A Playbook for Achieving Product-Market Fit by Dan Olsen

By Katsiaryna Drozhzha on December 22, 2017.

Why do most products fail to achieve product-market fit? Product management expert Dan Olsen shares his advice from The Lean Product Playbook on how to achieve product-market fit. Like Spiderman, he knows that great product management comes with a lot of responsibilities. In his PRODUCTIZED talk, Dan explains his Lean Product Process, an iterative methodology for achieving product-market fit, illustrated with real-world case studies.

With Great Responsibility Comes NO Power

The motto for product management should be:

With great responsibility comes NO power.

Quite often, the product manager is considered the CEO of the product. From defining the key MVP features to developing a roadmap, PMs are responsible for a lot of things regarding the product. And regardless of how we can define the PM role, there is one thing that always firmly lies in the bucket of a product manager — achieving product-market fit.

“People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying NO to 1,000 things.” ― Steve Jobs

However, most people talk about the product-market fit almost simplistically — ignoring the importance of their product’s ecosystem. So, how do you determine the conditions to achieve your product-market fit? And are there any essential elements to create a proper product development strategy?

After working as a product leader at Intuit and providing product consultancy all over the world, Dan Olsen started to see that there is a certain pattern and conditions of what to is true in managing the product. In his book The Lean Product Playbook, Dan brings up several steps that product managers have to follow in order to achieve the product-market fit.

Product-Market Fit Pyramid

The key framework in the book is the Product — Market Fit Pyramid. All the layers of the pyramid are hierarchical and are built on top of each other, that proposes a structured guideline to achieving product-market fit.

The bottom layers of the pyramid is the market. As a product manager, you should remember that you don’t control the market. If you change your customer, then your whole pyramid falls down and you have to start all over again. You can pick which market you want to go after, but in fact, everything builds on top of your target customer and their needs. Whose life are we trying to make better? Who we are trying to create value for? Within our customer needs, which ones are undeserved?

The top layers are where the product piece comes in. That is where you have more control and that is where you form hypothesis and execute them. In the Product-Market Fit pyramid, this layer is broken up into three key elements:

Value proposition. Or, in other words, how do we plan to be the best on the market by building the product on the underserved customer needs?
Feature set. What is the functionality we need to build to deliver the benefits that fit customer needs.Validating at this stage plays a crucial role in defining the right direction for your product.
UX Design. That is when you bring the functionality alive to your customers. That is when they use it and interact with it.

Once you design you define your product-market fit pyramid, it’s time to work through your key hypothesis. The Lean Product Playbook proposes a prescriptive lean product process, that allows you to validate your assumptions step by step.

All you need to do is to start at the bottom of the Pyramid, getting clear on the following hypothesis:

  1. Who your target customer is?
  2. What are his underserved needs?
  3. What do we want the value proposition to be?
  4. What is the MVP feature(s) that we need to build?
  5. What is the UX we want to craft?

As a proponent of early stage product validation, Dan suggests as a 6th step of this process to come back to your initial customer. If you have a UX prototype or if you have a product, close the loop and actually talk to the target customer you started out within the first place. That will help you to see where you are within the product-market fit cycle. But let’s come back to the lean product process and see how you can apply it to your product.

Determine Your Target Customer

The first step to achieve the product-market fit is to determine your target customer. This process can be applied on a new product level and on a feature level alike. Why is that important to talk about target customer? Because every target market has distinct needs.

Think about the transportation market, Dan explains that even if the target customer has the same basic need- transportation- his or her specific desires are still very diverse. For example, a soccer mum and a “speed demon” will most likely have different needs when it comes to the car safety and speed features. So, when you look at your product through the lenses of a specific customer, you can see the detailed need and optimize your product for a specific segment.

Start with some rough hypothesis, and then iterate it later.

Identify Underserved Customer Needs

The second step of your lean product process is identifying underserved customer needs. Here, what can help you is to divide your hypothesis into the “problem space” vs the “solution space.”

Dan defines problem space as a customer problem, need or benefit that the product should address. In contrast, in the solution space there is a specific implementation to address the customer need or requirement.

“Problem space vs solution space” helps you really understand what is that true competition and substitutes for the need that you are addressing. The classic example being that in the 1960s, NASA contractors spent millions to develop a so-called space pen so that American astronauts could write in space, whereas the Soviet cosmonauts used a pencil. Dan demonstrates that we tend to live in the solution space without really asking what the real problem is. In the product world, there are many teams that just rush into the solution space and start coding without getting a clear idea of the problem space they are in.

Problem vs. Solution Space: Slideshare

You need to make sure that you spend enough of time in the problem space before you proceed to finding the solutions. Before mapping over to the solution space, try to identify your product statement and write your strategy from the customer prospective. Answering a simple question “Why do I need that product?” might help you determine your objectives.

After defining your product vs solution space you need to prioritize the needs. Dan brings up the “importance of satisfaction” visual framework to map out the prioritization process.

In his closing argument, Dan defends to the a quantitative approach towards importance and satisfaction from Tony Ulwick’s book What Customers Want.

Define the Value Proposition

Once we get clear on what the underserved customer needs are, the next step is to define the value proposition. Which needs are we actually going to claim our product delivers on?

Dan advises to use Kano model to articulate your value problem. The main way to put the Kano model to use is to answer the following questions: which user benefit are you providing? and how are you better than competitors?

Step 1: List a row per row what are the the most important benefits for your product space;
Step 2: Create a column for each of your key competitors;
Step 3: Rate your competitors.

What matters the most from this exercise is the key differentiators.Those are basically the performance benefits where you plan to be the best in the market and whether do you need delighters. Very few product teams actually go through this exercise to ensure they deliver a differentiated product.

As we go to the next step of the lean product process, we need to make sure that the MVP has the key differentiators in it.

Building the MVP Feature Set

After defining your target customers and the value proposition, now it comes to specifying your MVP. Dan explains it with another pyramid from Aarron Walter’s book Designing for Emotion. Aarron sees the product divided in functionality, reliability, usability and delightfulness. We can use that framework on the way how we approach MVP.

Slideshare

We build the substance of functionality, but tend to say, “you know what, it is OK if it buggy, it is just an MVP. We can fix it later. Let’s just test it.” However, it doesn’t not mean that your product will be OK for your customer.

Even if you want to build only a slice of a pyramid for your MVP, it should look more like this: whatever substance or functionality you are biting of, you make sure it is functionable, reliable, usable and delightful enough. It doesn’t have to be perfect, it is still an MVP. So, keep that in mind while you are testing your value proposition.

Launch your MVP and Close the Loop

The next step in the lean product process is the creation of the MVP prototype. Use good UX design practice to create a prototype, understand how it is going to work, and then test your MVP with the target customer.

Remember, that the product that you’ve built is the manifestation of all the assumptions you and your team made along the way. Take all of them and close the loop.

A LiveSketch of Dan’s talk by Live Sketching

Access Dan’s PRODUCTIZED presentation below:

About Dan Olsen

Dan Olsen is the author of the Lean Product Playbook, an entrepreneur, consultant, speaker, and expert in product management and Lean Startup. At Olsen Solutions, he works with CEOs and product leaders to help them build great products and strong product teams, often as interim VP of Product. Priorly, Dan has worked with a range of businesses, from small, early-stage startups to large public companies, on a wide variety of web and mobile products. His clients include Facebook, Box, Microsoft, YouSendIt (now HighTail), Epocrates, Medallia, XING, Financial Engines, and One Medical Group.

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About the Author

Katsiaryna works at Productized as a content strategist. After spending some years traveling the world, she moved to Lisbon to discover the secrets of Western Europe. In her “free time” she enjoys surfing the waves of the Portuguese coast.