Most companies are looking for outcomes, unfortunately the majority of what they get is output.
Everyone from executives to entrepreneurs don’t want to create products, they want what a product can create for them—truly extraordinary customer benefits. They don’t want to solve point problems, they want better, faster and cheaper results. They are looking for a competitive advantage for their customers to experience, value and love.
Outcome-based businesses value results. If your customers don’t succeed your effort is wasted—regardless of all the output you create along the way.
Shifting to an outcome-based approach is non-negotiable in creating a culture of experimentation and learning. It demands that you clarify the success you seek—in quantifiable terms—by crisply defining what you’re trying to achieve so people know why it matters.
Everyone wants ‘happier customers’ but that’s too abstract. Outcome-based businesses want ‘a 30% increase in customer retention in the next 12 months’. Clarity of destination allows people to explore different options to discover if the investments you make are moving you in the direction you desire.
An outcome-based approach allows you to be accurate, more adaptive, and take action to course-correct and own the results you gather relative to the final destination you wish to be. Checking, rechecking and navigating the uncertain path towards the desired benefits and behaviors your product exists to create.
With an output-based approach, all you end up with is activity. Busy-ness and bad investments because your success is getting your task (not a customers benefit) done—if you can even tell when ‘happier customers’ is ever done.
Why People Communicate Outputs Over Outcomes
One revealing question I like to ask leaders is, “What is your current focus?” Typically, their immediate response is to talk about their output, “We’re investing $10 million in innovation”, “We’re creating a big data analytics platform”, or everyone’s favorite “We’re building an App”.
So why do people only talk about what they are doing instead of why they are doing it? Quite simply, they often don’t know.
In her outstanding book Powerful: Building a Culture of Freedom and Accountability, Patty McCord—who served as chief talent officer at Netflix—explains that her litmus test to know if Netflix had a connected why and what was to stop any employee, at any level of the company, in a break room or elevator and ask them this question: “What are the five most important things the company’s working on for the next six months?” If they couldn’t reel off every priority, ideally using the same words used in communications to the staff, then Patty knew that Netflix leadership was failing to do its job, not the individual.
The follow up question—and the true measure of organizational and strategic alignment—is to ask, “How are your efforts designed to impact the outcomes the business is aiming for?”. Again, highly aligned but loosely coupled teams will answer quickly and directly. The honest answer for the majority is “I don’t know” but who would dare say that to a senior leader?
Instead, what you will get is a list of all the stuff that poor employee is frantically busy outputting because of their uncrisp, lack of clarity. That’s not the individuals fault. Your system of leadership is at fault, and you must own and unlearn it.
Are You Ready To Learn What Needs To Be Unlearned?
If people don’t understand or aren’t clear on the desired outcomes of the company, initiative or piece of work their are a part of, how can they ever help to achieve it? What you communicate, measure and reward as success is what you will get.
When people lack clarity they will optimize for what is in their control, output that is attainable to them but not necessarily the outcomes you want to produce.
The litmus test question for you and all business leadership teams that seek to create outcome-based businesses is this, what answer will you get when you stop an employee in the hallway and ask them what their focus is?
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Barry O’Reilly is the founder and CEO of ExecCamp, an entrepreneurial experience for executives, and the management consultancy Antennae. A business advisor, entrepreneur, and sought-after speaker, O’Reilly has pioneered the intersection of business model innovation, product development, organizational design, and culture transformation. He works with the world’s leading innovators, from disruptive startups to Fortune 500 companies. He is a frequent writer and contributor to The Economist, Strategy+Business, and MIT Sloan Management Review, as well as a coauthor of the international bestseller Lean Enterprise: How High Performance Organizations Innovate at Scale―included in the Eric Ries Lean series and a Harvard Business Review “must-read” for would-be CEOs and business leaders. He is also an executive advisor and faculty member at Singularity University.