Output vs. outcome vs. impact - What is the difference and why is it important in product management?

The most important facts at a glance

• The clear distinction between output, outcome and impact is essential in order to measure and increase success in product management.
• Output refers to the visible results of the development, outcome to the actual benefit for the target group and impact to the long-term, sustainable effect.
• Targeted integration and control of output, outcome and impact enables effective product development, increases customer satisfaction and creates long-term business benefits.

How the distinction between output, outcome, impact and input can improve your product

The distinction between output, outcome and impact is an important step in measuring and improving the success of your product.

Input is what is given into, taken into or processed in a process or system.

The output, or rather the result, is what comes out at the end of processing the inputs.

The outcome is the result or effect and provides information on whether these have actually brought a real benefit. The outcome is the effect that a work result or output achieves. It should create value for the customer or enable your company to work more efficiently or effectively.

The focus on the outcome helps your team to ensure that the features are not just skipped, but also generate real added value for the customer. This is the only way to sustainably improve the product.

The impact, best translated as impact, meaning or effect, shows whether the added value of your product has had a lasting effect on the customer.

At the end of the day, your customer pays for the impact. Conversely, this means that understanding the customer's impact gives you a good picture of what added value has been created and whether your pricing is appropriate.

By applying these principles, you can ensure that your projects not only deliver short-term results, but are also successful in the long term.

Definitions: Input, output, outcome and impact

To better understand the terms input, output, outcome and impact, it is important to have a clear understanding of their definitions and differences. Here is a more detailed definition of the terms.

Definition Input

Input comprises the entirety of production factors that are used to produce output, such as operating resources, materials and labor, know-how, etc.. These resources are necessary to realize the planned activities and outputs. The ratio of output to input is referred to as productivity.

In professional settings, input can also include information or guidance needed to perform tasks effectively. Inputs can be intellectual, creative or valuable, depending on their nature. Often these types of input are also referred to as activities and considered separately. We see the activities as part of the input.

Inputs are the basis for all further steps and form the basis for the subsequent outputs and outcomes.

Definition Output

Outputs are visible results in product management and are typically features and functions. They are the direct results of the activities carried out, typically software development, and are at the heart of entrepreneurial activity in modern organizations. Examples of outputs are

• Trained participants
• the presence of wells
• Increase in sales
• Improvement of KPIs
• Wireframes
• Designs
• Technical concepts
• Prototypes or first versions of a product (MVP)

Outputs show that certain activities have been completed and are often easier to measure than outcomes.

In the product context, an output is usually a finished feature or product. Here, finished means that the feature is functional and can be used by the customer.

Definition of outcome

Outcome refers to the actual added value or benefit that results from the outputs and how this is measured. It describes the effect or benefit that the outputs achieve for the target group.

Outcomes have a direct impact on the target group and express the value or benefit created by what has been done. Outcomes are often more difficult to measure than outputs, as they can include qualitative and quantitative changes.

One example of outcome is the improved ability of users to save their favorite songs.

Definition Impact

Impact is the result or consequence of outcome and represents the long-term and sustainable effect. Impact refers to the long-term and sustainable benefit that the outcomes achieved have for the company, customers or society.

Examples of impacts are higher crop yields, which lead to more income and better food security. Impact describes the long-term and sustainable benefits achieved through the outcomes and often goes beyond the direct influence of the project.

The outcome is the effect that a work result or output achieves. It should create value for the customer or enable the company to work more efficiently or effectively. Impact looks at long-term success.

Definition of output vs. outcome vs. impact by Jeff Patton:

This great video explains the differences between output, outcome and impact. Jeff is a great thought leader and we highly recommend his books and videos.

<iframe title="vimeo-player" src="https://player.vimeo.com/video/206617354?h=a4f8a1f8e8" width="640" height="360" frameborder="0" allowfullscreen></iframe>

If you watch the video, however, you will notice that he uses a different definition for impact.

Jeffs defines impact as ROI, market share or brand awareness. He uses this to look at the long-term effect the product has on the company . In our definition, we look at the long-term effect the product has for the customer.

Why do we do this? A company can create a certain value for the customer with its products and services. The company can "skim off" part of this value through the price of the product. We believe that it makes more sense to measure the outcome and impact on the customer instead of projecting these onto your own company. In the long term, the company will only be successful if the customer receives real added value from the product. For us, this is therefore the "leading indicator" for ROI or market share.

Differences between output, outcome and impact

Output vs. outcome

Output is the direct result of a decision-making process such as products or services, while outcome represents the short and medium-term effect of the output and impact the long-term effects. Output usually refers to visible or material products, while outcome describes the effect achieved with the output.

A focus on outputs can lead to a motivation problem among employees, as they only complete tasks without any knowledge of the impact for the company. The distinction between outcome and output is important, as outputs show that something has been done, but not necessarily whether it has brought any real business benefit.

Measurability of output vs. outcome

Outputs are almost always quantitative and easily traceable as to whether they have been achieved, while outcomes can be both qualitative and quantitative. Outputs show that a particular activity has been completed, while outcomes represent the actual success or added value of that activity.

A pure output such as the number of blog articles published does not show the actual benefit for the target group and is often difficult to translate into direct added value. Outcomes can be measured both qualitatively and quantitatively and are often more difficult to evaluate than outputs. A sole focus on outputs can lead to organizations overlooking the actual improvements for their target groups.

Short-term vs. long-term prospects

Outputs provide a short-term view as they are visible immediately after the completion of an activity, while outcomes and impacts require long-term perspectives to assess the actual changes and impact.

Mistakes can occur when organizations do not clearly distinguish between short-term results (outputs) and long-term effects (impacts). The boundaries between outcomes and impact are often blurred, making it difficult to differentiate and focus on them. Project teams often struggle to clearly differentiate outcomes from impacts.

Practical example of output vs. outcome

Examples for clarification

These practical examples can help you to make the theory of impact, output, outcome and impact understandable and tangible. They help to illustrate the implementation of these concepts and show how significant improvements can be achieved through their application.

Example input, output, outcome and impact based on the Product Masterclass

Inputs in the Product Masterclass

Inputs in the Product Masterclass are our know-how, how to teach people topics, the idea for a system with 4 different coaches, of course the coaches themselves.

Output of the Product Masterclass

The output of the Product Masterclass is the number of people who have completed our training and whether they can remember the knowledge imparted in the Product Masterclass.

This output is measured by conducting an anonymous assessment before and after the Product Masterclass to see how the participants' view of their job, role and responsibilities has changed.

Outcome of the Product Masterclass

The outcome for the participants is that they can do their job better. Of course, the knowledge that we already measure in the output is part of it, but what is much more important to us is whether the person and the mindset have changed.

After the masterclass, we hold 1:1 discussions with the participants in which we talk about their changed situation and new challenges. Here we look for clear indicators. For example, we ask whether and in which situation the participants have applied the knowledge from the masterclass. Last week we had a participant who said with a smile: "... My boss noticed it too, he always said, did you get that from this masterclass again?". This is of course a clear indicator for us that the participant has done his job differently and that his environment has noticed this positively. We regularly receive reports of participants doing situations faster, with more self-confidence, more competently and better.

This means that we measure whether we achieve the desired outcome for our customers. You can find some of these conversations on our website in the testimonials here >>

Impact of the Product Masterclass

The impact of the Product Masterclass is whether the participants have become better product managers in the long term and whether we can attribute this to the Masterclass.

For example, we received feedback from participants that she would receive €30,000 more in salary. After the masterclass, she had more competence and self-confidence. This led to her proactively driving projects forward and her environment naturally noticed this. After some time, she was given responsibility for the development of important products and thus increased her salary.

Another participant got a job at a top digital company in Munich. When asked how he managed it, he said: "... you know Thomas, I had to do a case study in the application process and I just thought about how we would have done it in the Product Masterclass."

These are stories about long-term impact. In these cases, we may even have been able to positively influence careers and life paths. A huge impact.

So far, we have only measured the data qualitatively, but we are working on a system that also records this data quantitatively.

Example input, output, outcome and impact for Basecamp

Inputs Basecamp

Inputs, or the ingredients Basecamp needs to build good software, are excellent software developers and other employees (Product, UX,...). This means implementation capacity, i.e. human resources. In addition, a deep understanding of your customers and how projects are best managed. In addition, Basecamp has adopted a special way of building software. This approach is called Shape Up and is described in a free book that you can find here: https://basecamp.com/shapeup/

Shape Up describes the activities to generate a certain output from the inputs. Other companies use Scrum or the OKR framework here.

Output Basecamp

The output of Basecamp is a software with certain features and functions. In this case, user-friendly project management software that includes functions such as task management, file sharing and team communication. This software enables teams to work together more efficiently and organize projects better.

Outcome & Impact Basecamp

The outcome and impact of Basecamp can be seen in the improved productivity and collaboration of teams using the software. In the long term, this leads to greater efficiency, better project results and increased employee satisfaction. Companies using Basecamp often report a significant improvement in project delivery and a reduction in misunderstandings and delays. The difference between output and outcome can be clearly seen here. Output is what is delivered, outcome is what it does to the users.

https://basecamp.com/customers

Common mistakes in product management when using outputs and outcomes and how to avoid them

Many companies tend to use output and outcome interchangeably, even though they are different concepts. A common mistake is to confuse the terms output, outcome and impact, which can lead to ineffective project strategies. Corporate cultures are often characterized by an outdated mindset that rewards activity and input rather than actual added value.

A focus on outputs can lead to a motivation problem among employees, as they only complete tasks without any knowledge of the impact for the company. The misunderstanding of the difference between outcome and output usually leads to two central problems: low business value and unmotivated employees and a poor product.

Error 1: Focus on output = feature factory

Output is often confused with outcome, which leads to the success of a project being measured incorrectly. A common mistake is to focus on outputs instead of outcomes, which can lead to low business value and unmotivated employees. In product management, we call teams that are only focused on churning out features feature factories.

At the end of the day, this leads to resources being used ineffectively as the actual benefit of the features is not considered.

To avoid this mistake, it is important to focus on the actual benefits and long-term effects of the features and functions. But how is this possible if you have defined success factors? This brings us to the next point:

Error 2: Missing measurement of outcomes

Outcomes are more difficult to measure than outputs, as they can be both qualitative and quantitative and depend on the perception of the target group. The success of outcomes is largely dependent on the perception of the target group, which makes measurement more complicated.

One challenge in measuring outcomes is the systematic recording and presentation of results that are influenced by structures and processes. Without adequate measurement of outcomes, it remains unclear whether the activities actually lead to the desired changes.

In product management, the first step is always to measure the use of products, features and functions. It often makes sense to enrich the quantitative data with qualitative data. In other words, you talk to users about their experiences with your product or feature.

Mistake 3: Neglecting the impact

The long-term impact of an initiative is often overlooked if the focus is only on short-term results. This leads to important long-term changes not being recognized and promoted. A product may appear successful in the short term if the focus is only on the outputs achieved, but without considering the impact, the long-term benefits for the company or society may remain unclear.

Neglecting impact can mean that products do not reach their full potential and valuable opportunities to create sustainable improvements are missed. A conscious focus on impact helps to keep an eye on long-term goals and ensure that the outcomes achieved also have a positive effect in the long term.

OKRs (Objectives and Key Results) and their role

OKRs, or Objectives and Key Results, are a popular management method for companies that want to work more outcome-based. OKRs provide a framework to promote a focus on outcome and impact in projects. The method usually consists of a limited set of 3-5 objectives, each measured by 2-4 clearly defined key results.

In order to successfully apply formats such as OKR, it is important to understand inputs, outputs and outcomes in a differentiated way. This is the only way to use the method effectively. Key results should be results-oriented and not just a list of activities that can be ticked off, but should be formulated in an outcome-driven way. This helps to focus on the actual results and the long-term benefits.

Introduction to OKRs

OKRs stand for 'Objectives and Key Results' and are a strategic management framework for translating corporate strategies into short-term measurable goals. They were developed in the 1970s to achieve common strategic goals for companies and organizations. Clear OKRs help to focus objectives and planning on the desired outcomes and impacts.

As a rule, 40% of the strategy and content comes from top management (top-down), while 60% comes from teams and employees (bottom-up). This mix of top-down and bottom-up approach ensures that the objectives are both strategically aligned and practical to implement.

Formulation of effective key results

Effective key results should be outcome-oriented and avoid measuring only activities or output-based metrics. A good key result must be measurable so that it can be determined without doubt whether it has been achieved or not.

Outcome-focused key results measure the actual impact on users, such as an increase in time spent on an app. An example of an outcome key result could be a 30% increase in the average time users spend on a platform.

In social media marketing, outcome-based OKRs can consist of turning social media channels into a community and proving their strategic value.

Implementation of OKRs in products

Continuous monitoring and evaluation of OKRs is crucial to ensure that products remain focused on outcome and impact. Adjustments to OKRs are necessary to continuously improve products and align them with the desired outcomes and impacts.

Methods for adjusting OKRs can help to recognize and counteract undesirable developments at an early stage. Microsoft has implemented OKRs to promote a culture of accountability and clear goals, resulting in improved team alignment and productivity. Creating cross-functional teams around complex OKRs can ensure that outcomes are achieved efficiently.

Summary

The clear distinction between output, outcome and impact is crucial for success in product management. Outputs are the visible results of the activities carried out - in digital product management typically the deployment of features - while outcomes represent the actual added value and benefits created for the target group. Impacts are the long-term and sustainable effects that arise from the outcomes achieved.

Too many teams focus on output and delivering features instead of focusing on the outcome and the actual benefit to the customer in order to create long-term value for your customers and your organization.

Frequently asked questions

What is the difference between output and outcome?

The difference between output and outcome lies in the fact that output describes the visible results of a product, while outcome represents the actual benefit for the target group. The latter focuses on the added value for users.

Why is it important to measure the impact of a product?

It is important to measure the impact of a product in order to understand the long-term positive changes and the benefits of the results. This helps to evaluate the long-term sustainability of the product.

How can OKRs help in product management?

OKRs can help in product management by promoting alignment with long-term goals and ensuring that products remain focused on outcome and impact.

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