(00:01):
KPIs versus okay, OKRs. Hey, my name is Daniel Audunsson. And in this video, I'm going to show you how to run your business scientifically with metrics. Now, this is something that I've picked up on and learned and evolved, uh, throughout more than eight years of running my own online businesses. And I can tell you that when you learn how to use numbers and metrics to run your business, it changes the game. You know, things become a lot more clear and predictable and under control, and you're able to really make clear logical decisions and really understand, you know, what is driving performance, what might be an issue in your business, like what's a constraint and you just really understand, you know, where to focus in terms of taking your business to the next level. So I'm really excited to share this with you and KPI's and OKRs.
(01:02):
This is the best combination that I found. And when you run, you know, use both types of metrics together, uh, to, you know, it really gives you all the metrics you need to, to run your business like a scientist, which again is a game changer for you. If you're not doing this already. So I'm really excited to dive in and share this with you. Now, this isn't only worked for me. It's worked for also many of my students by now that have implemented the same setup in terms of using metrics to run their business. So I can tell you for a fact that, you know, if you're coming from a situation of not using metrics to run your business or using them in sort of like a random, um, unclear sort of cloudy way to adopting a full blown holistic approach to using metrics for every part of your business that matters, then it does change the game and the impact is dramatic.
(01:59):
So again, really excited to dive in and share this with you. So let's just get started. Now, first thing is the KPIs. What I'm going to do is I'm kind of going to compare KPIs to OKRs. And in reality, it's not really KPIs versus OKRs. It's what I've learned really works is not, you know, should I choose KPI's or should I choose OKR? It's actually KPIs plus or cares? You know, that's, that's the magic combination. When you have KPIs, which stands for key performance indicators for a certain purpose in your business, and then you combine it with OKRs, which stands for objectives and key results. That's when things really click and you've got a way to track every part of your business scientifically, and really manage and run your business, um, through a set of metrics that gives you, you know, the insights and things that you need to make great decisions and work with a big team and all those types of things.
(03:03):
So, um, so let me just explain, you know, sort of what the differences are, right? Uh, cause that's important to have KPIs, you know, they are really metrics and it's a set of metrics that you use to monitor things in your business, right? So you use key performance indicators to monitor what's going on in your business. That's really the main purpose. You know, it's kind of like giving you, uh, you could call it like a scoreboard or a scorecard to, to really just, you know, monitor the main parts of your business. So it stands for key performance indicators. You know, it's not every performance indicator of your business, but this name really says a lot, you know, it's key performance indicators. So these are metrics that give you a really good indication of, you know, how the business is performing. And then when you combine it, you know, these different metrics into one set and you do it right, you've got really a way to understand, uh, you know, 99% of the performance that matters in your business and see if it's going in the right direction or the wrong direction and things like that.
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Um, with OKR, it's more about building things, right? So with OKR, you know, we don't really use it to monitor so much like the day to day operations of the business and how that's performing, but it's more to build things like projects, uh, you know, at this new thing to your business and, and really grow the business, uh, and just build things within your business. So it's more like for project management that is really tied into goals and objectives in a very scientific way. And it's a very powerful method to actually have a team and cascade, uh, responsibilities down and things and, and really, you know, have a team come together to, um, accomplice, common objectives and things like that. So I'll explain this better. Uh, but you know, high level, key performance indicators are for monitoring things, objectives, and key results are for building things within your business.
(05:04):
So it's kind of like, you know, running the business and growing the business, right. That's kind of the key difference here now. So KPIs you're using those to measure ongoing performance in the business. So, you know, day in and out week in and out month in and out over time, it's telling you how the business is performing, performing and how the performance might be fluctuating up and down and in different areas of the business. So this gives you like a finger on the pulse of your business really well, the OKRs, again, they're about measuring progress towards objective or, or as you say objectives, right? So they are a way to really understand how you're making progress towards the main objectives in the business right now. And you can use both of you are solar preneur running the entire business on your own, or you can use both with a big team, uh, and you know, both KPIs and OKRs really give you an ability to work with the team a lot more effectively because you've got objective numbers to talk about and reference.
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Uh, so either for, you know, how is the business performing operating day in and out, or, you know, how are we making progress towards our objectives? And usually those will be like aspirational things that, that you're building new products, different things like that, then your business now, in terms of the way it works with the timeframe, right? So with KPIs, you really have the same set of KPIs for extended periods of time. Uh, you might change them up, um, you know, kind of, um, based on certain things like stages of growth and things like that, you know, like a brand new business will have different KPIs, then a more mature business, but more or less this day, the same overtime, uh, and don't change so much. And he really will, you know, create a set of KPIs that are specific to your business and your type of business.
(07:09):
So they're measuring the right things, um, based on again, the type of business that you're running. Uh, and then also based on the type of business you're running, you're going to select a timeframe, which is one of these, you know, it could be a daily timeframe, it could be a weekly timeframe, or it could be a monthly timeframe. And really the main thing that determines which timeframe you want to select for your KPIs, and you just choose one right daily, weekly, or monthly. Uh, the main thing that's going to determine what timeframe you select is again, the type of business that you're running. So let's say you're running a, um, a eCommerce business selling private label products on Amazon, as an example, you know, for that a daily timeframe for tracking your KPIs is going to be too fast. Most likely, you know, it's going to be a very chaotic because like your sales volume and different things you're tracking with your KPIs are going to fluctuate naturally are day by day and without cause for concern and things like that.
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So if you track it on a daily basis, you've got daily KPIs, you know, it will be just too noisy. Like there'll be a lot of chaos within your numbers, and it's going to be really hard to, um, you know, take or receive, you know, key insights, the right type of insights that you want from your KPIs to make good decisions, alert you of issues and things I'll mention here in just a bit. So that will be too fast for that kind of business. Uh, and on the flip side, a monthly timeframe will be too slow for a eCommerce business, selling private label products on Amazon. And the reason is that, you know, things can happen within the month that you want to be able to detect. And it's too slow to wait like an entire month to pick it up. So let's say you're having issues with your inventory performance, like staying in stock or something like that.
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You want to see that within a couple of days, right? So weekly would be good for that monthly to slow cause then, you know, he might wait almost an entire month with all picking up on those problems and that's, again, it's not going to help you solve it quickly enough. So for a private label business, as e-commerce selling private label products on Amazon, a weekly timeframe is just right, because it gives you the right balance between speed and sort of like consistency and stability of the numbers. So you you're giving it enough time to, you know, give you clear indication of what, what is going on with the performance of the business week by week. So it enables you to make clear decisions. And it's also fast enough. So you can pick up on things within a couple of days, this is fast enough, right?
(10:00):
So you've got to strike the right balance depending on your business. Some businesses, you know, daily will actually be fine and will make sense for some monthly will be better than daily or weekly. Cause weekly even is too fast. There's not enough data on a week by week basis for the key metrics to really, you know, make sense of things. So hope that makes sense, blow with OKRs. This is totally different. So while the KPIs are like the same, you know, day in and out week in and out month in and out, depending on the timeframe, you're still like the OKRs are going to be new every quarter and every year. So what you do with ORCC, you want to have a, at least, you know, this is what has worked for me. So now I'm sharing with you, like how I use these metrics.
(10:44):
You know, there's not like an academic course from Oxford or something. This is how I actually use this metric to get results and run my businesses effectively online businesses. Right? So for OKRs, you know, they are new, right? So each quarter we set new OKRs. So every quarter, this is four times per year and there are new each time, you know, some of them may be carried over, but they're going to be set, you know, a fresh, like new, a new set of old OKRs, every single quarter and the same costs every single year. So you're going to have both at the same time, quarterly, OKRs, and yearly. So you start each year by mapping out the yearly OKRs, and then you map out the ochres for the next quarter, like January, until end of March. Right? And then you repeat that process at the end of the first quarter, and you would review the, how it all went.
(11:39):
And then you would set another set of quarterly OKRs for Q2 and, you know, with four sets of OKRs in a four quarterly sets that should lead you to accomplice the entire yearly set of OKRs. So that's how that works. Now, the next point of difference is really the number of KPIs versus OKRs to use. So for KPIs, you will set like six to 12 for the business. And the main thing is to have a set of KPIs for the entire business. You know, you could have KPIs for the departments in the business as well, if you were at a certain size, but the main thing is really this overall set for the entire business. And you would set six to 12. That's a good number. So you don't want to have, you know, you're probably not going to be able to have much less than six KPIs because you need to have enough KPIs to really give you a good insight into every area of the business that actually matters.
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Right? So if you have like three, you know, that really most likely can't cover every part of your business, that's important, right? It's not going to give you insert into, let's say, if you take private label eCommerce business, as an example, you know, having like three KPIs is not going to give you insights into the key areas or all the areas that you need to be monitoring like your R and D or product development, your supply chain, your marketing and sales, your finances, you know, your overall revenues and things. So like that's going to be too little, but you could accomplish it with six, seven, eight. That's usually a really good number and you want to keep it as simple as possible, right? So you want the KPIs to be basically as few as you can. And obviously with a KPI, um, you know, you can have a, um, you know, one KPI that is basically derived from a couple of different KPIs. So the overall metric gives you an indication of several different things within that part of the business. Uh, and I'll have a separate video on KPIs and OKRs that you can watch after this one to have a really clear understanding of how to use eats. This is more to give you a high level overview of each. And what's the difference between both?
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Um, now, um,
(13:58):
Yeah, so six to 12, you don't want to go over 12 KPIs, ideally, because that's going to be a lot. You might go over it, but really then you probably, you know, you should be able to, um, collate some of them together, combine maybe two or three into one and things like that. Cause if you have more than 12 it starts to get kind of a confusing and you got too many numbers, right? It's not about just having the most amount of numbers it's about having
(14:24):
The best sets possible. And the less
(14:29):
KPIs have to accomplish, you know, what the KPI's are there to do, which is to give you insight into the key performance, uh, you know, areas of the business. If you can do that with fewer KPIs, that's better, right? So with KPIs, it's one to five per year, right? Cause you set them each year and then also per quarter. So you've got like one to five for the year and then one to five each quarter and the same applies like the fewer OKRs. You can have really the better, um, especially if you're a smaller business, you know, you shouldn't have more than three at a time, really, at least for the quarterly ones. Cause you probably not going to have a capacity to accomplish that many. And a big part of the reason you do OKR is really just to get things really clear and focused and, um, scientific in terms of how you're measuring the progress towards the goals that you set.
(15:26):
Right? So it's goal setting. Okay. Ours. Um, but in a way that's really clear and simple, you know, and, and it's confining you to like with this limit of like five maximum, you're going to have to figure out how to, you know, uh, bring all your objectives into five sets or less, and that's going to really help you because it's going to make you focused. And realistically, you're not going to be able to do more than that at a time overall for the business. Right. And it's not going to help you to try to do more than that. So usually we sit, my business is set around three OKRs per year and quarter, sometimes two, sometimes four, but something like that, two to four, a one is usually, you know, two little, um, depending on what the business is doing. But two to four is probably the range you're going to be at three being kind of ideal in my view.
(16:19):
So that's how that works. Now KPIs are a leading indicator. So the good thing about KPIs is that they, um, what this means is that they will give you insights into future performance of the business. So by reading the KPIs, let's say it's each week, uh, based on what you're seeing this week, it's probably going to give you a good indication of what's going to happen next week. And then we get to that, um, for good or worse, you know, it could be good science, it could be bad sign. So the other thing that KPIs do is that they are an alert of operational issues. So when you have issues in the business, if you selected your KPIs correctly, you're going to be able to notice any major type of issue in the business, more or less through looking at the KPIs and because it's a leading indicator, you can usually fix it before it gets really bad. That's one of the big benefits of the KPIs. Now with the OKRs, they're more like a trailing indicator. So they won't really tell you what's going to happen tomorrow and things like that. Uh, but so they're showing you like how you're performing, so how you're making progress towards an objective. So you review it, um, after you've done this, right? So it tells you like how you've been doing in terms of getting towards this objective that you've said,
(17:42):
Yeah,
(17:44):
Another thing with OKRs. So that's, that's, you know, that's a good thing. It shows what's, what's going on. It doesn't show you, you know, what to expect in the future, but how you're doing right now, this is also important. Um, and because it's a trailing indicator, it will also show you, so it will alert you of capacity issues, meaning that if you're not really making progress as quickly as you want to, or you have to, to achieve, the OKRs that you've set, you know, you've either set the OKRs too high. You've been too ambitious or, and, or, you know, it basically tells you the same thing, the capacity that you have right now, in terms of how much you're able to do yourself or with a team, the current team you have, uh, could potentially be not enough to accomplish this. So it might tell you that you need to increase this capacity or increase the efficiency or set OKRs that are a bit lower.
(18:42):
So it will really help you understand like the capacity of your business to make progress and, and, and, and accomplish projects and, you know, hit your objectives, your goals. So for good or worse, they will tell you, like, do you need a bigger team or more efficiency, or are you being unrealistic with your goals, your objectives, right. Both are important to understand because over time, what this process helps you to do is really get aligned and in tune with the business and you understand what you can actually do and what you can't do and where you might have to improve in things. And that's really important if you want to be very successful with your business, you know, you want to be able to be realistic. And at the same time you're obviously like ambitious, right? So hopefully this makes sense. Now the final thing here in terms of the difference is that, um, the use of the KPIs to optimize areas of the business or how we really use them, you know, beyond kind of this monitoring things is we use them to optimize areas.
(19:47):
So, you know, you have different areas of the business. Like I mentioned, with a private label business, e-commerce, you're going to have like a product development or the supply chain, a marketing and sales or advertising and finances and things like that. So, so let's say, you know, you notice that a certain area of your business isn't really performing well enough, like you're lagging behind, or this is, you know, you notice this isn't really moving in the right direction, this KPI, then you can put focus on that KPI and really, you know, use the KPI, Seth that you have to like communicate to your team, for example, and just put focus on this KPI, which represents this specific area that you want to optimize and improve. And then, you know, all your decisions really, and things that you're doing in the business for a period of time, it can be concentrated on this KPI, driving this KPI, improving this KPI and thus that area.
(20:47):
So it gives you a very clear data driven way of optimizing a specific area of your business. Now for the OKRs, we use them to complete projects. So we're not really using them to optimize an area like an ongoing area of the business, like operations. It's more to complete projects, right? So we're using the OKRs to align our team around common objectives, and we use it to communicate what has to be done, what needs to happen to achieve this objective. And then we use it to track the progress being made towards achieving that objective and communicate, you know, this is too slow or whatever, or this specific thing that we need to do as well. Isn't really moving or it's lagging behind. Right. So, so I think that's, that's it for this video. I just wanted to give you an overview here in this one. Um, so hopefully this gives you a sense of like how OKRs and KPIs together are really useful.
(21:49):
And that's really, uh, what has worked extremely well for me and my students, um, with their businesses. So, and this is because, you know, these are really complimentary, like two different types of metrics, but when you have both, you've got a way to monitor the operations, the ongoing performance. Plus you've got to wait to, to, uh, you know, build things and grow, uh, both been a very data driven, scientific objective way that makes you and the team accountable to what's going on. So if you want to learn more about KPIs and OKRs, I have two different videos specifically covering each one and showing you how we use them. Uh, so definitely if you're interested in this, you want to check that out and I'm going to have a link here, uh, uh, at the end of this video where you can click to watch the next video, which is the KPIs with examples.
(22:44):
So I'll show you exactly how KPIs work, how we set them up, and I'll give you specific examples of KPIs that we use in our business. So, so that's it, if you like this video, obviously click like and subscribe to my channel. If you like, like this video and you want more information like this, just fundamental business principles and strategies that actually work to make a business successful. Um, and any comments or you want to ask any questions on this? You're welcome to comment below this video. I would love to hear from you, and I'll be sure to respond back to you as well. If you have friends or business partners that you think would benefit from this as well, I would really, it would mean a lot to me if you share this video with your friends or business partners. So again, that's it be sure to check out the next video here. Link will be at the end here on the screen. If you want to learn more about KPIs and how to set up, how to use them in your business, uh, again, to monitor things and measure ongoing performance. So you can click that to see the video on key performance indicators with examples, and then after that you can go, or you can do that. Now you can go and watch the OKRs video as well. So again, hope this was helpful and, uh, talk to you soon. Bye for now.
