In this article, you will learn the differences between output and outcome as well as the impact they have on your company. It also explains how the two concepts relate to the OKR framework and what you need to be aware of to create successful Key Results.
- Definition: Output and outcome
- Problems for output-oriented companies
- OKRs and outcomes
- Outcome vs. output FAQ
To clarify the difference between these two terms right from the start, here is a short definition of each:
An output describes the result of an activity. For example, if a music streaming service, such as Spotify, launches a new feature, this is referred to as an output. The output does not yet indicate what added value the user or customer will experience.
An outcome is the actual added value of the output for the target group. To stay with the example of Spotify: Thanks to the newly-released feature, listeners are now able to save their favorite songs more easily. A real added value has been created and the outcome resulted from the output.
The term business impact is also frequently used in connection with output and outcome. In a sense, it goes one step further. Business impact describes how customer value can be translated into business value. It is usually indicated through KPIs.
In summary, this means:
Thanks to the new feature (output), listeners are able to save their favorite songs more quickly (outcome). This leads to increased satisfaction with the user-friendliness of the service. As a result, the company expects an increase in subscribers and a corresponding increase in sales in the next six months (impact).
Two core problems can often be identified for output-oriented companies.The first concerns the entire organization and the wrong measurement of success, while the second specifically influences the teams and employees.
False measurement of success
This problem is a result of management often focusing on the “wrong accomplishments.” At first glance, a high production volume seems great and the company may look successful. But this is just an output. If this does not have the significant impact of actually creating added value and resulting business impact, the team is likely not working effectively or may even be working on the wrong things.
If a company published ten blog articles per month in 2021, it was the champion of output. However, if the articles were not read by the defined target group and nobody benefited from their publication, they would not produce any outcome. In this case, valuable resources would have been wasted on work that did not have any added value for the customers.
Missing the big picture
When the employee perspective is taken, the second core problem becomes visible. If the entire work of the team is focused solely on output, neither the company’s big picture nor the impact of each individual on the top goal are recognizable. In this way, valuable potential is lost. Employees end up simply doing what they are told to do instead of being told what the goal is and forging their own path to get there. Not only does this have a negative impact on the entire team’s motivation and commitment, it also affects the attractiveness of the company for new talent. The generation of young professionals, in particular, wants to know the impact their work has on the company. If this is not clear, an interest in working together will be lost.
So what does OKR have to do with outcomes and outputs? OKR, or Objectives and Key Results, is a holistic method for managing goals. While Objectives are ambitious, non-measurable goals, Key Results are characterized by their ability to measure whether a goal has been achieved. One Objective is usually accompanied by two to five Key Results. The Objective specifies the goal and the Key Results show how to achieve it. Accordingly, an Objective with multiple Key Results is a method of describing the outcomes as well as the path to these goals. The various processes surrounding the OKR framework help achieve a company’s defined outcomes.
Output vs. outcome-focused Key Results
Do Key Results describe outputs or outcomes? They can be both. However, focusing solely on output and outcome Key Results is not optimal, as it will put companies at risk of losing sight of their overall strategy.
An output-focused Key Result for Spotify could be, for example, the launch of two new features meant to improve navigation in the app. The mere release of these features does not say anything about the impact they have on the listeners. That means, at this point, it is an output.
An outcome-focused Key Result, on the other hand, would be a 30 percent increase in the average time listeners spend in the app in the first quarter. Thanks to the new feature, listeners have more fun using the app and stay on it longer. The 30 percent increase is the outcome.
What are the definitions of output and outcome?
An output describes the result of an activity a company carries out, but which does not have a measurable impact on its customers. An outcome is the actual added value that results from the output for the target group.
What is business impact?
Business impact is the effect on the business value of a company and is usually indicated through KPIs. An example of this would be an increase in sales or improvement in the profit margin.
How do OKR, output and outcome relate to one other?
OKR is a framework that supports companies in the operationalization of outcomes. This is particularly helpful in the execution of the company strategy. An outcome, or the actual added value for the target group, is accomplished through the results of predefined activities or initiatives (output). With help from Objectives and multiple Key Results, both an outcome and results that should be achieved are defined. To that effect and with help from OKRs, employees at all levels of the company are aligned in a results-oriented manner instead of simply focusing on the completion of given tasks.