The Four-Way Fit model is composed of a framework and a method. For the past five chapters, we have explored the framework — as it is expressed in its canvas and spreadsheet forms. The framework is static: a strategic snapshot. Now it’s time to turn to the Four-Way Fit method. The method is the dynamic process by which you translate the framework into a plan, act on its settled assumptions, test your hypotheses and narrow in on truth.
When you pursue the Four-Way Fit method with discipline, you will be more likely to:
The Team domain is the final domain in the Four-Way Fit for a reason. Your value breakthrough will be achieved by your team. Your team will optimize that value. Your team will build sustainable competitive advantage. It takes people to design an intelligent, efficient scaling path. The more capable your people are to address the task at hand, the better your outcomes will be.
If you are the CEO, as you move from phase to phase it’s on you to bring together a team stocked with all requisite competencies, arranged into right roles, placed within a serviceable organization structure and empowered to pursue sound business outcome objectives. Team, the fourth and final domain in the Four-Way Fit framework, is the key that unlocks the potential hiding in the recesses of the other three domains. …
The Four-Way Fit framework places unique importance on the third domain: Model. To build an iconic enterprise, it’s not enough to achieve a value breakthrough. You must also discover a business model breakthrough, one that enables you to profitably scale while keeping cash flows manageable and building sustainable competitive advantage.
The Model domain is made up of five subdomains:
These five subdomains interact with each other in important ways. Pricing shapes unit economics. Unit economics shape your customer acquisition method. Pricing and unit economics also impact cash flows. All of these impact your sources of competitive advantage — your competitive moat. …
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Have you reached a value breakthrough? Until you do, your existence is threatened. Once you have discovered that breakthrough, the world opens up. You earn the right to embark on the scaling path. Yet even then, the work has only just begun. Now you must extend and optimize that value. Now you must find a path to sustainable competitive advantage.
This is the innovation journey. It’s hard. Markets and customers evolve; competitors rise. Value has a half life. To keep ahead, you are challenged to build rising customer-defined value — day by day, brick by brick — while avoiding the waste of money and time in the process. But how? The only way is to first conceive of creative innovations, and then put them to the test to confirm their breakthrough impact. In this chapter, we focus on the first thing — conceiving of creative innovations. …
The first of the four domains in the Four-Way Fit is Market. If you are to become an iconic global enterprise, you must achieve a value breakthrough, expand upon that breakthrough by optimizing it, and then make it sustainable — in a large and ready market. But how do you confirm that the market is large and ready? How do you confirm that there are customer segments within this market that have gaping problems and screaming needs, ones you can address with a valued product and viable business model? You do so by confirming your assumptions in three subdomains:
To advance on the journey of company-building, you begin with a look outward from your current stage to the next. What performance outcomes, once achieved, will prove that you have reached the next stage? Since progression from one stage to the next makes a company more valuable to investors, these performance milestones are key. Each is a value inflection point.
As you ponder what it will take to reach this value inflection point, you will quickly realize there are things you “think”, and there are things you “know”. You think that your customer’s greatest problem is “x”, but you don’t know. You think that if you build product feature “y” your customer churn will drop, but you don’t know. You think that if you increase your price by 10% you will only lose 2% of your customers, but you don’t know. Then there are the things you’re pretty sure you know. You know the most important segment for your product is North American furniture stores with > 5 locations. You know from past experience that a newly hired salesperson should be able to close, on average, three deals per month after a three-month ramp-up period. To think a thing is true is different than to know something is true. …
Has your company achieved such a big value breakthrough in such a big market that you are on a growth rocket ship? As you zoom up towards the stars, have you figured out how to steadily add to your value, widening your advantage over all competitors? Or have you found a way to shut these competitors out entirely, freeing you to dominate your market for many years? If so, you don’t need to read this book.
All others should keep reading.
Seventy-five percent of all VC-backed startups fail to return investor capital.¹ Of all small businesses launched in the United States, half are gone within five years.² And the odds of iconic success are witheringly small. …
As the pandemic rages, health systems hit the breaking point. On the front lines, health care workers push past exhaustion, returning to harm’s way day after day. Hospitals from New York to Detroit to New Orleans have begun to collapse under the caseload.
Last night I watched a video posted by an ER nurse from Detroit. She had just returned home. The staff at a local hospital had been overwhelmed, and had placed a call for help. Despite having already worked a 12 hour day, she got out of bed and went in. Now home after the unscheduled overnight shift, she described the scene. The last ventilator was deployed on her shift, with still more patients waiting in distress. The pain drugs used for intubating a patient had run out. Tylenol had run out. PPE equipment was out. …
We are in the midst of a global pandemic. Families shelter in place and hunker down. Planes, airports, restaurants and streets are empty. Small businesses are on the brink of failure. The stock market is in freefall. Even the largest global enterprises are in a scramble, cutting costs and protecting cash reserves. And the human cost is just now coming into focus. Over the coming weeks and months, this virus will exact a heavy toll on the global human family. Far too many will die. …
On the side of the box marked “Trust,” make sure to slap a label that reads, “Fragile: Handle with Care”. Trust is the foundation of every good relationship. It’s hard to find and easy to lose. It is a precious thing, to be protected and cherished.
There are many ways to breach trust. You can fail to be transparent about how the consumer data you possess is monetized. You can fail to properly balance free speech with community protections. You can introduce algorithmic bias into consumer e-commerce transactions (such as lending). You can improperly tip the scales for some marketplace participants over others. Or you can breach trust by exposing your customers’ data to hackers. …