The startup market in Southeast Asia (SEA) is expected to grow so rapidly that in the next three years, the investment in startups in the region is expected to reach US$70 billion. By 2024, SEA is presumed to produce at least 12 new businesses with a total market value of at least US$1 billion each.

But the success rate of startups globally is still low – 90 per cent of startups fail. Have you wondered why innovative ideas fail to turn into successful businesses?

Steve Blank, the founder of the Lean Start-up movement said, “Startups are not miniature versions of established large companies”. While large companies execute known and proven business models, startups are in search of business models.

Most startups fail because they do not find the right business model, they could not find the product/market fit, and could not find enough paying customers.

Product/market fit

Don Valentine of Sequoia Capital said, “Target big markets — If you don’t attack a big market, it’s highly unlikely that you’re going to build a big company.”

“When a great team meets a lousy market, market wins. When a lousy team meets a great market, market wins. When a great team meets a great market, something special happens.”

“If you address a market that really wants your product — if the dogs are eating the dog food — then you can screw up almost everything in the company and you will succeed. Conversely, if you’re really good at execution but the dogs don’t want to eat the dog food, you have no chance of winning,” according to Andy Rachleff, CEO of Wealthfront.

Also Read: OKR is a startup lifesaver. Here is how to craft them

Finding the product/market fit is the first task of any startup that is aiming for success, or even to survive.

Finding product/market fit with OKRs

Finding the product/market fit is famously considered as an exercise in serendipity by many, but it doesn’t have to be. A startup can define hypotheses and test them through iterative business execution.

The following key principles of OKRs will be relevant for finding the product/market fit:

Let us consider the example of a startup that aims to find a profitable business model for selling organic nutritional supplements.

Objectives or Stretch Goals: Objectives should be ambitious and should map to the hypotheses that the team would like to test. The first hypothesis to test should be the Value hypothesis – is there an attractive market for organic nutritional supplements in the major metros of SEA?

The team may want to choose one locality in Jakarta to test out their hypothesis. They may want to use different hypotheses for testing out other factors such as price, delivery model, and marketing communication.

Key results: Key results are metrics used to measure the achievement of an objective. In the above example, key results could be:

In six weeks:

• Selling to 2,000 customers in one locality
• Achieving a repeat order rate of 60 per cent
• A conversion rate of at least 25 per cent
• At least 200 customers ready to refer other customers
• The Average Order value of at least US$50

Benefits of using OKRs

• Focus: Startups have limited resources. Hence it is important that everyone in a startup fixate their efforts on achieving the chosen objective. By clearly defining the OKRs and the time frame to achieve them, everyone absolutely knows what they need to do on a particular week or day.
• Transparency: When OKRs are used along with a good tool, everyone is clear about their team’s goals, the goals of other teams, the company’s objectives and the achievement status of all the OKRs. This keeps everyone on the same page, inspires people to achieve like the leaders in the scoreboard. In great teams, resources are also reallocated, with additional help extended to the teams that are falling behind.
• Early identification of problems: One of the biggest benefits of using OKRs is the “surfacing up of problems” early. The weekly reviews ensure the uncovering of problems as every team needs to report their progress as well as confidence level in achieving their key result. In the case of early stage startups, reviews can be done even twice a week or daily until they find the product/market fit.
• Alignment: OKRs ensure that everyone is aligned towards the overarching goals. In our example, while the sales team is focused on the key result of “selling to 2000 customers in six weeks, the Customer Success team is focused on achieving repeat order rate of above 60 per cent.”

Also Read: Global pandemics, trade wars: why OKRs are more vital than ever before

Tips for making OKRs work for startups:

• Three objectives or less: As resources are limited, it will be a good idea to focus on just one or two objectives until the product/market fit is established. The upper limit should be three.
• Plan shorter cycles: Aim for one- or two-week cycles to test hypotheses. Quarterly cycles are good after product/market fit is established.
• Learning: Startups should plan to obsessively learn during this phase. Having internal tools that can be used to record client interviews, have hashtagged conversations so that the field lessons are quickly disseminated across sales, customer success, product and marketing teams.
• Data before ego: Not everyone can be an Elon Musk or a Steve Jobs; having a great intuition about the market and designing products without market research is difficult for an overwhelming majority. Founders should put their ego aside and respect the ‘market” while testing their hypotheses and be ready to pivot early while they still have the funding left.

OKRs, in our view, can be a great tool for startups of any size provided they are used diligently applying the core principles stated here.

Teams need to have an open culture valuing transparency, should be ready to go out to the market and test their hypotheses and rapidly recalibrate their offerings till they find the product/market fit.

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