If you really want to be more like a startup, you must optimize for Product/Market Fit.
Every big brand and agency seems to want to act “like a startup.” But that doesn’t mean what they tell you it does.
If you work in the corporate or agency world, chances are that at some point in the last 5 years you’ve had to listen to someone telling you to “Act more like a startup,” “Think more like a startup,” or “BE more like a startup.” While it is true that all companies need to keep pace with the rate of business redefining innovations that startups are creating, the key to achieving this is not just about being scrappier or “hackier.”
To create long-lasting innovations that can grow and become the future of your business, you need to optimize everything you do for finding and achieving Product/Market Fit. Here’s why…
A quick background, for context
The first 15 or so years of my career before I joined a startup were spent in top digital agencies in London and San Francisco, working for many of the world’s most respected brands, including Audi, Ferrari, Fiat, McLaren, Mercedes-Benz, Verizon, Visa, and many more.
Over this time I saw our clients realize the need to compete by experiences rather than just by advertising, and so the nature of our briefs shifted from campaigns, microsites and websites, to apps, connected products and services. Clients began to expect sustainable products that would grow thrive in the long term.
The problem is
If we look at the portfolio of almost any agency, or at the roll call of projects at any industry awards night, we see lots of cool and inspiring work that wins awards, but not much that really survives and thrives in the long term.
On the whole, the typical agency model is still: Get a brief from the client → work in secret → have an idea that the smartest experts and biggest personalities are sure is correct → build in secret → then launch with a huge flashy campaign.
To this day, this process still works very well for brand/marketing campaigns. There absolutely is still a role for the Don Draper character within the agency that has the bright idea, and there is still a need for huge explosive launches. But when it comes to creating a sustainable product, Don doesn’t rule, the customers do.
“We need to be more like a startup!”
At about this time, there was a whole host of articles, posts and declarations from numerous sources, including our own CCO at the time, that preached that agencies and their clients should act/think/be more like startups in order to be more successful. It is clear why this was so fashionable a point of view at the time. What is less clear, is exactly what should a company do to be more like a startup?
Answers seem to vary from just being more scrappy, to working in smaller teams, to using more tech, to removing layers of bureaucracy. By no means bad suggestions, but obviously not game changers in their own right.
How startups REALLY act differently
When I first read The Lean Startup by Eric Ries, it completely changed my thinking and exposed what was wrong with everything that most agencies and corporate clients were doing together. Eric, together with his contemporaries like steve blank, Alex Osterwalder and a league of bloggers and podcasters have taught the startup world that no matter how smart you think you are, you do not know all the answers, and in fact you are probably wrong. Your product and business model will not survive its first contact with your customers, so you had better adopt a scientific process that tests all of your ideas as hypotheses, and find out as quickly as possible if they are wrong.
But while many terms and principles like “fail fast” and “MVP” have crossed over into the mainstream and can be heard being recited in corporate halls across the world, in my opinion, the rest of the non-startup world is yet to pick up on what I think is the most powerful concept of them all: Product/Market Fit.
I believe that understanding of Product/Market Fit is the real defining difference between startups and the agency / corporate world.
What is Product/Market Fit?
As I discussed in my first Medium article, there are various interpretations and definitions of Product/Market Fit. I find it most useful to think of as:
The point at which you have proven that you have created a great product,
that solves a problem that a lot of people really want to see solved,
and you can take your product to that market profitably.
Sounds kind of obvious? Well it should be! Product/Market Fit has probably always been the defining factor for whether a business is successful or not, since the first trade in humanity. But lack of familiarity with this concept outside of the startup community shows that it is not as well understood as it should be.
The composition of Product/Market Fit.
I like to think of Product/Market Fit as either a pyramid, or a ladder of several rungs/levels that the innovator must climb to reach the point of Product/Market Fit.
- Level 1: Vision
Have we articulated a clear and compelling vision? Do we know the change we want to create in our customers’ world?
- Level 2: Problem/Market Fit
Is there a significant sized market for this, and do they REALLY care about the problem that we think they care about?
- Level 3: Problem/Solution Fit
Does our solution REALLY solve this problem? Or does it at least significantly move the needle to warrant the time and effort the user needs to invest in it? Do users “stick” with it?
- Level 4: Solution/Marketing Fit
Can we efficiently and sustainably reach the audience and convince them to buy the product?
- Level 5: Product/Market Fit
Does it all come together, such that the unit economics of the business really make sense at the scale of our ambitions?
Again this might sound obvious, but to share what I’ve more commonly seen in the work of agencies and their big brand clients:
- Level 1: Excellent, inspiring and compelling vision.
No problems here, agencies are amazing at this
- Level 2: Often skipped entirely.
The vision typicaly moves straight into being executed, with no validation of how big the audience really is, and whether they really care
- Level 3: Crafted by experts alone
The solution is often designed and built how the designers, clients or other HIPPO’s think it should be, without testing if customers will really use it every day
- Level 4: Fireworks
The team designs and executes an amazing launch marketing plan that really gets noticed, but doesn’t build a sustainable engine of growth, and traction is lost after the campaign ends
- Level 5: Fake traction
The product is launched without Product/Market Fit ever having been achieved, the product stops delivering value to the business, and is eventually killed.
Does this sound familiar?
You get what you optimize for
If you only optimize for a cool product, that’s all you’ll get. But being “cool” to you and your peers on an awards panel does not make for a successful business. At best you will create fake traction, and once the marketing launch dollars have expired, your product will cost more to run than the value it creates, and someone will kill it.
While Eric Ries’s Lean Startup approach can work for almost any type of business or product, there is a natural reason why The Lean Startup is more widely embraced within the startup community.
Consider the motivations for startup vs agency or brand…
The startup entrepreneur
When you are a founding member, or early stage investor of a startup, you feel it:
It is worse to have fake traction, than to have never had any traction at all.
Because when you get a signal of traction, you go all-in. You invest more of your own life’s savings, more of your time (often at the expense of friends and family), more of your reputation, your health and your heart and soul. To go through all that, only to find out months or years later that the venture is not sustainable, can be crushing, and it is all on you.
Therefore the smart entrepreneur’s desire for truth should override any ego.
The agency or corporate innovation team
In both enterprises and agencies, the innovator often cashes-out on their fame at the perceived high-point of a successful launch, and our hero either moves themselves, or is redeployed to the next team that needs to go from concept to launch in a similarly successful way.
Whether or not our hero really created a sustainable business future is now somebody else’s problem, our hero’s CV and awards cabinet already looks awesome. I’ve seen this happen countless times, and I must confess I have done it myself.
The agency / client relationship
The same pattern often repeats during the client and agency relationship. For years agencies have optimized for “cool” products and high profile launches, because that is what wins awards and PR, and awards and PR are what bring more clients knocking at the door.
“If you want to win an award, make work that other creative directors are jealous of.”
So said our then Executive Creative Director some 5 or 6 years ago, when we were the most awarded agency of all time, and he was right. But while optimizing work for awards ensures a successful future for the agency, it does not for the client.
Furthermore, the commercial relationship between client and agency also optimizes for the short term. This offers no tangible motivation for the agency to think longer term than creating a remarkable launch, which can help ensure their next contract.
To fix this, relationships need to be optimized for the long term. As my former colleague Dan Linsky once said:
“We can’t really start acting like a startup, until our clients start acting like investors.”
Optimize for investment, even if you don’t want it.
Similar to Josh Kopelman’s recent tweet-storm, The first concern of an investor — VC or Angel — is to get their money back, plus profit. To do this, they basically need to pick a winner. That is, to recognize a nascent product and business that has the potential to gain traction and grow exponentially over the long term.
Although a corporate innovator or agency might not be seeking VC investment as such, they are seeking that same outcome of traction, growth and profitability. So it makes sense that approaching and appraising a venture in the same way as a smart investor will be a smart move for their business.
One guy that should know, is VC investor Marc Andreessen of Andreessen Horowitz. It was Marc that actually coined the term “Product/Market Fit” in his blog post “The only thing that matters.” To paraphrase from that post:
“My contention, in fact, is that [startups] fail because they never get to product/market fit.
Do whatever is required to get to product/market fit…When you get right down to it, you can ignore almost everything else.”
Building a process that optimizes for Product/Market Fit
Some ideas, products and business models simply do not have the potential to achieve Product/Market Fit. But while it is not possible to design a process that guarantees Product/Market Fit, it is possible to find out quickly if the idea does have the potential to get there or not.
I believe that optimizing for Product/Market Fit is the key to creating products and services that grow and thrive long after the marketing dollars are switched off. And so I have built my consulting business around exactly this. My mission is to help you:
Quickly understand how your awesome idea can become an awesome business.
I do this by combining the best practices and techniques of Lean Startup and Product Management with my world-class experience of Product and Marketing Strategy. I am currently testing and refining this process in partnership with a range of startups, enterprises and their agencies.
While there are a few existing books and articles that propose a process for getting to Product/Market Fit, I personally don’t think any of us have completely nailed it yet, so I invite you to bring me your questions, ideas, challenges and learnings so that we can all share together.
- Enterprise brands and their agencies have no shortage of cool ideas or technology to bring them to market quickly. What they most need to learn from startups is how to create high growth products that are sustainable in the long term.
- To be more like a startup, you need to eschew fake traction, ego and short term fame.
- You get whatever you optimize for,
- But the only thing that matters is Product/Market Fit.
- So if your agency or corporation wants to create innovative business futures like startups do, you need to optimize for Product/Market Fit.
- Follow me and get in touch to explore more!