Setting goals for a startup: Implementing a business-aligned strategy effectively

The Indian startup ecosystem remains firmly established as the third largest in the world–a credible feat for a young sector in an emerging economy whose first unicorn emerged just over a decade ago.

Funding which had considerably dipped during the pandemic, is now showing robust signs of recovery. January-July 2024 saw 672 deals raising $6.3 billion in venture capital (VC) funding, a 42.1% year-on-year (YoY) increase in value, according to Global Data.

In this environment, investors are more selective, focusing on businesses with sound unit economics and clear paths for long-term growth. For those in the startup world or venturing into it, it's crucial to devise robust strategies that will convince investors these criteria are met. Equally important is deconstructing these strategies into ambitious goals and achievable metrics that measure progress. 

In this guide, we'll touch upon strategy formulation and explore frameworks you can use for goal-setting. We'll also illustrate how you can apply these frameworks to any function or business activity, such as receiving international payments.

Strategy extends beyond simply aiming for market leadership within five years. It requires deeper thinking to build a business that creates long-term value for stakeholders.

Consider two key factors while creating or reevaluating your strategy:

1. Understand market realities

This involves asking questions such as: 

• What are the target geographies and customer segments?
• Who are the competitors, if any?
• What are the on-the-ground realities in target markets regarding regulatory compliance, foreign exchange volatility, customer loyalty, and other factors?

A strong understanding of these variables will anchor strategy in practical insights.

2. Choosing a strategic path

The second part involves deciding the path forward. Given the above variables, how can startups achieve the dual objectives of creating a loyal customer base and building their envisioned long-term legacy? Startup builders and founders often turn to frameworks such as The Entrepreneurial Strategy Compass, developed by leading academicians Joshua Gans, Erin L. Scott, and Scott Stern. This framework helps evaluate strategic paths across four categories based on two variables: attitude toward incumbents and innovation.

3. Goal-setting frameworks to turn strategy into action

Once a start-up has defined its strategy, the next step is breaking it down into goals and metrics. This step is essential for converting vision and ambition into measurable, executable actions. A robust goal-setting framework enables organizations to:

• Prioritize goals and direct resources to achieve them within fixed timeframes
• Anticipate short-term and long-term obstacles and prepare actionable responses
• Maintain high degrees of internal accountability and transparency for team cohesion
• Monitor progress toward vision, allowing for timely course corrections
• Communicate clearly and accurately with external stakeholders, winning their trust

Several well-established goal-setting frameworks are used by businesses of all sizes. The OKR (Objectives and Key Results) framework, which played a key role in Alphabet Inc.'s journey of innovation-led growth, is perhaps the best known. Since its founding days as Google, the company and every team member have used OKRs.

Another popular approach is the SMART method, which defines goals that are Specific, Measurable, Achievable, Relevant, and Time-bound. Key Performance Indicators (KPIs) provide useful, short-term quantitative metrics that measure progress toward goals.

Startup founders should consider blending these approaches into a comprehensive framework:

a. Define SMART objectives

An objective is an ambitious goal that advances long-term vision. For example, a 5-year objective might be to become the leading provider in a space and improve customers' daily lives.

To make this SMART, organizations must break it down further. They should define what "leading" means—market share or profits? What specific features or benefits will their product offer to ensure this leadership? Answering these questions helps define SMART objectives.

b. Enumerate SMART Key Results

For each objective, startups should set 3-5 key results (KRs) that are measurable, actionable, and accurately gauge achievement. For instance:

• What market share should be achieved in each target segment within a year?
• How many proposed features and benefits should be delivered within that time?

At Google, achieving 60-70% of OKRs (on a 0-1 scale) indicated adequately challenging goals. Very low achievement suggested misalignments requiring examination, while 100% achievement often indicated the goal was too easy.

c. Monitor Progress with KPIs

KPIs help a start-up to stay on course toward medium- and long-term KRs and Objectives by tracking daily milestones. Effective KPIs include:

• Quarterly Net Promoter Scores (NPS)
• Customer Satisfaction (CSAT) scores
• Internal metrics like employee satisfaction
• Business metrics such as deals closed and case resolution
• Financial KPIs including revenue targets and profit margins

For startups with global ambitions, a streamlined international payments strategy is crucial for maintaining healthy revenues and cash flow. A well-structured strategy, supported by a clear goal-setting framework, can propel them toward global success.

A focused international payments strategy achieved through well-defined goals will:

• Guide pricing and revenue decisions for relevant geographies
• Address international payment challenges like FX volatility, delayed settlements, and regulatory compliance
• Optimize fund channeling across target geographies
• Clearly communicate payment expectations to stakeholders
• Standardize payment processes for operational efficiency
• Encourage exploration of new payment technologies and solutions

Here's a sample OKR for international payments:

Objective: Create a secure, fast international payments experience for customers in the US

Key Results:

• KR1 – Identify a proven payments platform within one quarter that is secure, easy-to-use, minimizes FX risk, ensures compliance, and covers the markets and additional use cases (such as transfer pricing, paying suppliers abroad, credit card facility and so on). It should also allow for easy and comprehensive monitoring of all aspects of international transactions such as compliance, accounts receivable and CSAT KPIs.
• KR2 - Launch a pilot program targeting one US region within the next quarter to test and refine the international payments process, incorporating customer feedback and optimizing it for scalability.
• KR3 – Scale the proven solution to serve customers across the US within six months.
• KR4 - Integrate the selected payments platform with the ERP and CRM systems within a year to enable seamless transaction tracking and customer invoicing.

Key Performance Indicators:

• Achieve 90% of payment collections within one week of invoicing during the pilot program
• Ensure 100% compliance with international regulations, reducing issues by 90% within one quarter
• Implement required payment modes across the US based on customer needs within one year

In today's volatile global economy, Indian startups with international ambitions must focus on:

• Creating winning strategies that leverage fund inflows and a maturing national ecosystem
• Setting and achieving careful goals to maintain accountability and strategic resilience
• Developing robust international payments strategies to optimize revenue, customer experience, security, and compliance