Reid Hoffman shares 5 steps for a successful approach to product-market fit
There are a mere handful of people in Silicon Valley with the leadership and strategy experience of Reid Hoffman. Reid is an acclaimed entrepreneur and investor who started and ran LinkedIn and today serves as an investor with Greylock Partners. He’s learned a thing or two when it comes to setting the right course to product-market fit and assembling the right team to make 10x impact an attainable goal. Reid covered these topics and much more during his conversation with Omidyar Network partner Shripriya Mahesh at our Product Leader Summit. You can listen in this week’s episode of Founder’s Corner, or read on for Reid’s key insights and frameworks for finding and maintaining product-market fit.
1. Start with your investment thesis
As an investor and entrepreneur, Reid views a startup’s approach to product-market fit through the lens of an investment thesis. He explains, “The investment thesis is set of bullets about the way that I think the world is becoming and how we are going to go after it, and that if I’m right and we execute well, this is how we’re going to win.” It’s important to have a clear thesis in place that defines the product, the market you’re targetting, your audience, the impact you aim to have, and why you are uniquely positioned to win. The next step is making sure that plan is sound.
2. Gut-check your game plan
As Reid notes, “The question is, how do you formulate that investment thesis? How do you test it as much as possible? Because, by the way, it’s fuzzy. It’s not like simple A/B testing.” Reid details a plan of attack: “In the various early stages you should talk to the smartest people you know and ask them what’s possibly wrong with your investment thesis.” Rigorously test your ideas by asking colleagues, partners, or friends to poke holes through them until your thesis is bulletproof.
“Talk to the smartest people you know and ask them what’s possibly wrong with your investment thesis”
Making sure your investment thesis is as strong as possible has an added benefit during those early days when pivots are inevitable. As Reid puts it, “You should pivot when you’re getting a set of good challenges that would decrease your confidence in your investment thesis over time.”
3. Deep dive into data
After you’ve ideated on your investment thesis and batted it around with the smartest people you know, you should move into factoring in data. Reid shares, “At some point, you should be able to robustly show that you have product-market fit. You should be able to show cohort analysis; you should be able to show that there are people who really love it. And then all the classic tuning techniques are the things that really fill out that market, whether they’re modes in virality or modes in the evolution of the product.”
And you can’t stop once you’ve found product-market fit. Reid explains that a “shift in product-market fit is rare. Once you establish something, it usually works pretty well. But shifts can happen, due to a shift in modality, like a shift from desktop to mobile, or it could be that someone has come along with something that is 10x better than the thing you have, and that is beginning to disrupt your company.” So as users, the market, and your competition evolve, your products need to do the same.
4. Go-to-market strategy should sit alongside product development
When you’re building your product, you should also construct the go-to-market and distribution strategy that goes along with it. Reid had to learn this lesson the hard way. He shared one of his early career errors, made while at his company SocialNet. “Early advice we heard was that we should have a partnership model. So we partnered with this paper in Phoenix to launch the product. In the first month, we only got six people through the partnership. We had put all this energy into the partnership which didn’t work, and if we had instead bought a phone book and called people, we probably would have had thousands of results. So that was clearly a failure of doing all this work on a product and not developing a sound go-to-market strategy.”
5. Determine which KPIs matter
It may seem obvious, but in order to gauge success, you must first identify the goal posts you are trying to hit. And in the first months or years of your startup, knowing which KPIs (key performance indicators) to focus on may be difficult without a wealth of company experience or customer insights. Reid suggests “thinking of KPIs as signals in the wind when you’re sailing. What are the signals I can get that would cause me to go, ‘Oh, maybe I’m not on track.’ You’re looking for disconfirmation. You’re looking for what would show me that I’m wrong and need to adjust.”
“Think of KPIs as signals in the wind.. What are the signals that would cause me to think I’m off-track?”
KPIs are not only critical to tracking your product’s success but also for making the best assessments around pivoting your company or product direction. Reid emphasizes, “You’re looking for that high watermark vision while looking very carefully for the things that would cause you to change course.”
Reid’s insights on setting your strategy, finding product-market fit, and establishing the right frameworks to both measure and revise your approach can be applied to your startup or entrepreneurial venture today. Having an investment thesis, punching holes in that thesis with feedback and data, harnessing a great go-to-market strategy, and being squarely focused on KPIs can give you the keys needed to unlock a repeating pattern for success.
For more insights from Reid, listen to the latest episode of our Founder’s Corner podcast. You can also tune into Reid’s own podcast Masters of Scale, follow him on Twitter at @ReidHoffman, or visit ReidHoffman.org. Subscribe to the Founder’s Corner podcast on iTunes, SoundCloud, or Overcast to hear more episodes and insights from today’s startup leaders.
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