

If a vision is where we want to be in a given time in the future, a mission is why the company exists. We at Qulture.Rocks exist to unlock human potential. It’s not where we want to be, but almost a fundamental guiding principle that should guide everything we do. We won’t, for example, get into the b2b banking space, because our mission is not to disintermediate access to capital nor to democratize great funding alternatives. (You can read more about missions and visions on OKR, from Mission to Metrics, our book).

My take is that there should be two visions on your strategic plan: a one-year vision and a 10-year vision.

How we’ll get there

The last part of a good strategy (or strategic plan, which is the document that explains the strategy) is “how we will get there,” where there means our vision(s).

The first part of “how we will get there” is derived directly from the SWOT matrix, and will suggest a path of action in the short-term. Pundits suggest that a SWOT matrix should produce four generic strategies from the interaction of quadrants:

  • Strengths and opportunities produce growth strategies
  • Strengths and threats produce external development strategies
  • Weaknesses and opportunities produce internal development strategies, and finally
  • Weaknesses and threats produce survival strategies

A graphic representation of the four generic strategies would look like this:

Brainstorming strategic themes from SWOT as part of strategic planning.

I don’t really like this model for two reasons: first, I think you can’t call these “strategies” since the product of the model produces only a fraction of what a strategy is. Cosmetic. Second, and most importantly, I think these SWOT themes, as I prefer to call them, should be the product not only of the interaction of two quadrants, but of all related quadrants, so that an opportunity may have both related weaknesses and related opportunities, and so on. A great way to find these SWOT themes is to first list all the SWOT factors (as each S, W, O, and T is called):

Brainstorming strategic themes from SWOT as part of strategic planning.

And then to cluster them in themes:

Brainstorming strategic themes from SWOT as part of strategic planning.

Important: A strength or a weakness can be agglutinated into more than one opportunity or threat. So be ready to do more than one Post-it for each strength/weakness.

With this, we have opportunities and threats surrounded by strengths and weaknesses that impact them.

The second part is to prioritize the opportunities and threats based on the quantity and quality of strengths and weaknesses associated with them. It is more art and less science.

The opportunities and threats that were best ranked (based on their potential impact) should be prioritized, since the organization by definition has scarce resources and needs to take care of the 20% of the issues that account for 80% of the impact (the famous Pareto rule).

Another great challenge is to understand if attacking any of the opportunities and threats in the SWOT may put the company in an undesirable situation in the future, possibly contradicting its strategy.

In the SpaceX example, we can arrive at the following priority threats and opportunities:

Opportunity 1

  • Demand for Low Earth Orbit Flights by US and Russian Telecommunications Companies
  • Strengths to be harnessed:
  • SpaceX rockets are uniquely positioned to carry Russian communication satellites (because of their diameter)
  • SpaceX’s sales force speaks English and is based in the US, so it is better equipped to meet the demand from US companies (versus French and Chinese companies)

Threat 1

  • Economic crisis in the U.S. could lead to lower shares, which could frustrate the stock offering scheduled for the quarter
  • Weaknesses to be minimized/reversed:
  • Company figures in the next earnings release will probably come in worse than expected by the market, further complicating the possibility of a stock offering

In this case, an opportunity to be exploited and a threat to be attacked were prioritized, based on SpaceX’s arrangement of strengths and weaknesses.

The opportunity to recruit engineers in India, for example, will not be exploited because a) the company has no senior executives willing to move to India, and b) migration to the U.S. is at a standstill due to the pandemic, with the result that engineers cannot work at SpaceX’s plants in Los Angeles and the region.

Important: it is just a coincidence that there is a strength associated with opportunity 1, and a weakness associated with threat 1. There could be strengths and weaknesses associated with both opportunities and threats.

From strategic planning to OKRs

The focus of this article was on everything that happens up to that point. However, let’s quickly summarize the process of deploying OKRs and projects to conclude our thinking with a golden key (we hope!).

After communicating the organization’s strategic planning to everyone, the organization starts to articulate all of this in OKRs and projects that can be used on a day-to-day basis by all employees in the organization.

From the 1-year vision, the organization’s OKRs are established, which in the case of a short cycle can be quarterly. With the organization’s OKRs established, teams and areas define their OKRs and projects.

Crew Dragon capsule, where the first American astronauts were carried by SpaceX.

Team OKRs can either be direct development of the organization’s OKRs, or OKRs related to opportunities to be exploited and threats to be attacked.

The process of deploying OKRs continues until the OKRs that can be deployed to the individual level are deployed. At the same time, projects and action plans are articulated, which are efforts and/or experiments that will help the organization achieve its OKRs, achieve its vision, or exploit its opportunities or attack its threats

Think that each OKR can be aligned to a higher OKR (parent OKR), the 1-year vision, or an opportunity, threat, strength, or weakness from the SWOT. Each project, in turn, can be aligned to a parent OKR, the 1-year vision, or an opportunity, threat, strength, or weakness from the SWOT.


How COVID-19 affected our strategic planning

Now for the second part of our conversation, we’ll get into how the current pandemic affected our strategic plan.

I told you I had to scrap most of what I had done in the form of a strategic plan since the end of January. More specifically, I kept the “why we exist” and “where we want to go” parts mostly intact (there were some changes to the one year vision,) but had to redo “where we are now” almost from the ground up, and therefore “how we’ll get there” in the process.

The biggest change took place in the SWOT. The COVID-19 threat, which wasn’t even in our threats section, got in and VERY high in our SWOT matrix. Pari passu, I had to deprioritize other stuff I thought were important threats because this new threat is, on the one hand, much more probable and impactful than other threats, and also because our competition-related threats are also going to change based on the probable response of said competitors to the pandemic.

Following the threat reprioritization, we also had to revise strengths and weaknesses, and how they were ranked since their primary ranking factors are their relationships to the Os and Ts on the matrix. We also did that.

What followed was a set of SWOT themes that were significantly different than what we had before, and that, behold, was more conducive to our longer-term choices, which felt really weird but ultimately great!

Anyway, I presented our new strategic plan, which was the end-product of the strategic planning effort, on Monday at our bi-weekly all-hands meeting and got praise for it. But most importantly (of course I loved the praise), I think the company is more aware and aligned around the short-term aspects of our strategy, and ready to start planning it more in detail (using OKRs and projects) and finally executing. This is a screenshot of my Zoom[5]:

Replanning OKRs

After we’ve communicated the results of our strategic planning to everyone at Qulture.Rocks, we’re working on a mostly new set of OKRs and projects that are more aligned with our current strategy.

It started with team meetings where people brainstormed changes with the help of our head of professional services, Renata Monteiro (who also helps customers with this stuff). This afternoon I’m revising everybody’s OKRs with said teams so that we can get to a final_final_vf_dont_change set by Friday.

The idea is that everyone knows what their (cristal clear) priorities are going forward. We then poll every Q.Player (that’s a new Qulture.Rocks feature) on Mondays to see what they think their 3 priorities are, and let leaders adjust and align accordingly.

I’m terrified about this crisis but confident that with an amazing team and a lot of alignment, we’ll get through it.


That’s it.

Thanks a lot for your time and patience.

Have a great one, and stay safe!!!

Kiko

PS: I do think all post-product market fit startups need a strategy. I don’t agree that strategy and Lean Startup, for example, are opposites, but I’ll get to that in a later post 🙂


Footnotes

[2] I refuse to use “unpack that” or “double click on that.”

[3] Yeah, I can see how a creative mind could spin that a bank was in the business of “unlocking human potential,” but you get my point.

[4] You can find more of my thinking around moats in A Genealogy of Network Effects. Also here in audio form.

[5] Cameras ON make for a much better experience running remote meetings!